(Reuters) - Barclays Capital upgraded homebuilder D.R. Horton Inc (DHI.N) to “overweight” and pointed to a potential recovery in the U.S. housing sector in 2012, encouraged by stabilizing prices in non-distressed home sales.
“It has become increasingly apparent to us that the pieces for a rebound next year are beginning to fall into place - chief among them being a stabilization in prices for non-distressed home transactions,” the brokerage said in a note.
In addition, Barclays, which initiated coverage on the sector about two months back, said economic indicators--including job creation, delinquencies, housing starts, homebuyer traffic and consumer sentiment--also showed that the housing industry was stabilizing.
Separately, brokerage Susquehanna expressed a note of caution over new home sales and said tripling of insurance in force since 2007, falling home prices and a recent up-tick in Federal Housing Administration delinquencies could increase headwinds in an already “low delivery environment.”
Meanwhile, another brokerage Guggenheim downgraded homebuilders such as Toll Brothers, Lennar Corp, Meritage Homes Corp and Ryland Group RYL.N to “neutral” from “buy,” citing absence of any positive new catalyst. The brokerage, however, maintained its “Cautiously Optimistic” view of the sector.
The homebuilding stocks have taken a breather since their big October rally, which saw DR Horton and Toll Brothers touch the valuation peaks they achieved during last year’s winter trading rally.
Reporting by Ashutosh Pandey in Bangalore; Editing by Sreejiraj Eluvangal