Yesterday, the National Association of Realtors reported that existing home sales dropped to a seasonally adjusted annual rate of 5.66 million units, a 2.2% dip from the prior month. Some analysts had expected the last-minute scramble to qualify for the tax credit to boost sales to 6.1 million units, but apparently it was not enough.
In order to qualify for the credit, homebuyers had to sign contracts by April -- however, existing home sales is based on transaction closings, so May and June should technically still show strong numbers. Whether or not they meet analyst expectations is another question.
One thing is for sure -- U.S. homebuilding stocks are getting squashed on the news. After a relatively positive 2009, several are down in the single digits on the day, and almost all of the big players are trailing the S&P 500 year to date. Here's how they have fared so far this year:
|
Company |
Current Price |
2009 Return |
Year-to-Date Return |
|---|---|---|---|
|
Beazer Homes (NYSE: BZH) |
$3.88 |
269.47% |
(19.83%) |
|
D.R. Horton (NYSE: DHI) |
$10.22 |
65.20% |
(5.98%) |
|
Lennar (NYSE: LEN) |
$14.20 |
48.82% |
11.2% |
|
KB Homes (NYSE: KBH) |
$11.89 |
0.66% |
(13.08%) |
|
Ryland Group (NYSE: RYL) |
$15.59 |
21.5% |
(20.86%) |
With the exception of Miami-based Lennar, all the stocks mentioned above have seen some serious price depreciation in 2010. Lennar, however, surprised analysts last quarter by reporting a smaller loss of $0.04 per share as opposed to the anticipated loss of $0.30 per share. In addition, Lennar has some of the highest operating margins among its competitors -- something that industry insiders hope will push Lennar into the black for the upcoming quarter. Other companies, such as KB Homes, have had difficulty handling overhead costs, which may keep the losses coming in the second half of 2010.
Either way, after the run-up that most homebuilding stocks had in 2009, it seems apt that these highfliers are settling down. Are their price movements justified, or is this a possible time to buy? Let us know your opinion in the comments section below!
