Saturday, October 27, 2007

Is Now the Time to Invest in Homebuilders Stock? Um, no...

National home builders are suffering from lower stock prices right now and some investors might think it's time to buy buy buy.

Forget it. While Centex, KB Homes and Lennar Corp., all of which have developments in Polk County, are suffering, now might not be the time to invest."Any time you start sector betting, you're concentrating your risk in one area," said Laura Hawley, a financial planner and vice president of Allen & Company in Lakeland.
On a national level, the home market isn't showing any signs of rebounding.Just 5.04 million homes were sold in September, down 19.1 percent from 6.23 million in September 2006.
This past week's home sales reports, released by the National Association of Realtors on Wednesday, sent builder stock prices tumbling.

Centex shares dropped 37 cents to $24.27. DR Horton Inc., one of the nation's largest builders, fell 49 cents, or 3.9 percent, to $12.22, while Lennar Corp. slid 37 cents to $22.07. Beazer Homes USA Inc. had shares decline 11 cents to $9.69."It is really just buyer beware," she said.Hawley likened the scenario to the dot com market bust in 2000."A lot of those companies that were blue chip stocks never recovered," she said. "It doesn't mean these companies are going to come roaring back like they were."

And when it comes to building new homes, it doesn't get much better. The Commerce Department reported Wednesday that construction of new homes fell 10.2 percent in September to a seasonally adjusted annual rate of 1.191 million units. The decline was more than double the 4.2 percent drop that analysts had been expecting and it pushed activity down to the lowest level since March 1993.

"I think the real estate market in general isn't done," Hawley said. "I think we still have a lot of weakness there."But Polk County, Florida is some ahead of the building bust curve. Contractors across the county pulled 271 new home permits last month, which is an 8.1 percent decline from 295 permits in September 2006. And while it is still the 19th consecutive month permit totals have declined, the lower decrease is encouraging. For more than a year, builders have sought some relief to the sluggish housing market.

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