patrick.net

Heraclitusstudent says

- I know there is a lot of nimbyism, especially in CA, restricting permits, but we are talking of the entire country here.

CA should be ashamed of itself, Austin Texas for 3 years had a streak of out building CA for new homes, that I believe has stopped due to the oil crash

Heraclitusstudent says

So why aren't we in a fucking building boom??

Builders need to make a $

Land Labor and Parts isn't that cheap and then you have some regulation in there as well.

Logan Mohtashami says

Land Labor and Parts isn't that cheap and then you have some regulation in there as well.

But also not every house has to be 2500Sqft + with granite everything, stainless everything and Mediterranean faux exterior architecture, gated and under an HOA.

There's no reason why Builders aren't building housing developments in the $155 to $225 range other than official policy.

A very well donated to official policy!

Well there probably are reasons, but those reasons are about as valid as the arument for "$100 Oil is here to stay" was in early 2014

Tenpoundbass says

But also not every house has to be 2500Sqft + with granite everything, stainless everything and Mediterranean faux exterior architecture, gated and under an HOA.

Big deviation from trend at the start of this century

Tenpoundbass says

But also not every house has to be 2500Sqft

Logan Mohtashami says

Land Labor and Parts isn't that cheap and then you have some regulation in there as well.

So are we saying the price is just not high enough?
Something here doesn't make sense. Prices went up much faster than inflation while their costs probably didn't.
Maybe they need to pay workers a bit better.
Maybe they need to focus on more basic units (apartments) with higher volumes/less margins.
There are some mystery roadblocks at work there.
In what other competitive market do you have prices jumping for 5 years and the offer not following?

I don't get it, we've got Ginormous houses and Tiny houses and that's IT!
Don't those pinheads get it? Why is diversity always two opposing opposite extremes with this generation(or these times)?

What happened to the concept of stater homes?

Heraclitusstudent says

So are we saying the price is just not high enough?

Remember Builders and Profit margins .... Wall Street...

Why do you think I tagged TOLL Brothers this cycle as the one builder to be careful one

Still with all that said, Builders are a better buy now than they were in 2015 and the Over hype in 2013 ... You can see why I made that 2015 Prediction article statement on the over hyping very clear... they had 24%-41% sales growth which made the stocks value a lot more future growth mid year.

But now, better buys

Here is why you can take a position in TOL now and not last year.

Basically in short your $6 dollars away really from the Great Recession outside the Last DIP in 2011

So you can see why on CNBC I was saying where is value if the New Home Sales are going to have it's 3rd straight missed expectation year

However, you can see the Pain TOL has had from a above 42 high in the stock now under $27, but now if you believe the builders aren't going to collapse this is where you take your position, not at the 38-42 level when people were saying simple garbage about the builders and new home sales.

@Strategist

Please tell me you're on board with me now on the builders?

Value....

KB Homes has great value!!!

Maybe the building is going on in other states.

indigenous says

Maybe the building is going on in other states.

Starts have legs to run, that's not the issue, even new home sales will grow this year.

It's just the Housing Nirvana Bulls over hyped the growth and we have had 2 valuation gaps higher in 2013 and 2015, both times it needed to be corrected.

Their is value now in the builders some are 2012/2013 pricing with sales much higher than those period.

It's all about valuation and profit margins at this point

Credit Suisse lowers target prices on home builders: "Weak" Jan. real est agent survey - worst seq perform for Jan in survey's 11-yr history

Logan Mohtashami says

Their is value now in the builders some are 2012/2013 pricing with sales much higher than those period.

It's all about valuation and profit margins at this point

And rates and home price increases and shortage shortage shortage.
OC prices are about to go through the roof. The ball has started rolling, and nothing can stop it.

Logan Mohtashami says

Credit Suisse lowers target prices on home builders:

Fools!

Do any of them pay a decent dividend?

indigenous says

Do any of them pay a decent dividend?

Look at KB Homes, lord it's basically at liquidation value right now and it pays a div.

Strategist says

And rates and home price increases and shortage shortage shortage.

Inventory is over 5 months now for the builders but their biggest competition is actually cheaper existing homes which are 10 times bigger on the inventory front.

That was the missing link in this cycle and we we have had 3 straight years of missed sales expectations.

Still their should be at least 4%-8% growth this year with upside potential if median price falls like it did last year

In any case since the builders had a solid correction, their is value at this point, back to 2012/2013 levels on the builders with higher sales, where last year they were so over hyped and presented no value

Strategist says

Credit Suisse lowers target prices on home builders:

Go check out KB Homes, if I giving you credit for who I think you're... you will totally get what I am saying

Logan Mohtashami says

Strategist says

Credit Suisse lowers target prices on home builders:

Go check out KB Homes, if I giving you credit for who I think you're... you will totally get what I am saying

I did. It looks like one helluva bargain to me.

Not if this is a precursor to more inventory. Sure, hot markets like the bay area are still tight, but rents are easing already in other parts. SRS is near a 52wk high, though still very depressed from its continued beating since the Fed started inflating post 2008. Housing shorts have been utterly and constantly destroyed and decimated since 2009, many fighting the Fed bazooka probably ended up in the poor-house. They are raging and trying to roar back now that we're still effectively sitting at ZIRP and the end of the QE tunnel and foreign housing money has likely been reached - I'm not so sure about the end of QE, never underestimate the Fed, maybe operation titty-twist is imminent! It's gonna be a good tug-of-war.

