Monday, January 31, 2005

Builders Stocks Mixed on Housing Data


Shares of the nation's top home builders mostly shrugged off economic data released Monday that indicated December sales of new single-family homes fell short of expectations, just one month after the industry suffered its steepest decline since 1994.

The Commerce Department said new home sales rose 0.1 percent to a seasonally adjusted annual rate of 1.1 million units in December - missing Wall Street expectations for sales of 1.2 million units. The data comes after new home sales plunged 12 percent in November.

The report indicated sales were weakest in the South and Northeast, but Midwest sales appeared strong. For the year, new home sales rose 8.9 percent to a record 1.18 million units.

Home building stocks - which were among the strongest performers on the stock market last year - originally turned lower after the government report was released. But the sector began to rebound as analysts noted that home builders continue to see market share gains.

"The relatively soft national numbers are in contract with results from public companies," said Daniel Oppenheim, an analyst with Banc of America Securities. "We continue to see a disconnect between the healthy demand seen by the publicly traded homebuilders and monthly new home sales from the Census Bureau."

Oppenheim said the housing market remains healthy, and he expects sales will continue to be strong. Builders have benefitted during the past few years on relatively low mortgage rates and an expansion of the U.S. economy.

D.R. Horton Inc. shares rose 65 cents to $39.62, Toll Brothers Inc. rose $1.05 to $77.88, Hovanian Enterprises Inc. rose $1.16, or 2.3 percent, to $52.36, Pulte Homes Inc. rose 57 cents to $65.56, KB Home rose $1.01 to $108.80, and Lennar Corp. fell 28 cents to $55.98. All stocks trade on the New York Stock Exchange.

Despite the weaker-than-expected new home sales data, analysts maintain the overall market remains healthy. Higher mortgage rates might slow down new home sales modestly in 2005, but Wall Street remains bullish on the industry.