To frame or finance..

An interesting report from Bloomberg this morning explains how for some U.S. homebuilders, financing is generating bigger bucks than framing at the moment. Turns out a Federal Reserve stimulus program intended to lower borrowing costs for homebuyers has had a mostly unintended impact – in the form of big profits for lenders. (Full Story)

“At PulteGroup Inc., the second-largest builder by market value, mortgage revenue jumped 70 percent in the third quarter, almost six times the revenue gain from home sales. At Lennar Corp., the No. 1 builder, mortgage-unit revenue surged 60 percent, double the increase in sales revenue. Aided by lucrative lending units, both companies posted the biggest overall profits since 2006. ‘The homebuilders are little players in the lending world, but they’re benefiting from the wide margins of the big players,’ said Michael Widner, an analyst at Stifel Nicolaus & Co. in Baltimore.”

“At this point in the cycle, when homebuilders are just starting to get profitable again, it’s not bad to be making money off mortgages – it’s just a little bit of a risk because there are a lot of factors beyond the control of builders that could influence that,” said Megan McGrath, MKM Partners.

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