The outlook for the US real estate market is not optimistic. Lennar Corporation and Horton Homes were downgraded by Citigroup
US residential builders Lennar Homes and Horton Homes were downgraded by Citigroup as the US real estate market is expected to remain sluggish. Citigroup also lowered the target prices of several other residential builders. Analysts noted that while an expected rate cut by the Federal Reserve may help economic recovery, housing permits, starts, sales, and prices are all below expectations. The stock prices of Lennar Homes and Horton Homes fell to their lowest levels since December last year
According to the Zhitong Finance and Economics APP, the stocks of several American residential builders fell on Tuesday after Citigroup downgraded Lennar Corporation (LEN.US) and Horton Homes (DHI.US), citing the possibility of a continued downturn in the U.S. real estate market for the remainder of the year.
Citigroup downgraded Lennar Corporation from "Buy" to "Neutral", with a target price lowered from $174 to $164, and also downgraded Horton Homes from "Buy" to "Neutral", with a target price reduced from $181 to $156. Citigroup also lowered the target prices of Forrest (FOR.US), PulteGroup (PHM.US), and Toll Brothers (TOL.US).
Analysts believe that the "soft data" may continue into the second half of this year, with recent housing permits, starts, sales, and prices all falling below expectations.
They pointed out that although an expected rate cut by the Federal Reserve could act as a catalyst for economic recovery in the second half of the year, "historical records show that the stock market does not always rebound during rate-cut cycles."
Despite Lennar Corporation and Horton Homes having "many commendable aspects", including strong cash flow, analysts believe that the "risks and returns are roughly balanced" for the next six months.
By the end of Tuesday's trading, Lennar Corporation fell nearly 2% and Horton Homes dropped over 1%, with their stock prices hitting the lowest levels since December last year. The stock prices of the other three residential builders whose target prices were downgraded by Citigroup also experienced declines