Hurricane Irene May Hurt NVR, Toll Brothers Most Among U.S. Homebuilders
NVR Inc. (NVR), Toll Brothers Inc. (TOL) and Hovnanian Enterprises Inc. (HOV) are the U.S. homebuilders with the greatest risk of potential damage from Hurricane Irene, according to a Wells Fargo & Co. (WFC) housing analyst.
The companies have the largest shares of communities in the storm’s predicted path, said Adam Rudiger, senior analyst with Wells Fargo in San Francisco. Irene, a Category 2 storm, was heading north toward the coast of North Carolina, posing the largest threat to the U.S. Northeast since Hurricane Gloria in 1985, according to the National Hurricane Center in Miami.
“Hurricane Irene will have a negative impact on orders, in our view, as weekends tend to be higher traffic days for builders,” Rudiger wrote in a note to investors today. “If any material damage does surface, it could have the adverse effect of delaying completion and could push closings out, thereby delaying revenues.”
U.S. homebuilders have struggled for profitability as sales slumped amid low consumer confidence, falling property values, tight credit and an unemployment rate of more than 9 percent. New-home sales fell to an annual pace of 298,000 in July. At that rate, 2011 would be the slowest year in records dating to 1963, the Commerce Department reported Aug. 23.
About 62 percent of NVR’s communities face potential damage from the hurricane, followed by 42 percent for Toll Brothers and 32 percent for Hovnanian. Beazer Homes USA Inc. (BZH) has 28 percent of its communities in the storm’s predicted path, and PulteGroup Inc. has 22 percent, Rudiger wrote.
NVR, based in Reston, Virginia, rose the least among the 12 members of the Standard & Poor’s Supercomposite Homebuilding index, gaining 0.2 percent to $616.50 as of 4:15 p.m. in New York Stock Exchange composite trading. Stocks rose today after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy isn’t deteriorating enough to warrant an immediate stimulus.
NVR and Toll Brothers have been the best performers in S&P’s homebuilding gauge this year, losing 11 percent and 15 percent, respectively. The index is down 26 percent.
Dan Malzahn, an NVR spokesman, didn’t respond to a voice mail message or e-mail seeking comment on the Wells Fargo report.
Toll Brothers ordered contractors at construction sites to secure loose objects and follow evacuation orders when necessary, said Kira Sterling, chief marketing officer for the Horsham, Pennsylvania-based builder, which has communities in the Carolinas and Mid-Atlantic region. The impact on sales is likely to be minimal, she said, because most potential buyers are on summer vacation rather than shopping for a new house.
“Are we disappointed we won’t have as much sales traffic?” she said in a telephone interview. “Of course, but this isn’t usually the busiest time of year.”
For the past 10 years, August has been the seventh-busiest month for home sales, Rudiger said in his report.
Storm-related sales disruptions are likely to be temporary, according to Walt Molony, a spokesman for the National Association of Realtors.
“Typically we see temporary disruptions on a monthly basis that tend to get smoothed in quarterly data,” Molony, based in Washington, said in a e-mail. “Often these are postponed transactions, but if there’s a lot of damage, it can be followed by a spike in sales. That occurred after hurricanes Katrina and Andrew.”
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