Homebuilders Construct Optimism with 2012 Orders

by Chicago Agent

Orders were up across the board for the nation's largest homebuilders in 2012's first quarter.

The uptick in construction activity has been one of the major housing topics thus far in 2012, and new stats on orders for the first quarter are continuing that trend.

According to the latest data, which was reported by economist Tom Lawler on the Calculated Risk blog, orders for the nation’s largest homebuilders exceeded economists’ expectations on just about every front.

For Ryland Group, for instance, which was the eighth largest builder in the U.S. in 2010, net home orders in the first quarter were up 40.5 percent from 2011’s first quarter, and the builder’s cancellation rate, at 18.0 percent, was an 18.2 percent decline from 2011. Home closings, which totaled 848, were 23.3 percent above 2011, and the company’s order backlog of 2,023 homes was a 38.1 percent increase.

Meritage Homes, the nation’s 10th largest builder in 2010, had similarly strong orders in the first quarter. Its net orders were up 36.2 percent from 2011, home closings up 11.9 percent and its backlog, at 1,300, is a 38.3 percent increase from last March.

In comments quoted by Lawler, Meritage said its orders have been so strong they have begun to positively impact price.

“Our spring selling season got off to a strong start, as evidenced by our 36% increase in sales in the first quarter,” Meritage said. “As demand has strengthened, we’ve begun to raise prices in most of our communities this year.”

M/I Homes, the U.S.’ 15th largest builder, and PulteGroup, the second largest builder, also reported positive orders in the first quarter, though not as stupendously high as that of Meritage and Ryland. Net orders for M/I totaled 764 for the quarter, a 16.8 percent increase, while cancellations were down 16 percent, closings up 15.5 percent and order backlog up by 24.09 percent. Pulte, by comparison, saw net orders rise by 14.9 percent and backlog by 11.8 percent, while cancellations dropped by 16 percent.

In comments to Lawler, M/I said that its first-quarter performance “reflect what we believe to be slowly improving housing condition,” and Pulte hinged on optimism, saying, “(w)e are only one quarter into the year, but the start has exceeded our internal estimates and has us cautiously optimistic that housing demand may have reached a positive inflection point.”

Perhaps the most positive detail, though, in the first quarter reports was the decided lack of concessions and special financing offerings. Ryland said that its incentives and concessions were down 11.7 percent from a year ago, and Lawler noted similar declines in price discounting among the other builders.

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