LGI Homes files for $125 million IPO as U.S. housing market recovers

n">(Reuters) - Homebuilder LGI Homes Inc filed with U.S. regulators on Wednesday to raise up to $125 million in an initial public offering, at a time when the recovery in the U.S. housing market picks up pace.

LGI Homes started in 2003 and currently builds entry-level homes that are priced between $115,000 and $260,000 in Texas, Arizona, Florida and Georgia.

U.S. homebuilder confidence neared an eight-year high in August as strong demand for and the limited supply of new and existing homes outweighed higher mortgage rates, data from the National Association of Home Builders showed.

LGI Homes' revenue nearly tripled to $143.4 million in 2012 from 2010, the company said in a filing with the U.S. Securities and Exchange Commission. (link.reuters.com/tyt62v)

The Woodlands, Texas-based company said it revenue has grown at a compound annual rate of 61 percent since 2010.

LGI Homes sold 1,062 homes in 2012, almost 2.5 times higher than 2010. It has sold over 5,000 homes since 2003.

The filing did not reveal how many shares of common stock the company planned to sell or their expected price.

The company intends to list its common stock on the Nasdaq under the symbol "LGIH".

It said Deutsche Bank Securities, JMP Securities, JP Morgan, Barclays, Bank of America Merrill Lynch and Builder Advisor Group were underwriting the IPO.

The amount of money a company says it plans to raise in its first IPO filings is used to calculate registration fees. The final size of the IPO could be different.

(Reporting By Varun Aggarwal in Bangalore; Editing by Savio D'Souza)

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U.S. housing recovery loses a step as pending home sales fall

A real estate sales sign sits outside of a house for sale in Phoenix, Arizona June 2, 2009.

Credit: Reuters/Joshua Lott

By Jason Lange

WASHINGTON | Wed Aug 28, 2013 10:51am EDT

WASHINGTON (Reuters) - Contracts to purchase previously owned U.S. homes fell for the second straight month in July, a sign that rising mortgage rates are taking the steam out of America's housing market recovery.

The National Association of Realtors said on Wednesday its Pending Homes Sales Index, based on contracts signed last month, decreased 1.3 percent to 109.5.

That was a steeper decline than most analysts had expected, and could provoke added caution at the U.S. Federal Reserve over plans to reduce a bond-buying economic stimulus program.

"Higher mortgage rates (are) beginning to take some bloom off the buoyancy in the housing market," said Millan Mulraine, an economist at TD Securities in New York.

The data had little impact on Wall Street, where the focus was on the potential for a military strike by the United States against Syria. U.S. stocks opened flat, while yields on U.S. government debt rose.

Contracts fell across most of the country, with losses concentrated in the Northeast and the West.

The U.S. housing market was battered by the 2007-09 recession but appeared to turn a corner early last year when home prices began to rise again.

Since May of this year, however, mortgage rates have risen dramatically on bets the Fed would reduce monthly bond purchases before long.

Last week, the average rate for 30-year mortgages rose 12 basis points to 4.8 percent, the Mortgage Bankers Association said in a separate report.

Rates have surged more than a percentage point since May, when officials at the Fed began dropping stronger hints that the central bank would begin withdrawing monetary stimulus.

This already appears to be reducing the pace of price gains as well as refinancing activity. Loan applications for home purchases have also fallen sharply since May, although they ticked higher last week.

Still, rates remain low by historical standards, and most economists think the housing sector will continue to recover, albeit at a slower pace.

In a Reuters survey published on Wednesday, economists said household formation and a tight supply of properties available for sale would shield the housing market from a spike in home lending rates.

The poll forecast sales of previously owned homes at an average annual rate of 5.20 million units in the third quarter, picking up slightly to a 5.24 million unit pace in the final three months of the year.

The average 30-year rate was seen averaging 4.17 percent this year, jumping to 4.90 percent in 2014. In the May poll, economists had forecast it would average 3.58 percent this year.

