Homebuilders have found themselves in an extremely high rate of return business, given their position to deliver to an under-supplied market. In this clip from "Ask Us Anything" on Motley Fool Live, recorded on May 31, Motley Fool contributor Tyler Crowe discusses how homebuilders have seen profitability soar in today's market.
Tyler Crowe: Every single earnings report that I read from homebuilders, we were seeing high revenue growth. Volume of sales is a little bit down, but price increased. They were able to offset pricing, labor costs and material costs with higher home prices, which more than offset it. Here's what is fascinating. There were a couple of things that were just absolutely fascinating to me about this was that net margin percentages for most of these companies are as high as their gross margins were five years ago. Their ability to command prices has been extremely high. The ability to deliver to an under-supplied market has been very helpful and it's creating incredible profitability for these companies. I looked at about six or seven of them, and the worst of them had a return on equity of 17.5% over the past 12 months. We're looking at an extremely high rate of return business. DR Horton (DHI 0.19%) authorized a share repurchase, that would be 3% of their market cap. Lennar (LEN 0.12%) said they were going to do $2 billion. Smaller company Green Brick Partners (GRBK 0.69%) just gave an authorization to buy back 10% of their market cap and share repurchases. The narrative that homebuilders are going to get crushed in this environment, I don't think anyone at homebuilders or anyone told the homebuilders because they seem to be doing extremely well.
