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TheStreet Open House

[video] Higher Home Prices Hurt Lennar's Sales

Stocks in this article: LEN, HD

The video this transcript is based on appeared on December 18.

NEW YORK ( TheStreet) -- Homebuilder Lennar beat its earnings estimates, but price increases hurt new sales. Belpointe Strategist David Nelson gives his outlook.

VIDEO TRANSCRIPT:

Debra Borchardt:
Good morning and welcome to Wall and Broad, lots of economic housing data
out today. November building permits rose to 1,007,000, that was above the expected 983,000. Then we got November housing starts they increased to 1,091,000 versus an estimated 950,000. Plus this morning we got home builder Lennar (LEN) , they reported their earnings, and the company beat on estimates but warned that its higher prices were hurting its new orders. Joining me now is David Nelson he's the chief strategist at Belpointe Asset Management. David, we all know that home prices have been going up, did they raised their prices too high, is that gonna hurt them?

David Nelson:
It obviously didn't hurt this quarter, it's not surprising that the stock is up as strong as it is this morning. It was a huge beat, nothing you can say bad about it, it was top-line bottom line beat and if they can do this in a rising interest rate environment and carry that forward in what's likely to be a bad year for bonds next year, that's pretty good news for them.

Debra Borchardt:
Right now when we look at the chart the stock looks like it was on a comeback when you look at just over a three month view, it looks like it was starting to really pull back and then we look at it over the past year though, it looks like it still has a whole lotta work to do.

David Nelson:
It sure does, and it's got to break out of this range maybe this is this start of that and I think probably the fear in housing stocks in general has been this move upward in the interest rates, everybody's anticipating the taper if not today, perhaps you know sometime in the next couple of months. Interest rates are rising, bond guys get that, they get it you seen the TLT in bonds head south, it's a headwind for companies like this, mortgage rates are likely to climb, so if they can do this in a rising interest rate environment it's pretty good news not just for them but for the economy as a whole.

Debra Borchardt:
And it sounds like for home builders in the housing sector in general like you're saying, if they were able to put these kinda numbers up in a tough environment you know people are, when they gonna buy a house they gotta buy a house, and the rates are not gonna keep them from doing that.

David Nelson:
It's a two-prong approach because as rates go up, that spurs a lot of buying because people start to panic, those who were sitting on the fence waiting to buy they go oh my God, I've gotta do something right now I better do this so, pull some of that forward so you give back some of that a little bit later on, but overall it's pretty good news.

Debra Borchardt:
All right well I don't we're gonna get any more bargains on the prices in housing, so that sounds like another reason why people need to hurry up and buy their houses now. That's it for Wall and Broad, good luck trading everyone.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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