The US housing market seems to be recovering amid low mortgage rates and an improving job market that is helping the economy to recover from the financial meltdown. Housing prices have increased dramatically and some analysts are fearful that this will lead into another housing bubble. Property prices increased almost 11% in March 2013 over the past year according to the S&P/Case-Shiller 20-city home price index, the biggest gain since 2006. This could signal an overheating in the housing sector.
This confidence in the homebuilding market has spiraled stock prices of some of the US homebuilders such as Lennar Corporation (NYSE:LEN), which is trading at forward price-to-earnings ratio of 26 times, while Meritage Homes Corp (NYSE:MTH) is trading at 19.5 times and The Ryland Group, Inc. (NYSE:RYL) at 13.6 times.
Lennar: Solid results
Lennar Corporation (NYSE:LEN) has posted solid figures for the first quarter of 2013. Its revenue from home sales increased 40% to $855 million compared to the same quarter a year earlier, mainly caused by a 28% increase in home deliveries and a 9% average increase in sales price of those deliveries. Its net earnings surged more than 285%, from $14.9 million to $57.5 million in the same period comparison.
Credit: Lennar Corporation (NYSE:LEN)
This could be a good stock to use to gain exposure to the homebuilding sector. Moreover, some homebuilding companies have been pushing prices up as supply is very limited, something that could further increase profits.
Meritage Homes: Enjoying the recovery
Meritage Homes Corp (NYSE:MTH) builds and sells first-family homes across the western, southern and southeastern United States. This company is also enjoying the better market conditions. It posted a 39% increase in home closings and its homes orders improved 35%. The total value of its home orders improved as well, surging 69% for the first quarter of 2013 compared to the same quarter the previous year and totaling $520 million.
Meritage has been increasing its lot supply, reaching 21,029 lots under control in 2013 with net sales orders above their supply capacity. The company’s management expects a 40% increase in home closing revenue in upcoming quarters due to the larger backlog and sales, exhibiting a high confidence in the housing economic recovery.
Ryland: On top of the housing wave
The Ryland Group, Inc. (NYSE:RYL) is a homebuilder and a mortgage finance company. The company is geographically diversified, being present in 17 markets across 13 states. In the first quarter of 2013, the company posted a $374.7 million in revenue, a 73% increase compared to the same quarter of 2012. Its net income also soared from a net loss of $5 million to a profit of $22 million in the same period of comparison. The Ryland Group, Inc. (NYSE:RYL) reported increases of 54.4% in sales volume and 57.2% improvement backlog as compared to the first quarter of 2012. It also ended the quarter with a strong balance sheet with $614.6 million in cash and cash equivalents.
