Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that assessments of housing activity went flat in April with the composite HMI index climbing to 47 from 46 the prior month while the "buyer traffic"
Housing starts are expected to total 930,000 in tomorrow’s update for March, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). The projection represents a modest rise vs. the previously reported 907,000 for February.The Capital Spectator’s median forecast for March is below a trio of consensus estimates based on recent surveys of economists.
Here’s a closer look at the numbers, followed by brief definitions of the methodologies behind The Capital Spectator’s projections:
VAR-3: A vector autoregression model that analyzes three economic series to project housing starts: new home sales, newly issued permits for residential construction, and the monthly supply of homes for sale. VAR analyzes the interdependent relationships of these series with housing starts through history. The forecasts are run in R using the “vars” package.
ARIMA: An autoregressive integrated moving average model that analyzes the historical record of housing starts in R via the “forecast”
Although shares of LGI Homes (LGIH) have not made much progress since I wrote about it in January, the company is making significant progress with its growth strategy, and its fundamentals and future expectations are even better than I expected. Q4 results and Q1 home closings paint a picture of strong growth across the board, and we can see that the first meaningful results from the geographical expansion beyond Texas, which now accounts for approximately 80% of revenue. Q1 home closings trends indicate that full year results might be much better than the company's initial guidance, which will most likely be raised higher during the year. Management sounded confident in this year's price gains and growth prospects, and I am raising my price target to $34 to reflect the improved future expectations. The overall situation in the housing market is still favorable, and the mortgage rates might stay low