Just about flat with last year.
LGI Homes (LGIH) closed on 306 homes in July, down 1.7% from 311 a year earlier, the entry-level home builder reported late Wednesday. In June, LGI Homes’ closings rose 7.3% to 355. In May they spiked 69.4% to 432 homes. Year-to-date closings are up 24.1% vs. a year earlier. LGI Homes shares fell 6.6% to 32.45 soon after the opening bell on the stock market today after falling all the way to 31.10 – but rebound off an entry point exactly there and from its 50-day moving average. The stock is technically back in buy range. LGI Homes rose 1.4% to 34.74 on Wednesday, consolidating after hitting a record high on July 26 – a day before LGI was added to the S&P SmallCap 600…
Is the above info signal or noise?
Dropping 1.7% from the previous year seems bad. But might it be normal business lumpiness and the law of averages evening out––meaning that since the previous months were exceptionally good, it makes sense that July might be down a bit.
Or is this data point signify that the business itself is somehow slowing down internally/structurally?
Year to date closings are up 24.1%. That seems wholesome. If that were to repeat every year, Monkey would be well fed. Do the July numbers suggest that kind of growth is now over, a la SKX, and that Monkey will be left holding a bag of rotten bananas? Or is this more market chicanery?
Thus far, all of Monkey’s positions have been obliterated on the first sign of growth slow-down, but the ones that performed well have not moved up (except for Amazon, essentially, and even that is giving back gains). Stupid, stupid bears, always getting into everyone else’s banana stacks without even asking.
Monkey, last month our best speculation was that closings were leveling off because customers are turned off at the prospect of have to wait too long to occupy a new home.
Bookings are backed up, some building trades are in low supply, yada yada.
That’s all I got…besides fewer bananas ;-(
If closings are leveling off because customers don’t want to wait longer than their pre-determined date for moving into a new home, I blame sales and marketing for most of that.
It is the builder who needs to close the deal. If they can’t come up with enough reasons to talk someone into staying with a new house instead of jumping into an existing house, just because it is going to take another few weeks longer than hoped for, that is a problem.
I’m not buying that as a reason (not that it really matters what I feel up here in Idaho).
Not pounding on sales and marketing for LGIH because I don’t know. I would put it down as lumpiness in the construction industry. Construction is notoriously boom or bust (or somewhere in between). It is the builder’s job to manage expectations, yet still deliver.
Besides, there are plenty of low cost (and high cost) ways to make a customer happy and to stay, even for the one’s that are in a rush. For the others, well, you can’t sell 'em all…
I have to laugh at my own ignorance. I had some extra cash that I wanted to put to work, so I thought, “gee, I like LGIH alot and their PE is purty darn low, so let’s add some.”, totally not thinking about the fact that the monthly Home Closings report was about to come out and I might want to wait for that first.
DOH! Painful lesson being learned today. I hate me right now.