DR Horton's net sales for US homes rose 81% to 23,726 in the fiscal fourth quarter, illustrating continued strong demand amid historically low mortgage rates, the company said Nov. 10.
"We remain cautious regarding the impact of the COVID-19 pandemic and other external factors may have on the economy and our operations in the future," CEO David Auld said during the company's quarterly earnings call. "With 38,000 homes in inventory, an ample supply of lots and continued strong sales trends in October, we are well positioned for another great year in 2021."
The largest US homebuilder reported net income of $829 million in the quarter, up 64% from $505.3 million in the year-ago period.
DR Horton's results illustrate domestic demand strength for polyvinyl chloride, a construction staple used to make pipes, window frames, vinyl siding and other products.
Domestic and export PVC prices have risen to multi-year highs amid tight supply after crashing in April at the height of COVID-related shutdowns and economic shocks that stymied construction activity.
Domestic prices fell 8 cents/lb ($176/mt) in April and May to 47 cents/lb ($1,036/mt), the lowest level since Jan. 31, 2018, S&P Global Platts data showed. Export PVC prices fell 39% in six weeks to a 12-year low of $520/mt FAS Houston on April 29, Platts data showed.
Both have rebounded sharply with supply limited by various factors, including continued reduced upstream chlor-alkali rates, hurricane-related shutdowns and turnarounds or other operational issues.
Domestic prices have gained 14.5 cents/lb ($319/mt) to 61.5 cents/lb ($1,356/mt), with potentially another 6.5 cents/lb ($143/mt) in price increases for October pending. Export prices more than doubled to $1,195/mt FAS Houston, and could inch up further amid global tight supply, bucking the typical seasonal trend of softening at the onset of winter weather.
Strong home sales, demand seen lasting into 2021
US PVC producers have been wary of ramping up chlor-alkali rates in part amid uncertainty that coronavirus surges could dampen demand. But DR Horton executives said Nov. 10 that they see strong new home sales and demand lasting into 2021.
"We believe the increase in demand in the second half of our fiscal year was fueled by increased buyer urgency due to lower interest rates, a limited supply of homes at affordable price points and, to some extent, pent-up demand from the pandemic slowdown earlier this year," CFR Bill Wheat said.
Michael Murray, the company's chief operating officer, said new home construction launched in fiscal fourth quarter will be delivered through the rest of 2020 and into the first three months of 2021.
"I think we'll see an elevated level of homes in inventory going into the next quarter," Murray said. "And then we're going to monitor for what we see in spring selling conditions, and we'll adjust to meet demand. 6.6% to 1.388 Right now, we feel really good about the outlook for the market."
US housing starts data also illustrates strong demand. September US housing starts rose 1.9% to 1.415 million units from August, and were 11.1% higher than in September 2019, according to US Census Bureau data.
January continues to show the 2020 high of 1.617 million units, but the September data showed an increase after August starts fell 6.6% to 1.388 million units from 1.487 million in July. October housing starts data is slated to be released Nov. 18.
