Sector Snap: Homebuilders fall with market

Shares of homebuilders fall with market; analyst forecasts disappointing home sales

• On 2:18 pm EDT, Thursday October 1, 2009

NEW YORK (AP) -- Shares of homebuilders slid Thursday as the broader market fell and a Fox-Pitt analyst predicted disappointing fourth-quarter sales for the sector.

In afternoon trading, shares of KB Home fell $1, or 6 percent, to $15.61. Lennar Corp. shares fell 80 cents, or 5.6 percent, to $13.45. Toll Brothers Inc. slipped 46 cents, or 2.4 percent, to $19.08. Hovnanian Enterprises Inc. lost 39 cents, or 10.2 percent, to $3.44.

MDC Holdings Inc. fell 96 cents, or 2.8 percent, to $33.78. NVR Inc. shares slipped $17.61, or 2.8 percent, to $619.76.

The drop-off came even after the National Association of Realtors said pending home sales in August rose 6.4 percent from July to 103.8, which handily beat analyst expectations.

But elsewhere, the Institute for Supply Management said its index of manufacturing activity in September slipped to 52.6 from 52.9 in August, well below analysts' expectations of 54. New claims for jobless benefits, meanwhile, rose more than expected to 551,000.

The reports sent Wall Street lower. Major stock indicators lost more than 1 percent in afternoon trading.

In a note to investors, Fox-Pitt analyst Robert Stevenson said the upcoming deadline for the $8,000 first-time homebuyer tax credit has already started dampened sales of homes.

Stevenson said he doesn't expect the tax credit to be renewed beyond the Nov. 30 deadline.

Meanwhile, elevated unemployment levels will also weigh on buyer's appetite for new homes, he wrote.

"Rational people worried about their jobs do not use their life savings to buy a home," Stevenson wrote. In addition, he noted that many buyers are having trouble selling their existing homes .

There are still nearly 4 million homes on the market, he said. While that's down from the peak of 5 million, it remains well above historical levels, Stevenson said.

Buzz up!