(Reporting by Jason Lange; Editing by Chizu Nomiyama and Krista Hughes)

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Lowe's, like Home Depot, benefits from housing rebound

By Dhanya Skariachan

Wed Aug 21, 2013 1:47pm EDT

n">(Reuters) - Lowe's Cos Inc (LOW.N) reported stronger-than-expected quarterly results as the housing market's recovery encouraged Americans to spend more on their homes, and the No. 2 home improvement chain narrowed its sales gap against rival Home Depot Inc (HD.N).

The results prompted Lowe's to raise its fiscal-year outlook, and its shares hit an all-time high on a split adjusted basis on Wednesday.

The news came the day after Home Depot also reported rosy results, giving further proof of the strength in the U.S. housing market recovery.

Lowe's sales at stores open at least a year rose 9.6 percent in the second quarter ended on August 2 but trailed the 10.7 percent increase at Home Depot.

However, that is the narrowest gap in same-store sales between the two retailers since the third quarter of 2010, BMO Capital Markets analyst Wayne Hood said.

"This could signal that (Lowe's) product line reviews and merchandise assortment overhaul are starting to work," Hood said.

Home improvement chains, whose sales crumbled during the housing downturn, are enjoying a comeback as rising prices for homes have led to renewed interest in renovating them.

"We think both companies are on a pretty good surfboard in front of a pretty good tsunami," said Bill Smead, a portfolio manager at the Smead Value Fund in Seattle.

U.S. home resales rose in July to a more than three-year high, the National Association of Realtors said on Wednesday, suggesting a sharp rise in borrowing costs has had only a limited impact on the housing recovery so far.

"The rate increases will likely take some steam out of the recent housing market rebounds, but shouldn't derail it as long as job gains persist, homes continue to appreciate and rates rise more gradually going forward," Lowe's Chief Executive Officer Robert Niblock said on a conference call.

Smead's firm holds Home Depot shares and sees better longer-term prospects for the industry leader, citing its strong management team, free cash flow and balance sheet.

Some analysts also say Home Depot will continue to outperform Lowe's on the sales front for a while, in part because it derives much more revenue from the key contractor and professional customer group.

These customers account for 35 percent of Home Depot's sales, compared with 25 percent at Lowe's. Some analysts have said it is hard to close that gap quickly because Home Depot has more stores than Lowe's in major metropolitan areas, where many of the professional contractors are based.

Lowe's recently agreed to buy several neighborhood hardware and garden stores in California from Orchard Supply Hardware Stores Corp (OSHWQ.PK), which Sears Holdings Corp (SHLD.O) spun off less than two years ago. The deal gave Lowe's access to Orchard's prime locations in high-density markets in California, an area where it was under-represented.

Shares of Lowe's were up 4.4 percent at $46.05 in afternoon trading after rising as high as $47.25 earlier in the session. Home Depot dipped 0.2 percent to $74.11.

Both stocks trade around 19 times expected earnings for the next 12 months, making them more expensive than many of their retail peers.

PLAYING CATCH-UP

Lowe's net earnings rose to $941 million, or 88 cents a share, in the second quarter from $747 million, or 64 cents a share, a year earlier. Analysts were expecting a profit of 79 cents a share, according to Thomson Reuters I/B/E/S.

Sales increased 10.3 percent to $15.71 billion, exceeding analysts' estimates of $15.06 billion.

For the fiscal year ending January 31, Lowe's said it expected total sales to rise about 5 percent, while it had previously called for a 4 percent increase. It raised its earnings-per-share forecast to about $2.10 from $2.05.

Home Depot was quicker than Lowe's to cut costs during the recession. In recent years, it has also benefited from its efforts to improve customer service and attract shoppers with more compelling prices than its rivals. It has tailored its marketing to local areas, centralized distribution centers and shifted more workers to jobs where they serve customers directly.

After losing share to Home Depot for several quarters, Lowe's laid out a turnaround plan. As part of its makeover, the smaller company started offering everyday low prices and products targeted to specific geographic markets.

It made its stores more appealing with improved signs, television displays that stream videos on how-to-do projects, and lower racks to make items easier to reach.

