Wednesday, April 06, 2005

Home Builders Stock Falls on Order Worries

Home Builder Companies' Stocks Slump As Standard Pacific Sees Orders Decline

NEW YORK (AP) -- Investors moved out of home building companies Wednesday after Standard Pacific Corp. reported new orders declined 2.2 percent during the first quarter, and indicated it will intentionally slow sales in the fast-growing Florida market.

The Irvine, Calif.-based company said a majority of the weakness came from its two largest markets, with new orders falling 21 percent in California and 18 percent in Florida. Standard Pacific said it decided to scale back the pace of sales in Florida to catch up with construction demand.

"We view the decline as a combination of a company-specific issue of intentionally slowing sales in Florida based on the lengthening backlog and slower sales in Southern California (much weather related, but improving sequentially)," Banc of America analyst Daniel Oppenheim wrote in a research note. "The company is likely encountering difficulty finding subcontractors (in Florida) to complete the homes as quickly as they can be sold."

Standard Pacific shares fell $4.25, or 5.7 percent, to $70.40 in midday trade on the New York Stock Exchange. Concerns about housing demand caused builders overall to be among the weakest sectors trading, with the Dow Jones Home Construction Index down 11.16 points, or 1.3 percent, to 839.75.

Oppenheim -- who rates Standard Pacific at a "Hold" with a price target of $83 -- is still bullish on the home building sector. He sees an "upside in the home builders based on the positive secular trends and reasonable valuations, which should offset the challenges from modestly rising rates."

Elsewhere in the sector, Pulte Homes Inc. fell 91 cents to $73.28. Toll Brothers Inc. fell 32 cents to $79.64. Hovnanian Enterprises Inc. fell 39 cents to $51.30. Beazer Homes USA fell 72 cents to $49.52. All trade on the New York Stock Exchange.

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