New home demand reaches 10-year high

New home demand reaches 10-year high

The most recent data on housing starts and new home sales painted a decidedly gloomy picture about the state of the nation’s housing economy.

The latest report from the Department of Housing and Urban Development and the U.S. Census Bureau showed that housing starts sank to an eight-month low in May, and the most recent data from those same agencies showed that new home sales fell by 11.4% in April.

And while some observers are suggesting that the lack of housing supply is nearing “emergency” status, one prominent homebuilder is seeing just the opposite.

Lennar Corporation said Tuesday that it saw double-digit increases in revenue from home sales, deliveries of new homes, and orders for new homes in the second quarter.

In fact, Lennar said that the demand for new homes just hit a 10-year high, as the second quarter saw the homebuilder receive more new home orders in any quarter in the last 10 years.

Lennar shared the stats as part of the release of its second quarter financial results.

“The overall market improvement was supported by our highest quarterly new orders in the last ten years of 8,898 homes, a 12% increase year over year,” Lennar CEO Stuart Miller said on Tuesday. “Home deliveries and revenues from home sales increased 15% and 18%, respectively, year over year, while our backlog dollar value increased 20% to $4 billion.”

Overall, Lennar reported second quarter net earnings of $213.6 million, or $0.91 per diluted share, compared to net earnings of $218.5 million, or $0.95 per diluted share, in the same time period last year.

Lennar cited expenses related to its $643 million acquisition of WCI Communities, a “lifestyle community developer and luxury homebuilder” headquartered in Florida, as a drag on its earnings results.

Lennar reported that its revenue from home sales increased 18% in the second quarter of 2017 to $2.9 billion from $2.4 billion in the second quarter of 2016.

The homebuilder said that the revenue rose primarily because of a 15% increase in the number of home deliveries, excluding unconsolidated entities, and a 3% increase in the average sales price of homes delivered.

Lennar’s new home deliveries, excluding unconsolidated entities, increased to 7,687 homes in the second quarter of 2017 from 6,711 homes in the second quarter of 2016, while the average sales price of homes delivered was $374,000 in the second quarter of 2017, compared to $362,000 in the second quarter of 2016.

Those results have Miller feeling bullish on the state of the housing economy overall, suggesting that the recent market-wide housing data is not as dire as it appears.

“These strong results were supported by an improved macroeconomic environment, renewed optimism, wage and job growth, and increased consumer confidence,” Miller said. “We are now seeing, contrary to recent reports on housing starts and building permits, more of a reversion to normal in the housing market than the slow and steady recovery pace of the last several years.”

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