Two weeks ago, I argued that homebuilders were in for a rude awakening once interest rates start creeping higher and oversupply takes hold after years of record growth.
I guess I was the one in for the rude awakening as my email lit up with readers arguing that I had it all wrong and that it was different this time. I'll concede the points regarding the larger homebuilders gobbling up market share in a highly fragmented sector. I'll concede the improved operating efficiencies. Yet, I can't accept that record earnings and order backlogs assure that the sector won't fall into a cyclical lull.
But that argument may fall on deaf ears as the companies continue to produce stellar results. Last night, it was Lennar
Lennar closed out a robust quarter with a $4.5 billion backlog. It is raising its 2004 profit outlook and now expects to produce earnings of $5.30 a share. KB Home also had that aromatic baked apple pie smell permeating through its quarterly open house, with first-quarter earnings soaring 40% higher.
More importantly, each company reported higher order backlogs on a dollar basis than its latest top-line growth. So, yes, the positive trends are accelerating. Yet, a lot of that is based on low interest rates keeping new home prices buoyant.
Our Home Center has certainly been active with folks looking to find a new house or refinance their current homesteads. The healthy growth by Lennar and KB along with others like M.D.C. Holdings
If you're looking to move this year, have you checked out our Home Center ? Regardless of where you see the housing market going in the near term, do you think it will get cheaper or more expensive to maintain your home in the coming years? All this and more -- in the Building/Maintaining a Home discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz thinks that home is where the heart is -- at least in Edgar Allan Poe's Tell-tale Heart. He does not own shares in any companies mentioned in this story.