NEW YORK (Thomson Financial) - Shares of homebuilders slumped after a
government report Monday showed sales of new homes in the U.S. fell much more
than expected in December -- to the lowest pace since February 1995 -- and
prices plunged.
The iShares Dow Jones U.S. Home Construction ETF (ITB) tumbled 4.2% to
$17.23, while the S&P Homebuilders SPDR (XHB) dropped 3.8% to $19.06.
The Commerce Department said new home sales fell 4.7% to a seasonally
adjusted annual rate of 604,000 units in December. Forecasters had expected only
a minor drop to about 645,000 units.
On a calendar-year basis, the number of new homes sold in the U.S. in 2007
was 40.7% lower than in 2006, the largest decline since September 1981.
The median home price dropped a whopping 10.9% to $219,200 in December from
a month earlier.
The number of new houses for sale at the end of December fell to 495,000,
but the slower sales rate raised the inventory overhang to a supply of 9.6
months.
"Price declines are a necessary component of clearing the inventory. We are
not disappointed in the huge price drop, but we are let down by the fact that
the inventory did not come down nearly as much as the deep price concession
would have suggested," said Jeoff Hall, economist at Thomson Financial.
"We think price has further downside to explore (perhaps another 10% more),
postponing the recovery of residential investment and activity long into 2008."
Among individual issues, shares of Toll Brothers Inc. fell 5.5% to $20.29,
D.R. Horton Inc. dropped 4.5% to $14.74, and Centex Corp. fell 4% to $25.33.
Pulte Homes fell 4.2% to $12.55 and NVR Inc. dropped 3.2% to $574.
KB Home fell 4.2% to $22.68 and Champion Enterprises Inc. lost 4.9% to
$8.60.
Wanfeng Zhou
wz/pc
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