Deutsche Bank Report Hits Homebuilders, SEC Formalizes Beazer Probe

A Deutsche Bank report issued Monday said the housing slump intensified in June as tighter loan standards and rising interest rates forced higher cancellations for homebuilders. Several homebuilder shares and ETFs fell to multi-year lows following the report. Although builders say the entry level and high ends of the housing market are faring well, 'move-up' homes are suffering from an existing homes sales glut. Deutsche says the homebuilders in its universe lost $5.4 billion in Q1 from land writedowns and impairments and more of the same is expected when several homebuilders report earnings this week. Hovnanian shares fell 7.2% to $15.25, bringing them to a 55% drop this year. Centex, reporting Tuesday, carries a 13.75% short interest. The iShares Dow Jones Home Construction ETF and the S&P Homebuilders ETF have fallen 30% and 31%, respectively, since January. In related news, the SEC has formalized its investigation of Beazer Homes for alleged securities law infringements. The FBI is also investigating Beazer for mortgage fraud at its lending arm. In June, Beazer fired CFO Michael Rand for trying to destroy evidence in the SEC probe, and the company is facing class action suits. Beazer's shares closed Monday at $18.76, a 60% drop on the year. Shares fell further to $17.77 in AH trading.

Sources: Bloomberg I,II, MarketWatch, CNN Money, Wall St. Journal, The Street, Big Charts Detailed Quotes, Reuters
Commentary: The American Dream Is Overbought and Overbuilt • From a Homebuilder's Perspective, Resale Market Is the Problem • Brief Foreclosure History & Mortgage Delinquency Maps
Stocks/ETFs to watch: Centex Corp. (CTX), Hovnanian Enterprises (HOV), Beazer Homes USA (BZH), Meritage Homes (MTH), Standard Pacific Corp. (SPF), Ryland Homes (RYL), M.D.C. Holdings (MDC), KB Homes (KBH), Toll Brothers (TOL), iShares Dow Jones U.S. Home Construction (ITB), SPDR Homebuilders (XHB), PowerShares Dynamic Building & Construction (PKB)
Earnings call transcripts: Hovnanian Enterprises F2Q07 (Qtr End 4/30/07) Earnings Call Transcript • KB Home F2Q07 (Qtr End 5/31/07) Earnings Call Transcript • Toll Brothers F2Q07 (Qtr End 4/30/07) Earnings Call Transcript

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