Housing stocks declined Wednesday after a trade group said mortgage applications fell last week and a ratings agency slashed one homebuilder's credit ratings to junk status.
The Mortgage Bankers Association said Wednesday that both refinance and purchase application volume decreased last week, suggesting potential home buyers are still sitting on the sidelines as the housing slump continues.
In a client note Wednesday, Soleil Securities Group analyst Anna E. Torma said further interest rate cuts by the Federal Reserve are less likely as the central bank recently adopted a more neutral stance.
"We still look for prior Fed easing to flow through to mortgage rates and believe it will be a key driver for stabilizing the housing market," Torma wrote.
However, Torma believes that the housing market still faces "substantial headwinds."
Meanwhile, credit ratings agency Fitch Ratings late Tuesday night downgraded four of Standard Pacific Corp.'s ratings to junk status due to continued softness in two of the builder's core markets, Florida and California. Shares of the company plunged 16 cents, or 6.4 percent, to $2.36 in midday trading Wednesday.
Centex Corp.'s stock lost 65 cents, or 3 percent, to $21.16, while Lennar Corp. fell 57 cents, or 3 percent, to $18.26. DR Horton Inc.'s shares declined 47 cents, or 3.3 percent to $13.85.
Luxury builder Hovnanian Enterprises Inc. decreased 21 cents, or 2.4 percent to $8.67. On Tuesday, Lehman Brothers analyst Megan Talbott McGrath cut her third-quarter and fourth-quarter estimates to reflect the company's recent equity and debt offerings.
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