Beazer Misses Earnings; “Hovnanian Shares Plummet 14 Percent, Homebuilders Standing At The Precipice”

Investment Research Dynamics

Beazer Homes (BZH) dropped more than 6 percent today after reporting tepid third quarter results, and several other builders were selling off with Hovnanian’s demise. How could a national homebuilder be self-destructing before our eyes in this supposedly robust economy?

Of course U.S. homebuilders have been keen to buy into the “recovery” story because it sounds good and there are always homes to sell. As NAR keeps telling us, the water is fine, so jump on in! Interest rates are low, and there are homes for sale that need families in them. Never mind the fact that the rate of U.S. homeownership is at a new 48-year low. Never mind the fact that wage growth is still in the basement while asset prices have spiraled upward. The stock market is just a few percentage points from an all-time high, soeverything is surely awesome right? Home prices are still climbing in many U.S. markets, so this is a sign of growth and household formation right?

You can read the rest of this article here:  AaronLayman.com

Today Beazer Homes missed both its Wall Street brain trust earnings and revenue estimates.  How is this possible in what is supposed to be the hottest housing market since 2004?  I did just a quick scan of its financials and its cash levels fell, inventories increased, debt increased and total liabilities increased from its Fiscal Q2 to Fiscal Q3.  Worse, Beazer’s operations burned another $36 million of cash form Q2 to Q3.

Again, how is this possible in this housing market?

Or maybe the current housing market isn’t really a strong as the snake-oil salesmen at the National Association of Realtors, Wall Street and the financial media would have you believe.

With interest rates and mortgage rates steadily rising now, going forward the entire housing market is going to be reporting negative comps.  The comps have looked robust over the past couple of quarters because last year’s numbers were weak because interest rates were over 100 basis points above where they were in the first five months of 2015.  Furthermore, the Government increased taxpayer risk exposure to Fannie and Freddie by reducing the down payment requirements and drastically reducing the amount of mortgage insurance borrowers have to pay.

 But interest rates are going back up, disposable household income is declining and less Americans have full-time jobs.  It’s going to get ugly in the housing market and everyone who has stretched to buy home this year and going to be horrified when they realize that they are significantly underwater on the mortgage by the end of the year…