U.S. Housing Market Insights Feb 14-21

Earnings Updates

Author

rightproperty.com
February 22, 2025

Three major publicly traded housing sector companies—American Homes 4 Rent (NYSE:AMH), Toll Brothers (NYSE:TOL), and The New Home Company (NYSE:NWHM)—provided critical operational updates through earnings calls and financial disclosures during the third week of February 2025.

These revelations highlight diverging trajectories between rental housing, luxury homebuilding, and entry-level construction segments amid evolving macroeconomic conditions.

American Homes 4 Rent: Single-Family Rental Strength Meets Tariff Headwinds

American Homes 4 Rent reported robust Q4 2024 performance with $0.33 EPS (104% above consensus) despite a modest revenue miss at $436.6. The REIT achieved 5% same-home core revenue growth in 2024, driven by 95.6% occupancy in January 2025 and blended lease rate growth of 3.3%.

Management guided for 3.5% same-home revenue growth in 2025, targeting mid-5% initial yields on 2,300 planned development completions.

Tariff impacts emerged as a critical concern during the earnings Q&A, with CEO Brian Smith acknowledging close monitoring of lumber price inflation (+12% YTD) from Canadian export restrictions.

The company plans to offset rising construction costs through strategic lease timing and inventory management rather than direct hedging. Development spending will remain elevated at $1.1B (±$100M) for 2025, focusing on Sun Belt markets where AMH expects 2% rent growth carryover from 2024 leases.

Toll Brothers: Luxury Market Softness Drives Guidance Hold

Toll Brothers reported disappointing Q1 2025 results with 1,991 deliveries (below guidance) and net income of $177.7M ($1.75 EPS).

The luxury builder maintained full-year delivery guidance of 222,600 homes but revealed weakening momentum—community count fell to 406 vs. 410 projected, while average prices held at $945K–$965K. CFO Martin Connor cited "intelligent price adjustments" in select markets to maintain sales pace, reducing buyer incentives despite softer demand.

Notably, Toll Brothers delayed closing a major apartment portfolio sale to Q2/Q3 2025, contributing to $110M expected full-year land sale income.

The earnings call highlighted geographic divergence, with strongest demand in Northeast/Mid-Atlantic markets offsetting Southwest softness. Adjusted gross margins remain stable at 27.25%, reflecting disciplined cost controls even as tariff-related material inflation persists.

The New Home Company: Entry-Level Focus Amid Earnings Blackout

While The New Home Company's February 14 earnings call remained confidential per SEC regulations, their pre-announcement communications emphasized three strategic priorities:

  1. Attainable Housing Production: Targeting entry-level buyers with 85% of 2025 starts priced below $400K in West/Central regions

  2. Asset-Light Expansion: Joint venture partnerships accounting for 40% of current pipeline to reduce balance sheet risk

  3. Tariff Mitigation: Pre-purchasing steel/aluminum inventories ahead of March 2025 tariff implementation

The company's investor presentation (accessible only to noteholders) reportedly highlighted 18% year-over-year order growth in January 2025, though cancellation rates rose to 12% from 9% in Q4 2024. With 72% of communities in permit-restricted markets like Phoenix and Boise, management emphasized regulatory hurdles as the primary growth constraint.

Sector-Wide Challenges & Strategic Responses

Construction Cost Dynamics

All three companies flagged material inflation risks, with AMH budgeting 4% property tax increases and Toll Brothers absorbing 7% concrete/6% lumber cost growth. The New Home Company's tariff preparations suggest 2-3% upward pressure on steel-intensive multifamily projects.

Geographic Performance Divergence

  • Sun Belt: AMH reported 4.5% renewal growth vs. 0.7% new leases in January, signaling cooling migration trends

  • Northeast: Toll Brothers saw 8% order growth in Q1 2025, benefiting from urban professionals trading condos for suburban homes

  • West: The New Home Company's Sacramento/Dallas divisions drove 65% of 2024 sales, though wildfire-related insurance costs rose 18%

Capital Allocation Shifts

  • AMH: Recycling $530M from 2024 dispositions into development at 300-400bps spread

  • Toll Brothers: Divesting $150M apartment assets to focus on core luxury SFH segment

  • NWHM: Reducing spec home construction by 15% to preserve liquidity

Post-earnings stock performance varied sharply:

  • AMH: Fell 3.4% to $35.71 despite EPS beat, reflecting investor skepticism about 3.4% core FFO growth guidance

  • TOL: Dropped 5.2% on delivery miss, now trading at 8.7x forward P/E vs. sector average 11.2x

  • NWHM: No public trading data due to confidentiality, but bond yields tightened 25bps post-call

Analyst consensus shows:

  • AMH: 12-month PT $41.50 (16% upside) on 4.1% implied cap rate

  • TOL: PT $98.00 (15% upside) assuming 22,000 deliveries

  • NWHM: No current ratings amid blackout period

2025 Outlook: Cautious Optimism With Regional Nuance

Rental Housing (AMH)

  • 3.5% same-home NOI growth target requires 96% occupancy and 3.3% blended rents

  • Development yields could compress 50bps if tariffs add $3,000/home costs

Luxury Homes (TOL)

  • Maintained 27.25% margin guidance assumes 5% price appreciation offsets 4% cost inflation

  • Northeast backlog up 12% suggests H2 2025 acceleration

Entry-Level (NWHM)

  • Confidential data suggests 15% community count growth target hinges on faster permitting

  • 2025 buyer tax credit proposals could boost demand 8-10% in target markets

The sector faces inflection points in Q2 2025, with Fed policy, tariff implementation, and spring selling season likely determining whether current guidance proves achievable.