AP
Sector Snap: Homebuilders Slip
Wednesday January 2, 11:53 am ET
Homebuilder Stocks Decline After Residential Construction Spending Falls in November


NEW YORK (AP) -- Shares of major homebuilders declined Wednesday after a government report indicated residential construction spending dropped for a record 21st month in November, as the housing market continued to suffer through its worst slump in two decades.

The Commerce Department reported that private residential construction fell in November by 2.5 percent to an annual rate of $484.9 billion, down 17.5 percent from a year ago.

However, spending gains on government projects and nonresidential construction offset the decline in residential projects. Total spending on construction projects inched up 0.1 percent in November, exceeding economists' expectations.

Builders have recorded major losses in the past year as they contended with declining home prices and sales, plus ballooning supplies of unsold homes. The disrupted credit markets have diminished the pool of qualified home buyers, and a spike in foreclosures has dumped more supply onto the market.

Most economists believe the housing slump will last through 2008, forcing builders to further slash prices on already built homes and sharply curb construction plans.

On Monday, M/I Homes Inc. said it will take charges of about $80 million in the fourth quarter on the sale of 3,700 lots, and said it could take more impairment charges related to its inventory during the quarter. The builder also sold all its current lots in the West Palm Beach, Fla., area, and is exiting that market. Its shares were unchanged at $10.50 in Wednesday morning trading.

KB Home is scheduled to release its fourth-quarter results next week. Its shares lost 35 cents to $21.25.

In December, Toll Brothers Inc., the nation's largest builder of luxury homes, posted its first quarterly loss in 21 years, while Hovnanian Enterprises Inc. reported its fifth consecutive quarterly loss. Shares of Toll Brothers stock declined 28 cents to $19.78, and Hovnanian's stock slipped 22 cents, or 3.1 percent, to $6.95.

Among the other major builders, Centex Corp.'s shares decreased 41 cents to $24.85, Lennar Corp.'s stock fell 20 cents to $17.69, and DR Horton Inc. stock dropped 3 cents to $13.14.