Investors Run for Shelter As New-Home Starts Slow

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Editor’s Note: This story has been corrected to accurately report the amount of KB Home’s quarterly dividend.

Last month’s data showed that Americans’ homebuying has continued its slowdown. That’s leaving the shareholders of homebuilders such as KB Home in Westwood and Ryland Group Inc. in Westlake Village out in the cold.

New-home sales plummeted month to month by 8.1 percent to a seasonally adjusted annual rate of 406,000 in June, the Census Bureau and Department of Housing and Urban Development reported July 24. In addition, May’s figure was revised downward from 504,000 to 442,000.

New-home construction also continued to slide, with both single and multifamily starts dropping from May to June, according to data released July 17 by the Commerce Department. Total housing starts fell 9.3 percent from May to June.

This weak data put pressure on most homebuilding stocks, including KB’s and Ryland’s. KB’s shares fell 9 percent for the week ended July 30 to close at $16.68. Ryland’s stock was even harder hit, plunging 11 percent to $34.83. Both companies were among the biggest losers on the LABJ Stock Index (See Page 28.)

Yelena Shulyatyeva, an economist at BNP Paribas in New York, doesn’t see things changing anytime soon, as high student debt and stagnant middle-class wages are holding back potential first-time homebuyers. She mentioned little progress in the housing market and expects it to continue to slow down.

“Housing will remain an area of concern this year for Fed Chairwoman Janet Yellen and her colleagues,” she wrote in a July 24 note.

KB and Ryland declined to comment for this article.

Ryland’s stock is down 9.3 percent over the past 52 weeks, while KB has dipped 1.4 percent. Over the same time period, the Dow Jones industrial average and the S&P 500 climbed 8.8 percent and 17 percent, respectively.

However, shareholders of both companies got some comfort as KB and Ryland recently announced that they would be paying a dividend, as companies sometimes do to help keep investors happy. KB revealed in April that it would continue its quarterly dividend of 2.5 cents a share. Ryland’s board announced July 24 that it would start to pay shareholders 3 cents a share each quarter.

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