
Lennar, Hovnanian: Homebuilder Winners & Losers
(Homebuilder winners and losers report updated with commentary and closing stock prices.)
NEW YORK (
) --
Stocks in the homebuilder sector pushed higher Wednesday following
better-than-expected data on existing-home sales in November.
"For a moment in time it's an encouraging number," said Paul Anastos, president of Mass.-based Mortgage Master. "We can draw a conclusion that potential buyers are seeing a relationship between still-low mortgage rates and favorable prices to buy homes...it comes down to
perceptions of affordability."
Lennar
(LEN) - Get Report
gained 2.4% to close at $18.96 following the report,
PulteGroup
(PHM) - Get Report
added 4.1% to $7.64,
D.R. Horton
(DHI) - Get Report
3.1% to $12.28,
Toll Brothers
(TOL) - Get Report
2.7% to $19.96 and
KB Home
(KBH) - Get Report
rose 2.8% to close at $14.21.
>>Homebuilder Stocks: Behind the Numbers
Small-cap builder
Hovnanian Enterprises
(HOV) - Get Report
was among the few leading the group lower, shedding 2.5% to close at $4.25, well off earlier lows. Hovnanian reported disappointing quarterly results and a double-digit drop in new-home contracts, despite narrowing its losses.
"Hovnanian continues to lead the sector with the highest impairment charges as a percentage of inventory owned, and it now has written off 47% of its total inventory value," noted Vicki Bryan, senior high yield analyst at Gimme Credit. "Without additional big tax refunds, which are unlikely, the company could burn through its available cash in two years."
Existing-home sales rose 5.6% last month to a seasonally adjusted annual rate of 4.68 million units, the National Association of Realtors said Wednesday.
Despite the uptick, the road to a sustainable housing recovery is long, Anastos said. Last month's pace of sales of previously occupied homes remains 27.9% below year-earlier levels in Nov. 2009, the initial deadline for the
first-time buyer tax credit.
"It comes down to the basics -- unemployment remains high and consumer confidence remains low, so people are not in a position to be out buying homes," he told
TheStreet
. "We're at the best home affordability levels seen in 30 or 40 years, but it comes down to confidence. Can I make payments? Will I have a job? This is driving the housing market."
Anastos said
rising mortgage rates, which some market watchers view as deterring home buying activity, are not likely to continue to rise, but are also unlikely to return to record lows seen in recent months.
Mortgage application activity fell sharply last week as
pushed higher for the sixth straight week.
The total volume of
mortgage applications dropped 18.6% in the week ending Dec. 17. The average rate on a 30-year fixed mortgage edged up to 4.85%, from 4.84% in the prior week, approaching six-month highs.
>>Housing Market to Recover in 2013: Analyst
Last week's
disappointing homebuilding permits data further confirms that the "housing market recovery remains fragile at best," Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm, told the
TheStreet
.
He cited the usual suspects of high unemployment, potential buyers' low confidence among in the stability of home prices and the large inventory of distressed properties that still need to be cleared.
Foreclosure activity declined dramatically in November, but Brungardt said the 21% month-over-month drop was "a false positive," a result of the so-called "robosigning" scandal that led to procedural delays and foreclosure moratoriums at servicers like
Bank of America
(BAC) - Get Report
and
JPMorgan Chase
(JPM) - Get Report
. Even
Fannie Mae
(FNMA.OB)
and
Freddie Mac
(FMCC.OB)
, which stand behind the vast majority of U.S. mortgages, have said they won't push forward on foreclosures during the holiday season.
Brungardt estimated that the shadow inventory of homes could take two to three years to clear to a point when housing supply and demand begin to match up again, and that no acknowledged housing bottom will appear until that shadow inventory is significantly curtailed.
Homebuilders should expect material dampening of
new-home purchases until then, Brungardt forecast. Current homeowners will also continue to be impacted unfavorably, he told
TheStreet
Thursday morning.
Brungardt added that the recent spike in
mortgage rates -- a jump of 70 basis points over a short period of time -- also worked to delay a housing market recovery. Rates are still historically low, he conceded, but need to stay in the 4.5% to 4.75% range in order to fuel a meaningful recovery. He expects mortgage rates will fall again and then level out for a period of time.
The
SPDR S&P Homebuilders
(XHB) - Get Report
, an exchange-traded fund that tracks the homebuilder sector, remains 61.7% off its peak of $46.08 in early 2006. The
iShares Dow Jones US Home Construction
(ITB) - Get Report
ETF remains 73.1% off its peak of $50.10 in the spring of 2006.
-- Written by Miriam Marcus Reimer in New York.
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