GregTheAnalyst
Independent Investor, Macro/Micro & Technical Analysis
Lennar is a bad bet, because housing will not rise while a record affordability crisis is already here, and homebuilders should do poorly in coming quarters. The stock is fighting around $117, its 2021 peak and where its monthly 50-period moving average sits, and a drop below its 2005 level would be a big problem. x.comÂ
Lennar trades poorly as yields climb, hitting new 52-week lows, and it builds poor-quality homes. It is also engaging in activities aimed at propping up its earnings. x.comÂ
US homebuilders remain a place to avoid as Fed Chair Warsh's rate hike lands on an already weak housing market. Lennar reported orders down 9%, incentives running at 12% of the sale price and mortgage rates near 6.8%. x.comÂ
Lennar's shift toward an NVR-style asset-light model could let free cash flow and buybacks compound value even without a rerating. Having spun out Millrose and moved much of its land off the balance sheet, Lennar needs far less capital to grow, so when housing normalizes similar economics could return on a much smaller base. The market still prices it like the old land-heavy builder. NVR created value by shrinking its share count, not via a premium multiple. Ted Weschler is buying heavily. x.comÂ
Ugly housing conditions provide the contrarian sentiment for a major homebuilder bull run over the next 12 months. Bears investing through the rearview mirror are going to be proven wrong. x.comÂ
US homebuilders look attractive because America remains structurally undersupplied with housing, and Berkshire Hathaway is buying quality builders while Wall Street focuses on near-term affordability pressure. Berkshire added about 2.74 million Lennar shares as elevated mortgage rates weigh on builder valuations, after acquiring Taylor Morrison and investing in D.R. Horton and NVR. Follow the smart money, but always mind the price. x.com x.comÂ
KB Home shows the housing recession is continuing: even with average selling prices down 5% year over year, deliveries fell 23%. Per @aviancapital, housing revenue fell 27% and backlog value 7%. x.comÂ
The housing market is about to tank, which hurts homebuilders such as PulteGroup and KB Home. Recent results show net income down 75%, gross margins down 25% and operating margins down 75%, with major discounts needed to clear inventory. Builders citing higher land costs while still buying land at inflated values to build zero-margin homes is bankruptcy writing on the wall. x.comÂ
Lowe's is a high-quality long-term hold to buy while housing is out of favor. Its five-year chart looks flat because of post-Covid sentiment, but its share count has fallen substantially over the past decade, and it has beaten the S&P 500 over 10 and 20 years. Q1 was a double beat with sales up 10%, though guidance spooked investors. The $210 level was the target for adding, and the timing of a housing recovery is unknown. x.comÂ
Homebuilder stocks are priced for a soft landing that the inventory data doesn't support. New home supply hit 10.3 months, the highest since February 2009, against a long-term median of about 6, after jumping a full month in May. In 6 of the 7 times it reached this level since the 1970s, the US was already in recession. Mortgage rates and record ownership costs keep buyers out, and when builders cut prices hard to clear supply, margins will take the hit and the sector will reprice. x.com x.comÂ
Home buying is coming to a screeching halt, pushing homebuilders such as Toll Brothers and KB Home toward recession mode. Headcount reductions, cheaper builds, margin cuts and buyer incentives are likely next. x.comÂ