Why are home builders so low? KB has a pe of 7?
Why did they fall so much when this is probably the only sector of the economy that is guarantied a lot of business and good prices independently of whatever happens in China/emerging markets?

Strategist says

I did. It looks like one helluva bargain to me.

If you want your 200% return there is your pick

Heraclitusstudent says

Why are home builders so low? KB has a pe of 7?

Why did they fall so much when this is probably the only sector of the economy that is guarantied a lot of business and good prices independently of whatever happens in China/emerging markets?

Besides the article above if you listen to why I said the Builders didn't have value on CNBC last year it makes sense

Theme of 2015

“You get my drift: The bar for housing is so low that some housing bulls might try the predictable tactic of bellowing about exponential growth portending a miraculous recovery when all that is occurring is a bump up from a pitifully low base. I take a more measured (or perhaps jaundiced) view of what the future holds”

They were doomed from the start, they could never hit their sales metric so the pricing was based on a thesis that they would

2:21 Mark

http://video.cnbc.com/gallery/?video=3000388493

Heraclitusstudent says

Why are home builders so low? KB has a pe of 7?

Why did they fall so much when this is probably the only sector of the economy that is guarantied a lot of business and good prices independently of whatever happens in China/emerging markets?

I assume partially because of what happened in 2008. The bubble was in full burst mode while major talking-heads still pushed housing. Another reason could be margin pressure as affordability is coming to an end, so they have to build and sell relatively "cheaply" on pricey land.

Logan Mohtashami says

all that is occurring is a bump up from a pitifully low base. I take a more measured (or perhaps jaundiced) view of what the future holds”

They were doomed from the start, they could never hit their sales metric so the pricing was based on a thesis that they would

It doesn't explain much: Ok they have a low baseline. Ok they grow from there. They meet a target or not, BFD. They are growing.
Why does TOL, a growing company with probably years of growth in front of it, trade at a forward pe of 8, when CVX trade at 17?
Housing is rare and much more expensive than production price.
Oil is cheap and plentiful.

My theory is that people think Home Builders will not do well if rates are rising.
But first rates (mortgage rates) are not rising, second credit is not the barrier to more building. Permits are more likely the culprit.
If so we are likely to see much more building just because housing is rare and the population keeps growing, and authorities may want high prices, but not so high that the economy gets killed. Therefore they will be under pressure to up the supply.

Heraclitusstudent says

It doesn't explain much: Ok they have a low baseline

Everyone assumed housing was strong that was their first mistake

They were always going to miss their mark so once the market place finally got it, they sold them off

That was my call for 2015, 8%-12% growth with upside if Median Price fell

Median price fell we got 14.5% growht that is a 10%-27% miss on sales expectations

Heraclitusstudent says

My theory is that people think Home Builders will not do well if rates are rising.

We had one rate spike in 2014, Builders missed their sales metric points by 20%-28% in 2014

Heraclitusstudent says

It doesn't explain much: Ok they have a low baseline. Ok they grow from there

The CNBC discussion is perfect clear on why the Builders had no value last year, I even amazed myself how right I was ;-)

Logan Mohtashami says

Everyone assumed housing was strong that was their first mistake

During the crisis, existing home sales fell far less than new home sales, as we had overbuilding.
Now this situation will reverse as we move into far under built territory. People maybe had incorrect hopes for new home sales, but building MUST happen sometime .

Logan Mohtashami says

They were always going to miss their mark so once the market place finally got it, they sold them off

That was my call for 2015, 8%-12% growth with upside if Median Price fell

Median price fell we got 14.5% growht that is a 10%-27% miss on sales expectations

Logan Mohtashami says

The CNBC discussion is perfect clear on why the Builders had no value last year

I don't understand. They had a pe of maybe 10, now fall to 7.
At what point exactly did the market get ahead of itself?
That is your definition of no value? pe 10 with a growth of 10+%? In what other sector do you see that?

Logan Mohtashami says

We had one rate spike in 2014, Builders missed their sales metric points by 20%-28% in 2014

Is there a rate spike now?

And again the problem is not that credit is hard to get or expensive, even in 2014. The key problem on buyer side is that prices are ultra high.
The entire reason why sales are low and prices are high is because they are not building enough.
"Not building enough" cannot be a barrier to more building.

Heraclitusstudent says

At what point exactly did the market get ahead of itself?

If you based the pricing multiple and book value on new home sales hitting 24%-41% sales growth for last year, you were lead to believe a false model of growth

Rate of sales were decelerating from the start of the year but no one picked that up until it was too late

People forget headline sale numbers are misleading both up and down, revision trends are key for new home sales, I wrote about that a lot last year

and now everyone is wondering why the builders got smacked

It's because they missed their sales estimates

Heraclitusstudent says

Is there a rate spike now?

Work of 4.5% 30 year as a test level 10 year is 1.73% basically the low level of the mortgage rates range I have talked about for 2 years now, we are in a channel now on 10's

Logan Mohtashami says

It's because they missed their sales estimates

What was the final growth?
What pe you would generally associate with that growth rate, and why?

Heraclitusstudent says

What was the final growth?

14.5% which means that if you didn't have such a miss in new homes sales in 2014 new home sales would have been down negative 6 -8 percent

Over estimating sales for the 3rd year in a room

Hence why a lot builders and the XHB are 2012/2013 levels