By Tomi Kilgore, MarketWatch
Shares of home builders TRI Pointe Group and William Lyon Homes were took a dive Thursday, after Wedbush Securities analyst Jay McCanless cut his ratings, citing the “rapid” deceleration of demand in the companies’ key markets.
McCanless downgraded both stocks to neutral from outperform. He slashed his price target for TRI Pointe /zigman2/quotes/204302452/composite TPH +0.88% by 28% to $13 from $18, and for William Lyon /zigman2/quotes/208078919/composite WLH +0.81% by 37% to $22 from $35.
“The rapid deceleration in housing demand for California and Seattle...this summer requires a more conservative earnings outlook on our part,” McCanless wrote in a note to clients.
“Both markets have exhibited a rapid slowdown in unit sales and in home price appreciation,” he wrote. “We do not see a near-term positive catalyst to reverse either trend.”
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He noted California and Seattle represented about half of Irvine, Calif.-based TRI Pointe’s community count, and are just under 50% of Newport Beach, Calif.-based William Lyon’s count.
William Lyon’s stock dropped 7.8% to a 19-month closing low, while TRI Pointe shares shed 3.7% to close at a 12-month low. The stocks were the two biggest decliners, of the iShares U.S. Home Construction exchange-traded fund /zigman2/quotes/203468436/composite ITB +1.02% .
Among other more-active home builder stocks, PulteGroup Inc. /zigman2/quotes/201694804/composite PHM +1.09% lost 1.1%, KB Home /zigman2/quotes/206220859/composite KBH +2.14% shed 2.2%, Lennar Corp. /zigman2/quotes/202536373/composite LEN +1.00% dropped 1.3% and D.R. Horton Inc. /zigman2/quotes/202032328/composite DHI +1.41% slipped 0.2%.
Over the past three months, TRI Pointe shares have slid 20.6%, William Lyon’s stock has slumped 24.9% and the home construction ETF has slipped 3.5%, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.29% has gained 6.6%.