Lowe's has also increased its assortment of products available online and started mylowes.com, a website that allows shoppers to save their room dimensions, create a shopping list and set reminders to buy items such as air filters and batteries for smoke alarms.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)

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Housing Market: Builder Plots Acceleration

The boss of Bovis Homes has told Sky News the company is to step up its building of new houses as the market recovery gathers pace.

David Ritchie was speaking after the builder posted a 19% increase in first half pre-tax profit to £18.6m.

It said that while market house price increases were estimated at up to 2% over the year to date, its own average sale price had risen to £188,500 on average - a rise of 15%.

Bovis, like its competitors, has credited Government measures such as the Help to Buy shared equity scheme for improved activity in the market, benefiting first-time buyers especially.

Funding for Lending has aided borrowers in that it has brought down mortgage costs.

David Ritchie sees construction accelerating this year and next

The company spoke of an acceleration in business, with trading in the 32 weeks to August 9 realising a 43% increase in private reservations to 1,712 homes.

Mr Ritchie said: "The group has performed strongly during the first half of 2013 and has delivered a 50% increase in housing operating profit.

"We have plan in place this year to increase our production by around 25% year over year and we expect to increase our production again in 2014.

"So we are stepping up and building significantly more homes because of the initiatives the Government have put in place and our strategy being deployed."

Official data and other market surveys have all pointed to a recovery in activity, with the Royal Institution of Chartered Surveyors (RICS) suggesting there were signs of a recovery "round the corner" with every region of the country showing growth.

The speed of the market improvement in recent months has led ministers to dismiss fears that the Government's intervention risks creating a market bubble.

The property website Rightmove's latest report found the revival continued in August, despite the month seeing the first dip in sellers' asking prices during 2013.

It said asking prices edged down by 1.8% month-on-month to £249,199 on average - but the string of price increases seen over the last seven months meant they were still £20,000 higher now than at the start of the year.

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U.S. housing starts rise in July but miss forecasts

Carpenters work on new homes at a residential construction site in the west side of the Las Vegas Valley in Las Vegas, Nevada April 5, 2013.

Credit: Reuters/Steve Marcus

By Lucia Mutikani

WASHINGTON | Fri Aug 16, 2013 9:09am EDT

WASHINGTON (Reuters) - U.S. housing starts and permits for future home construction rose less than expected in July, suggesting that higher mortgage rates could be slowing the housing market's momentum.

The Commerce Department said on Friday that housing starts increased 5.9 percent to a seasonally adjusted annual rate of 896,000 units. June's starts were revised up to show a 846,000-unit pace instead of the previously reported 836,000 units.

Economists polled by Reuters had expected groundbreaking to rise to a 900,000-unit rate last month.

Permits to build homes rose 2.7 percent in July to a 943,000-unit pace. Economists had expected permits to rise to a 945,000-unit pace.

"It's not a surprise given the recent rise in mortgage rates. I think we are looking at a situation that some air is coming out of the housing recovery given the higher mortgage rates," said Michael Hanson, senior economist with Bank of America Merrill Lynch in New York.

"At this point, affordability has not changed that much on a historical basis. Housing affordability remains high, but fundamentals are less favorable for new buyers than they were a couple of months ago."

Mortgage rates have spiked in anticipation of the Federal Reserve tapering the $85 billion in bond purchases it is making monthly to keep interest rates low and stimulate the economy.

Economists expect the U.S. central bank to make an announcement on tapering at its policy meeting next month.

U.S. stocks were poised to open slightly higher after the data. The dollar pared gains against the yen and fell to a session low against the euro.

The residential construction figures last month could also be a reflection of supply constraints. Builders have been complaining about a shortage of labor and materials.

Still, residential construction remains on a firmer footing and should again contribute to economic growth this year.

A report on Thursday showed confidence among single-family homebuilders neared an eight-year high in August, with builders fairly upbeat about sales prospects over the next six months.

Though residential construction only accounts for about 3.1 percent of gross domestic product, housing has a wider reach in the economy. Analysts estimate that for every single-family home built, at least three jobs lasting for a year are created.

Economists expect average monthly housing starts for the whole of 2013 to top 1 million.

