Homebuilders Tumble on Citigroup Downgrade
This morning, Citigroup downgraded homebuilding stocks including Centex (NYSE: CTX), D.R. Horton (NYSE: DHI), KB Home (NYSE: KBH), Lennar (NYSE: LEN), Pulte Homes (NYSE: PHM), Ryland (NYSE: RYL) and Standard Pacific (NYSE: SPF) from Buy to Hold. Meritage Homes Corporation (NYSE: MTH) downgraded from Hold to Sell.
A Citi analyst said, "While we continue to believe that long-term investors will do well owning the homebuilders over the next few years, the current overhang of resale inventory and subprime rate resets appear to make historical trading and valuation analyses of limited utility for predicting near-term performance in the group."
KB Homes is feeling one of the worst declines today as a result of the downgrade. Sinking more than 4%, shares of KB Home set a new 52-week low today when its price went as low as $20.73.
Hovnanian Enterprises (NYSE: HOV) is proving today that a company doesn't have to be the target of a downgrade to feel the effects. Although Hovnanian wasn't one of the eight stocks mentioned in the Citigroup rating report, it is declining today with much of the industry as the downgrade certainly foretells of more negative news yet to hit the homebuilders.
Today, shares of Hovnanian marked a new 52-week low at $6.92 and are now trading around this level. In contrast, Hovnanian's 52-week high was set in February when the price went as high as $38.66, a nearly 80% decline in ten months.
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