DHI looks more problematic: orders sliding, inventories up, slight dip in profit margins:
Inventories:
Sept: 8,486.8
Dec: 10,074.1
Backlog:
Sept: 19,244
Dec: 20,816
orders:
Sept: 13,950
Dec: 11,463
operating margin:
Sept: 17.45%
Dec: 16.9%
Purchase index in 4th quarter averaged 465, first two weeks of January was 450, so don't think we can say these outfits are in much trouble, just a slow down. Would think they would slow down starts, and just work off inventory. With the purchase activity still running high, price cutting might not even be necessary. It's the cancellation rate on the backlog that is crucial, but so far they've managed to close their deals at a high enough rate. Also competition from resellers, especially ones stressed on resets.
In terms of mortgage rates, I'm wondering if a worm hole is developing with the 5 year ARM again, what is it 5.5-5.625%. It's being heavily subsidized by Asian FCBs.
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