The tide of a better home sales market has been rising, and, if you take a look at the first quarter sales results of the biggest publicly traded builders, it’s lifting all their boats, even though many are still leaky with losses.
Among the 11 who have reported their first quarter 2012 results, 10 out of 11 reported tidily higher deliveries compared with the same quarter of 2011, and 10 out of 11 recorded even greater growth in their order books.
"The spring selling season did arrive this year, and it remains in full swing," said D.R. Horton CEO Don Tomnitz during the company’s conference call with analysts.
On average, the builders were up 22.6% in deliveries and 28.2% in new orders. Only PulteGroup reported a smaller number of home deliveries (a drop of less than 0.8%), and only KB Home reported a fall in new orders (8.1%).
The sales numbers were so improved that the phrase "cautiously optimistic" became less persistent in CEO comments about the results, and several proclaimed that a turn-around in the market appears to be underway. A few, including Meritage Homes, Lennar, and D.R. Horton, said they had been able to increase prices here and there.
As a result, some even voiced hope that 2012 might be a profitable year for them, something most builders haven’t seen in years. In the first quarter, only five in the group turned a profit: D.R. Horton, (the highest at $40.6 million); Lennar, $15 million; M.D.C. Holdings, $2.3 million; NVR, $20.1 million; and Standard Pacific $8.5 million.
Five others, Beazer Homes USA, KB Home, Meritage Homes, M/I Homes, PulteGroup, and Ryland all ended the quarter with red ink, though all but one builder lost a lot less than they did in 2011. And a few came close to breaking even.
Meritage CEO Steven Hilton said he is confident that the company will be profitable for 2012 as a whole, even though Meritage logged a loss in the first quarter.
Some CEOs are already getting prepared to deal with some of the challenges of growth, specifically requests for price increases from suppliers who have been suffering along with builders during the downturn. Horton already has a strategy for that outlined by Tomnitz.
“Bottom line is, we are still not as profitable as we like, and we are starting more homes than anybody else in the country, so, as a result we are very, very competitively pricing [goods and services] and bidding everything out” to get the lowest price possible, Tomnitz said.
Teresa Burney is a senior editor for Builder magazine.