Homebuilder stocks have been on a pretty steady incline this year, despite concerns about whether the housing market is truly recovering. Although recent news has still been a bit mixed, the upshot is that the housing market really is improving, and there are concrete numbers to prove it.
Lennar (NYSE: LEN), one of the nation's largest home construction companies, reported a 33% increase in new home orders in the first quarter, as well as wider operating margins due to the ability of the company to reduce incentives and raise prices. CEO Stuart Miller's comments that stability was returning to the sector may sound trite, but the homebuilder's numbers seem to be proof. Its stock has been rising steadily, by nearly 60% from this time last year. Lest you think that this could be the result of wishful thinking on the part of investors, Lennar's first quarter easily beat analysts' estimates on EPS and revenue.
Ryland Group (NYSE: RYL) also has investor support, and, despite missing on revenue estimates, still delivered a revenue increase of almost 30% year over year. Other nuggets contained in its first-quarter report were an increase in new orders from the previous year of more than 46%, while closings rose 25% over the same time period.
Standard Pacific (NYSE: SPF), whose stock has risen 69% so far this year, also turned in numbers to die for: new orders up 43% from last year, an increase in backlog of 55%, and a revenue jump of nearly 56%. M.D.C. Holdings (NYSE: MDC) was equally upbeat, easily besting predictions in its own first-quarter report. New orders and backlog were up here as well, by 51% and 50%, respectively. Closings were up also, by 12%.
The increase in sale closings is significant, and it is noteworthy that a Wells Fargo survey for the month of March showed that both pricing and sales rates improved from February. A report from the National Association of Realtors reinforces this point, noting that the number of properties that had signed purchase and sale agreements rose more than 4% from February, and nearly 13% from March 2011. Although the report didn't designate sales that had actually closed, the data shows that the market is moving in the right direction.
Fool's take
The evidence indicates quite clearly that a housing rebound has begun, and is gaining momentum. There may be a few more sputters and stalls, however, before the recovery gets a firm footing. Things are not all sweetness and light just yet, and a National Association of Home Builders report published in mid-April notes that builders' confidence in completed sales is still shaky, and that headwinds such as the still-high levels of foreclosures on the market and tight credit policies are still affecting the sector. The prime selling season is upon us, however, and it looks as if it just may be the best one we've seen for several years.
The demand for housing will never decrease for long, which makes this sector great for long-term investing. If you are looking for other profitable ways to bolster your long-term financial security, then check out our free report, "3 Stocks That Will Help You Retire Rich." It's never too late to start planning for the future, so why not start today?
