Tuesday, October 04, 2005

Homebuilder Execs Bailing, Stocks Falling

MarketWatch reporter John Spence writes today of a heavy fall in shares of U.S. homebuilding stocks following a report of insider selling among executives in the homebuilder industry. Also likely contributing to the fall was news from Brookfield Homes Corp. that new orders in the quarter just ended were off 22%.

Is it just me, or is there more convincing evidence everyday that the housing market is in decline?

Here's the pertinent parts of the MarketWatch story:
With the nation's housing market booming and builder stocks skyrocketing, executives at the 10 largest development companies have unloaded $952 million of stock so far this year, according to a New York Times report.

Some analysts say the selling my foreshadow a downturn, while company executives say they are simply diversifying their portfolios by selling shares that have surged in value.

On Tuesday, shares Toll Brothers Inc. (TOL: news, chart, profile) lost 5.2% to $41.40, Hovnanian Enterprises Inc. (HOV: news, chart, profile) was down 4.6% to $49.28, Lennar Corp. (LEN: news, chart, profile) shed 3.9% at $59.31 and Ryland Group Inc. (RYL: news, chart, profile) gave up 4.8% to $66.05.

Homebuilders have reeled in huge profits pegged to a hot housing market, low mortgage rates and increasingly creative debt instruments. The Dow Jones U.S. Home Construction Index (DJ_HOM: news, chart, profile) is up 45.8% over the past year.

However, the sector declined sharply in August, and some commentators are saying the housing market may be cooling. New-home sales fell nearly 10% in August, mortgage activity appears to slowing and investors are worried about inflation and more interest-rate hikes engineered by the Federal Reserve.


— The Boy in the Big Housing Bubble