Wednesday, March 09, 2005

Interest-rate spike hits homebuilders

Inflation fears and rising oil prices pull down the sector
By John Spence, MarketWatch


BOSTON (MarketWatch) -- Shares of U.S. homebuilders fell sharply as yields on the 10-year Treasury note hit their highest levels since July, during Wednesday's sell-off in the bond market.


Shares of KB Home (KBH: news, chart, profile) lost 3.4 percent to $116.74, Ryland Group (RYL: news, chart, profile) shed 3.2 percent to $65.41, Toll Brothers (TOL: news, chart, profile) was down 3.1 percent to $83.57, Lennar Corp. (LEN: news, chart, profile) lost 3.2 percent to $57.66 and Pulte Corp. (PHM: news, chart, profile) was down 3.3 percent to $75.45.

Higher interest rates push homebuilders lower because consumers are less likely to purchase homes when rates move up.

Wednesday's sell-off in bonds was partly triggered by crude-oil futures moving above $55 a barrel, approaching record highs. Friday's trade-gap report, inflation fears and surging commodities prices also helped drive interest rates higher.

Homebuilders were also hit earlier in the week after Ryland Group said bad weather could delay closing on the sale of about 225 homes in the first quarter.

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