Disappointing July New Homes Sales Fuels Debate and Sends Homebuilders Lower (TOL) (KBH) (PHM) (DHI)

August 23, 2013 11:28 AM EDT Send to a Friend
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Homebuilder stocks were hit on Friday following data on July new home sales. July sales totaled only 394,000, well below consensus of 487,000, representing a 13.4% decline month-over-month.

The data sent shivers down the spines of investors, leading to declines in Toll Brothers Inc. (NYSE: TOL), Lennar Corp. (NYSE: LEN), PulteGroup, Inc. (NYSE: PHM), DR Horton Inc. (NYSE: DHI), KB Home (NYSE: KBH), and other homebuilder stocks, as many fear rising interest rates will derail the housing recovery. It's a debate that is likely just beginning.

In the view of MFR economist Joshua Shapiro, the data shows the housing market is not as rosy as believed and suggests that "higher interest rates are having an impact on individual demand for homes."

Pierpont Securities analyst Stephen Stanley disagrees. He thinks today's disappointing new homes sales data is "noise."

On Wall Street, the data was viewed as negative for the economy and, importantly, for Fed tapering. This caused a drop in 10-year U.S. bond yields and resulted in a decline in the U.S. dollar.

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