Sector Snap: Homebuilders down on weak reports

Homebuilder shares fall on report of drop in housing starts and Toll Brothers reports

Associated Press

Homebuilder company stocks fell Wednesday following a government report that pace of home construction slowed in January and a disappointing quarterly earnings report from an industry leader.

The share price of many homebuilders has been on the rise for the past few months as evidence mounted that the housing market was improving. But investors remain jumpy on any sign of weakness.

The Commerce Department said before the market opened that U.S. homebuilders began work at a slower pace in January than in December. Builders started work at a seasonally adjusted annual rate of 890,000 homes last month. That was down 8.5 percent from December, when housing starts had hit an annual rate of 973,000, the most since June 2008.

The report wasn't all bad news though. The drop occurred in the volatile area of apartment construction, which sank 24 percent. By contrast, the rate of single-family homebuilding rose 0.8 percent. Even with the overall decline, the pace of home construction in January was the third-highest since 2008 and was evidence of continued strengthening in residential real estate. Additionally, applications for building permits, a signal of future construction, topped December's rate and are at their highest point since mid-2008.

Separately, Toll Brothers said Wednesday that it returned to a profit for its fiscal first quarter, but results fell short of Wall Street expectations.

The company earned 3 cents per share and its revenue jumped 32 percent to $424.6 million. But analysts were expecting earnings of 11 cents per share on $505 million in revenue, according to FactSet.

Toll Brothers said the number of homes delivered during the quarter increased 32 percent but the average price edged down less than 1 percent, hurt by a consumer shift toward cheaper homes.

This follows a report Tuesday that showed confidence among U.S. homebuilders slipped in February from the 6 1/2 year high it reached in January, with many builders reporting less traffic by prospective customers before the critical spring home-buying season.

The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday dipped to 46 from 47 in January. It was the first monthly decline in the index since April. Readings below 50 suggest negative sentiment about the housing market.

The spate of disappointing industry news sent shares of most companies down Wednesday after hitting annual trading highs recently. Here's a look at how a number of companies fared by afternoon trading:

Hovnanian Enterprises Inc.: Down 19 cents, or 3.3 percent, to $5.57. It hit a 52-week high of $7.43 in early January.

Lennar Corp.: Down $1.64, or 4.1 percent, to $38.27. Shares reached an annual peak of $43.22 in late January.

Toll Brothers Inc.: Down $2.06, about 5.6 percent, to $34.84. Shares traded as high as $38.36 in late January.

PulteGroup Inc.: Down 87 cents, or 4.4 percent, to $19.08. The stock hit a 52-week high in January at $21.97.

KB Home: Down $1.15, or 5.9 percent, to $18.35. Shares reached their annual peak at $20.04 last week.

DR Horton Inc.: Down 99 cents, or 4.3 percent, to $22.30. The stock peaked last week at $24.66.

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