Home Builders Give Back Some Of Last Week's Rally
44 minutes ago - Dow Jones News
Related Companies
Symbol Last %Chg
DHI 12.96 -4.14%
HOV 4.05 -8.37%
LEN 12.87 -4.15%
LEN/B 9.87 -4.73%
RYL 22.77 -5.09%
As of 1:10 PM ET 8/10/09
By Jennifer Hoyt Cummings
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Shares of home builders pulled back from last week's rally, as analysts said investors are trying to determine if the gains were warranted.
The sector has rallied recently after the companies reported that while they are still mostly operating at losses, they've been seeing an uptick in demand, helped by the government's $8,000 tax credit for qualified first-time home buyers before Dec. 1.
Also boosting the stocks last week was positive economic data, including a jobs report for July that wasn't as bad as analysts had been expecting and data from the National Association of Realtors that existing-home sales climbed for a fifth month in a row in June.
Still, shares pulled back a bit Monday, as evidenced by the Dow Jones Home Construction index, which recently lost 2.6% to 282.28. Among the decliners Monday was Ryland Group Inc. (RYL), which fell 4.2% to $22.99 after FTN Equity Capital cut its stock-investment rating on the company to neutral from buy, saying the shares are fairly valued.
Other home-building stocks trading lower included Hovnanian Enterprises Inc. (HOV), down 5.2% to $4.19; D.R. Horton Inc. (DHI), down 4.1% to $12.97; and Lennar Corp. (LEN), down 3.4% to $12.98.
FTN's James McCanless said now that the results from the June quarter are out, investors are wondering what the next positive catalyst will be for the home-building sector. He said investors are regrouping Monday after recent macro-economic data has helped the sector rally.
"I think people right now are trying to take a step back and determine if these positive trends will continue," he said.
BGB Securities analyst Merrill Ross said positive order rates in the companies' latest quarterly results helped the sector rally, but investors may have gotten ahead of themselves since the companies are still operating at losses.
"People are realizing that profit is a long way off," she said.
Meanwhile, Fox-Pitt analyst Robert Stevenson noted that Monday's declines aren't out of the ordinary for the volatile home-building sector.
He said the declines could be caused in part by concerns that the government may soon restructure mortgage-finance giants Fannie Mae (FNM) and Freddie Mac (FRE), which are a major source of liquidity for the housing market. Both companies are currently under government conservatorship.
Stevenson said Friday's positive earnings report from Freddie wasn't enough to offset worries generated by Fannie last Thursday, when it reported a sharply wider second-quarter loss and requested another $10.7 billion in government aid. People are concerned about how much more rope Fannie and Freddie will be allowed, Stevenson said.
-By Jennifer Hoyt Cummings, Dow Jones Newswires; 212-416-2474; jennifer.cummings@dowjones.com
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(END) Dow Jones Newswires
08-10-09 1227ET
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