More Bad News Sends Local Shares Down

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Shares in local homebuilders and lenders were rocked Wednesday after data was released showing sales of existing homes plunged to historic lows in September and Merrill Lynch reported greater-than-expected losses from its mortgage investments.


The National Association of Realtors reported that sales of existing homes fell 8 percent in September, the largest decline since 1999 and far more than the 4.5 percent industry experts were predicting.


Poor sales also drove the median home price down 4.2 percent to $211,700, marking the 13th of the last 14 months that the year-over-year price has decreased.


The slowdown also swelled the nation’s inventory of unsold homes to 4.4 million units in September meaning at the current pace it would take 10.5 months to sell all of the existing unsold homes, a record length.


Shares in local homebuilders KB Home and Ryland Group Inc. were stung after the report was released. Los Angeles-based KB Home lost 4.1 percent to $26.07 while Calabasas-based Ryland dipped 1.7 percent to $25.06.


Local lenders were also hit hard mainly because Merrill Lynch & Co. reported its portfolio of mortgage debt lost $7.9 billion for the third quarter far above the $4.5 billion the firm had forecast two weeks ago.


Shares in Pasadena-based IndyMac Bancorp dropped 9.9 percent to $11.86 along with shares in the nation’s largest mortgage lender, Countrywide Financial Corp., which shed 7 percent to $13.99.


Separately, shares in Santa Monica-based Fremont General Corp. also dropped 8 percent to $3.10 Wednesday after Morgan Stanley said it is seeking at least $10 million from a unit of Fremont in a lawsuit that accuses the lender of refusing to re-purchase bad loans it sold.


Morgan Stanley said in a lawsuit filed Tuesday that Fremont Investment & Loan refuses to honor warranties it gave on hundreds of mortgage loans it sold between May 2005 and December 2006.

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