Builder Bounce Fails to Materialize

In yet another sign of negative sentiment surrounding the housing sector, investors gave only a slight bump to D.R. Horton (DHI) Tuesday morning after the nation's largest homebuilder said orders for the latest quarter increased 33% to $3.8 billion.

The numbers beat several analyst estimates but failed to help builders recover from Monday's bloodbath. On Tuesday, D.R. Horton rose 7 cents to $31.89 and Pulte Homes (PHM) added 15 cents to $36.55. But the Philadelphia Stock Exchange Housing Sector index fell 0.36%.

D.R. Horton reported that on a unit basis, orders for the quarter ended Sept. 30 rose 25% from a year ago to 13,950. Orders were up in all geographic markets.

Orders rose 55% in the Southwest, 51% in the Southeast, 27% in the Midwest, 26% in the Mid-Atlantic and 16% in the West.

"Contrary to investor fears that the housing market has peaked and sales are slowing down, we believe these results illustrate that the housing market remains on a solid footing, and DHI is positioned to continue to take market share from the smaller private builders," wrote JMP Securities analyst James Wilson in a research note. JMP provides investment banking services to D.R. Horton.

On Monday, homebuilding shares fell, with the Philadelphia Housing Sector index closing down 2.6%. The index was pressured by declines of 4% or more in Toll Brothers (TOL), Hovnanian (HOV), Lennar (LEN) and other builders.

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