Home Builder Earnings

Vital Statistics:

	Last	Change	Percent
S&P Futures	1692.0	-0.7	-0.04%
Eurostoxx Index	2923.4	17.0	0.59%
Oil (WTI)	102.8	-0.8	-0.79%
LIBOR	0.25	0.000	-0.16%
US Dollar Index (DXY)	80.59	0.140	0.17%
10 Year Govt Bond Yield	2.68%	-0.02%
Current Coupon Ginnie Mae TBA	105	0.2
Current Coupon Fannie Mae TBA	104.4	0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.39

Markets are flattish amidst a couple of big transactions - Applied Materials is buying Tokyo Electron (yes a Japanese company is being bought by an American firm) and there is a possibility of an "IPO" for Chrysler as Fiat and the UAW pension fund debate the value of the company. Bonds continue their post FOMC rally.

We have a couple real estate indices this morning - Case-Shiller increased 12.4% YOY, pretty much in line with forecasts, while the FHFA House Price Index increased 1.0% MOM. The FHFA index is more of a central tendency index because it focuses on homes with conforming mortgages attached to it - in other words, it ignores the jumbo space and cash transaction which are often distressed sales.

We have earnings from a couple of homebuilders today: Lennar (LEN) and KB Home (KBH). Orders dropped 9% on a unit basis, but increased 7% on a dollar basis. Their cancellation rate was 33%.  Revenues increased 29% and average selling prices rose 22% to 299k. KB's increase in ASPs is due to a strategic shift on their part. The stock is down small premarket. Lennar reported ASPs of 291k, with new orders up 14% on a unit basis and 32% on a dollar basis. Cancellation rate was 18%. The stock is up 1.5% preopen.

Jeffrey Metzger, CEO of KB Home said "The fundamentals of the current housing recovery are firmly in place, supported by low inventory levels, an improving economy, and positive demographic trends. Given these factors, we believe that the recent slower pace of recovery caused by an uptick in mortgage interest rates is a temporary effect and we expect to see steady upward demand for housing as consumers adjust to both higher rates and pricing."

Stuart Miller, CEO of Lennar said: "We continue to see long-term fundamental demand in the housing market driven by the significant shortfall of new single family and multi family homes built over the last five years. While there may be bumps along the road that may impact the short-term pace of the recovery, the long-term outlook for our business remains extremely bright."

Brent Nyitray, CFA

iDirect Home Loans

1010 Washington St, 6th floor

Stamford CT 06901

T: 203-817-3614

C: 917-841-4938

bnyitray@dcm-funds.com

AIM bnyitray