Home builder shares pounded after data
NEW YORK (Reuters) - Shares of home builders dropped sharply on Thursday after a government report showed that groundbreaking for new homes fell 6.1 percent in July to the lowest pace in more than 10 years, and building permits, a sign of future construction plans, sank to a near 11-year low.
Starts for single-family home construction, the primary source of income for most of the large U.S. home builders, were down 7.3 percent, and the pace permits were off 1.6 percent.
The report sent the benchmark Dow Jones U.S. Home Construction Index .DJUSHB, down 5.5 percent to 397.77, its lowest level since May 2003. It rose as high as 419.08 during the session. The index is down 64 percent from its peak in July 2005, when cheap mortgages fueled the U.S. housing boom.
Bank of America analyst Daniel Oppenheim said the drop in activity wasn't enough to begin to reduce supply as demand continues to fall more severely.
"We don't see a way to work through the current troubles without a sharp curtailment in construction activity in order to work through the excess supply," he wrote in a research note.
Shares of Hovnanian Enterprises Inc. (HOV.N) dropped nearly 13 percent to $11.17, while Pulte Homes Inc. (PHM.N) was off about 6.6 percent to $15.79. Beazer Homes USA Inc. (BZH.N), which is grappling with the housing downturn and federal investigations into its mortgage unit, fell 4.3 percent to $10.03.
Standard Pacific Corp. (SPF.N), whose business focuses on California and some of the once-hot Western U.S. markets, was off 8 percent at $8.23. Shares of WCI Communities Inc. WCI.N and Tousa Inc. TOA.N also were pounded, down 11 percent and 20 percent, respectively.
(Reporting by Ilaina Jonas, editing by Jeffrey Benkoe)
