Home builders have had a rough week on Wall Street, with stocks diving toward the lowest level in two years for several major companies.
A Standard & Poor’s index that tracks stock performance at 16 home-building companies sank 10.4 percent from June 1 to June 6, and 8.4 percent so far this week. The index peaked in January 2006, reaching 983.9 on Jan. 11. Since that date it has fallen about 38.1 percent. And since May 5, 2006, the index has dropped about 21.4 percent.
Standard & Poor’s tracks 16 companies in its home-building index, including: Brookfield Homes Corp., Beazer Homes USA, Champion Enterprises Inc., Centex Corp., D.R. Horton, Home Depot, Hovnanian Enterprises Inc., KB Home, Lennar Corp., Lowe’s Cos., M.D.C. Holdings, Mohawk Industries, Meritage Homes Corp., NVR Inc., Pulte Homes Inc., Ryland Group, Sherwin-Williams, Standard Pacific, Technical Olympic USA, Toll Brothers, and WCI Communities Inc.
Pulte Homes Inc. and Standard Pacific Corp., among other home builders, have lowered earnings forecasts for the full year based on declining market performance. And the National Association of Realtors this week lowered its expectations for existing-home and new-home sales for the year.
The association expects that new-home sales will fall 13.4 percent this year and housing starts will decline 6.2 percent compared to 2005, while existing-home sales will fall 6.8 percent.
Also, analysts are getting more wary of the stock performance at several home-building companies. Wachovia Securities downgraded Pulte, for example, from “outperform” to “market perform” on June 6, and Pulte also received downgrades from Susquehanna Financial (from “neutral” to “negative”) on June 2, AG Edwards (from “buy” to “hold”) on April 28, Janney Montgomery Scott (from “buy” to “neutral”) on April 28, Credit Suisse (from “outperform” to “neutral”) on March 14 and from JMP Securities (“market outperform” to “market perform”) on Feb. 2.
Hovnanian Enterprises, KB Homes, Standard Pacific, and D.R. Horton Inc., were also among the list of home-building companies that received downgrades from financial analysts this month.
Pulte Homes shares, which were trading at about $28.65 this afternoon after ending the day at $28.11 Tuesday, are at an annual low and are near a June 2004 level. The share price had risen as high as $48.23 in August 2006. KB Home shares were trading at about $46.58 today, the lowest point since September 2004. In July 2006, the price reached as high as $85.45.
Standard Pacific shares have fallen 14 percent so far this month, from $30.17 on June 1 to $25.95 on June 6, though the price had reached $26.34 during afternoon trading today.
Shares at home builder Centex Corp. were trading at about $46.58 this afternoon. In January, the share price reached $78.94, which was close to a one-year high of $79.66 in July. Since Jan. 11, 2006, shares have fallen about 41 percent.
D.R. Horton shares were trading at about $23.81 today after reaching $41.39 on Jan. 11, 2006 – a 42.5 percent drop in that time.