Thursday, December 16, 2004

Housing Stocks Fall on Construction Data

Housing Stocks Fall From Record Highs on Poor Construction Data NEW YORK (AP) -- Shares of home builders were battered Thursday after a government report showed the pace of new construction last month took its deepest drop in more than a decade.

The home building industry has seen stock prices soar to record highs as construction has spiked due to a drop in long-term interest rates.

But Thursday's report from the Commerce Department found housing starts decreased 13.1 percent in November to a seasonally adjusted 1.771 million annual rate. This was the sharpest fall since January 1994, when construction on new homes dropped 17 percent.

Analysts had expected a smaller decrease, and shares for some of the top U.S. home builders dropped sharply. The Dow Jones U.S. Home Construction Index -- which rose to an all-time high Wednesday -- fell 2.6 percent Thursday morning.

"November housing starts were much weaker than expected," said Merrill Lynch economist Ron Wexler in a report. "This data looks like a clean read, with no hurricane impact. This will engender a weak set of construction spending numbers in the coming months."

The housing report might have been just the reason investors needed to take profits on a sector that has seen some stocks jump 80 percent since the summer, analysts said.

D.R. Horton Inc. shares fell $1.68, or 4.1 percent, to $39.68. Toll Brothers Inc. fell 54 cents to $65.48, while Pulte Homes Inc. fell 87 cents to $64.12. Lennar Corp. shares declined $1.25, or 2.2 percent, to $55.10.

KB Home, which builds moderately priced homes across the nation, will report its earnings after the market's close. Analysts polled by Thomson First Call expect the company will report earnings of $4.13 per share on revenue of $2.31 billion. KB Home shares fell 29 cents to $105.21.

On Wednesday, Miami-based Lennar said earnings rose 21 percent from a year ago, but that less impressive than the 93 percent growth reported last week by Toll Brothers or the 47 percent growth from Hovnanian Enterprise.

Strong results for KB would come just a few weeks after the company proposed a 2-for-1 stock split and a 50 percent increase in its annual cash dividend. KB Home said the move comes as the company's financial performance surpassed expectations during the past year.

A similar move was announced Thursday by Meritage Homes Corp., whose shares have surged 83 percent since July. The company said it will initiate a stock split that will be effected by a dividend issued to the homebuilder's shareholders.

"This stock split is a reflection of the recent appreciation in our stock price as well as our expectation that 2004 and 2005 will be our 17th and 18th consecutive years of record revenue and earnings," said John R. Landon, Meritage co-chairman and CEO, in a statement.

Shares of Meritage rose 42 cents to $109.66 in mid-afternoon trading.


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