Sector Snap: Data Weighs On Homebuilder Shares

BOSTON (AP) — Stocks of homebuilders slipped Thursday after a fresh batch of housing data showed disappointing August sales, and a Citi Investment Research analyst suggested homebuilder stocks may be too expensive.

The National Association of Realtors said existing home sales declined 2.7 percent in August compared with a 7.2 percent rise in July. Economists had been expecting a fifth straight increase, which would have offered further indication that the national housing market is making a sustained rebound.

Also weighing down on the homebuilding sector was Wednesday's announcement by the Federal Reserve that it would slow down its purchases of mortgage-backed securities.

Citi's Josh Levin argued in a research note Thursday that he "cannot justify owning any homebuilding stocks at current valuations."

Levin said current stock prices for homebuilders are "stretched," even though he believes the worst of the housing market slump is over.

Levin said the current housing market bottom "differs materially" from previous market lows, based on factors including vacancy rates, foreclosures, homeownership rates and price deflation.