Homebuilder shares mixed on home prices report

Shares of homebuilders were mixed Tuesday after a report showed home prices rising in 20 major metropolitan markets for a third straight month, while one analyst suggests the improvement is only temporary.

The Standard & Poor's/Case-Shiller home price index gained 1 percent in August from July to a seasonally adjusted reading of 144.5. While prices are down 11.4 percent from August a year ago, the annual declines have slowed since February.

Prices are at levels not seen since August 2003 and have fallen almost 30 percent from the peak in May 2006.

Still, economists are concerned home prices cannot withstand falling consumer confidence, rising unemployment and foreclosures and the looming deadline for a first-time homebuyer tax credit. A separate report Tuesday from The Conference Board showed consumer confidence sliding unexpectedly.

Deutsche Bank analyst Nishu Sood wrote in a note to investors that foreclosures are the main reason home prices fell so fast and so far, and said he expects further pressure on home prices in 2010.

"Demand was boosted by investors and tax credits, supply was constrained by foreclosure moratoriums (and) modifications, and (Federal Housing Administration) financing was flowing freely," he wrote. "This entry level stabilization was real, but it is principally government sponsored and therefore tenuous."

Shares of homebuilders were mixed in afternoon trading. Hovnanian Enterprises Inc. added 21 cents, or 5.2 percent, to $4.28; Lennar Corp.'s stock rose 13 cents, or 1 percent, to $13.70; Meritage Homes Corp. gained 23 cents, or 1.2 percent, to $19.44; and shares of MDC Holdings Inc. advanced 34 cents, or 1 percent, to $34.59.

Toll Bros. lost 25 cents, or 1.4 percent, to $18.11, while DR Horton Inc. lost 7 cents to $11.86 and Ryland Group Inc. slipped 4 cents to $20.04. Pulte Homes Inc. edged down 4 cents to $9.66 and KB Home's shares fell 13 cents to $15.32.