The Zhitong Finance App learned that stocks of several US home builders fell on Tuesday after Citi downgraded the ratings of LEN.US (LEN.US) and Houghton Homes (DHI.US) on the grounds that the US real estate market may remain sluggish for the rest of the year.
Citi downgraded Rainer Construction's rating from “buy” to “neutral,” lowered the target price from $174 to $164, and downgraded the Houghton House rating from “buy” to “neutral,” and the target price from $181 to $156. Citi has also cut target prices for Forrest (FOR.US), Prudential Group (PHM.US), and Tor Brothers (TOL.US).
Analysts said they believe “data weakness” is likely to continue in the second half of this year, with housing permits, starts, sales and prices falling short of expectations recently.
They pointed out that although the expected Federal Reserve interest rate cut may be a catalyst for economic recovery in the second half of the year, “historical records show that the stock market does not always rebound during the interest rate cut cycle.”
Although Rainer Construction and Houghton House “have a lot to be commended”, including strong cash flow, analysts said they think the next six months will be “roughly balanced between risk and reward.”
By the close of Tuesday, Rainer Construction had fallen nearly 2%, Houghton Homes had fallen more than 1%, and their stock prices had fallen to their lowest level since December last year. The stock prices of three other residential builders whose target prices were lowered by Citi also fell.