Few industries had it tougher than construction in the post-boom years, but recent data has been very positive for the industry.
Toll Brothers has joined the league of revitalized builders, including Lennar and Hovnanian, if comments from the luxury builder’s CEO are any indication.
In an interview with CNBC, CEO Douglas Yearley said his company has been experiencing some of its strongest sales activity in years.
“[It’s been the] best spring in five years,” Yearley said. “[In 2012], our orders are up significantly and continue to be up significantly. I’m optimistic right now.”
Yearley added that 25 percent of Toll Brothers’ communities have seen price increases in 2012, and in certain metropolitan areas, such as Phoenix, inventory levels have dropped by several months’ worth.
The news on Toll Brothers is the latest in a long line of positive developments for U.S. home builders. As we reported earlier, fourth quarter sales at Hovnanian Enterprises were up 18.7 percent from the third quarter, and year-over-year sales in February were up 37.5 percent.
As a result of those numbers, investors have been increasingly bullish on homebuilder stocks, and the increased activity has pushed up the stock prices for a number of builders, including PulteGroup, KB Home and, coincidentally, Toll Brothers; altogether, an oft-followed index by S&P that tracks homebuilder stocks has risen by 80 percent since October.
Though much of those gains were not reflected in new home sales in February, which were down 1.6 percent from the year before, complementary data suggests that the recent swing in builder confidence (the NAHB’s Housing Market Index, which measures builder confidence, is at its highest level since June 2007) is in anticipation of future returns for the industry. Building permits, for instance, were up by 5.1 percent from January to February and 34.3 percent year-over-year.
As Bill McBride put it in a recent post: “This still hasn’t shown up in the Census Bureau new home sales reports – but it will. Lennar reported sales up 33 percent year-over-year, Hovnanian reported sales up 30 percent … I expect to see a further increase in sales in the Census Bureau monthly report.”
For further perspective on today’s construction market, check out the cover story to our latest issue, “What’s New with New Construction.”