Lennar Corporation (LEN), D.R. Horton, Inc. (DHI), Toll Brothers Inc (TOL): Watching for a Downturn in the Home Market

The magnitude of the improvement on a year over year basis is astounding. “With $250 million in pre-tax income through the first six months of the year, we have already exceeded our pre-tax profits for all of fiscal 2012,” the company noted recently. A turn for the worse, however, could have an equally large effect in the opposite direction.

Toll Brothers Inc (NYSE:TOL)‘ late May second quarter earnings release related a similar story. Deliveries advanced 38% year over year. New sales were up 36% based on home count, but advanced 57% in dollar terms. The average price was $678,000 in the second quarter, up from $631,000 in the first quarter and $585,000 in the second quarter of 2012. Backlog was up 52% to 3,655 homes, but advanced 69% in dollar terms. The average price of a home in backlog was $693,000. The company should report again in August.

Follow the numbers

Luckily for investors, these three home builders report in a sequential pattern. Lennar Corporation (NYSE:LEN) just reported, D.R. Horton, Inc. (NYSE:DHI) should report in late July, and Toll Brothers Inc (NYSE:TOL) should report in August. Keeping tabs on the backlogs and sales of the publicly traded home builders, then, is easier than you might expect.

Although this trio’s shares have come down a little of late, they all remain well above their recessionary lows. Essentially, the homebuilders are most appropriate for momentum investors as their core businesses ramp up again. But, you need to watch closely for slowing sales trends and be particularly watchful for a reversal.

The article Watching for a Downturn in the Home Market originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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