Last month, groundbreaking for single-family homes, the largest segment of the market, fell 2.2 percent to a 591,000-unit pace, the lowest level since November last year.

Starts for multi-family homes jumped 26 percent to a 305,000-unit rate, reversing the prior month's decline.

Permits for multi-family homes rose 12.6 percent to a 330,000-unit rate. Permits for single-family homes fell 1.9 percent to a 613,000-unit pace.

A separate report from the Labor Department showed nonfarm productivity increased at an annual rate of 0.9 percent in the second quarter.

Productivity dropped at a rate of 1.7 percent in the first quarter. Unit labor costs - a gauge of labor-related costs for any given unit of output - rose at a rate of 1.4 percent in the second quarter after dropping in the first quarter at a rate of 4.2 percent.

(Reporting by Lucia Mutikani, additional reporting by Richard Leong in New York; Editing by Paul Simao)

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U.S. housing starts rise in July but miss forecasts

Carpenters work on new homes at a residential construction site in the west side of the Las Vegas Valley in Las Vegas, Nevada April 5, 2013.

Credit: Reuters/Steve Marcus

By Lucia Mutikani

WASHINGTON | Fri Aug 16, 2013 9:09am EDT

WASHINGTON (Reuters) - U.S. housing starts and permits for future home construction rose less than expected in July, suggesting that higher mortgage rates could be slowing the housing market's momentum.

The Commerce Department said on Friday that housing starts increased 5.9 percent to a seasonally adjusted annual rate of 896,000 units. June's starts were revised up to show a 846,000-unit pace instead of the previously reported 836,000 units.

Economists polled by Reuters had expected groundbreaking to rise to a 900,000-unit rate last month.

Permits to build homes rose 2.7 percent in July to a 943,000-unit pace. Economists had expected permits to rise to a 945,000-unit pace.

"It's not a surprise given the recent rise in mortgage rates. I think we are looking at a situation that some air is coming out of the housing recovery given the higher mortgage rates," said Michael Hanson, senior economist with Bank of America Merrill Lynch in New York.

"At this point, affordability has not changed that much on a historical basis. Housing affordability remains high, but fundamentals are less favorable for new buyers than they were a couple of months ago."

Mortgage rates have spiked in anticipation of the Federal Reserve tapering the $85 billion in bond purchases it is making monthly to keep interest rates low and stimulate the economy.

Economists expect the U.S. central bank to make an announcement on tapering at its policy meeting next month.

U.S. stocks were poised to open slightly higher after the data. The dollar pared gains against the yen and fell to a session low against the euro.

The residential construction figures last month could also be a reflection of supply constraints. Builders have been complaining about a shortage of labor and materials.

Still, residential construction remains on a firmer footing and should again contribute to economic growth this year.

A report on Thursday showed confidence among single-family homebuilders neared an eight-year high in August, with builders fairly upbeat about sales prospects over the next six months.

Though residential construction only accounts for about 3.1 percent of gross domestic product, housing has a wider reach in the economy. Analysts estimate that for every single-family home built, at least three jobs lasting for a year are created.

Economists expect average monthly housing starts for the whole of 2013 to top 1 million.

Last month, groundbreaking for single-family homes, the largest segment of the market, fell 2.2 percent to a 591,000-unit pace, the lowest level since November last year.

Starts for multi-family homes jumped 26 percent to a 305,000-unit rate, reversing the prior month's decline.

Permits for multi-family homes rose 12.6 percent to a 330,000-unit rate. Permits for single-family homes fell 1.9 percent to a 613,000-unit pace.

A separate report from the Labor Department showed nonfarm productivity increased at an annual rate of 0.9 percent in the second quarter.

Productivity dropped at a rate of 1.7 percent in the first quarter. Unit labor costs - a gauge of labor-related costs for any given unit of output - rose at a rate of 1.4 percent in the second quarter after dropping in the first quarter at a rate of 4.2 percent.

(Reporting by Lucia Mutikani, additional reporting by Richard Leong in New York; Editing by Paul Simao)

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