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Ryland, Beazer Gain on Merger Talk

Stocks of homebuilders Beazer Homes, Meritage Homes and Ryland Group rise after a Citi analyst suggests the group is ripe for consolidation.



) -- Stocks of homebuilders

Beazer Homes

(BZH) - Get Report


Meritage Homes

(MTH) - Get Report


Ryland Group


rose in morning trading Wednesday after a


(C) - Get Report

analyst suggested the group was ripe for consolidation.

"We think that the likelihood of consolidation in the home-building industry has increased given the industry specific and broader macro economic events of the past few months," noted Citi analyst Josh Levin. "We view consolidation as the proverbial elephant in the room. Management teams are not discussing the issue publicly, but we would be surprised if at least some of them were not talking about it privately."

Shares of Beazer jumped 5.6%, outpacing the group ahead of midday. Ryland added 2.8% and Meritage 2.6%. The

SPDR S&P Homebuilders

(XHB) - Get Report

and the

iShares Dow Jones US Home Construction

(ITB) - Get Report

, exchange-traded funds that track the homebuilder sector and count Ryland among their top holdings, were 1.4% and 1.3% higher, respectively.

Separately, the Mortgage Bankers Association said early Wednesday that

mortgage applications increased by 13% in the week ended Aug. 13

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on a seasonally adjusted basis, led by a 17.1% surge in refinance applications, while loan applications for home purchases actually decreased by 3.4%.

>>Mortgage Applications Spike on Refi

Refi applications accounted for 81.4% of all applications, the MBA said, up from

a 78.1% share in the prior week

. It was the highest refi share of mortgage applications since January of 2009.

On Tuesday, the Commerce Department reported

construction of new homes rose a weaker-than-expected 1.7% in July

to a seasonally adjusted rate of 546,000 units, from a downwardly revised rate of 537,000 in June.

Economists had expected the figure to come in at 560,000 units, and view the most recent numbers as further evidence that the housing market is still working to regain its footing after federal tax credits for homebuyers expired April 30.

VOTE: Do We Need Another Homebuyer Tax Credit?

Would a new round of credits help or hurt the housing market?

-- Reported by Miriam Marcus Reimer from New York.


>>Mortgage Applications Spike on Refi

>>D.R. Horton to Outpace Homebuilder Peers

>>New Home Construction Rises in July

>>4 Top Homebuilder Stocks: Life After the Tax Credit

>>Beazer Homes: Hard Times Ahead

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