Hurricane Harvey Slams Homebuilder StocksBy
Hovnanian, LGI, Meritage shares slump after city flooded
Homebuilders to face increased competition for skilled workers
Shares of homebuilders, especially those with large portions of their business in the Houston area, slumped after Hurricane Harvey’s floodwaters washed over one of the most active U.S. cities for single-family construction.
The Bloomberg homebuilding index fell as much as 1.9 percent, led by Red Bank, New Jersey-based Hovnanian Enterprises Inc., which has 25 percent of its closings in Houston, according to Bloomberg Intelligence analyst Drew Reading. Hovnanian’s shares were down 5.4 percent at 2:30 p.m. New York time. LGI Homes Inc., Meritage Homes Corp., Beazer Homes USA Inc. and Taylor Morrison Home Corp., which have significant exposure to the market, also were among the worst performers.
While homebuilders may see a slowdown because of damage to construction sites, the bigger problem will be delays in land development and increased competition for labor because workers will be needed to rebuild existing homes, said Alex Barron, analyst for Housing Research Center in El Paso, Texas. The new-home industry is already facing a severe shortage of skilled workers.
“Insurance companies will be cutting checks and will need somebody to fix existing homes,” he said. “It all comes down to who pays most.”
It’s too early to tell how much damage the storm will cause to Meritage’s operations, said Brent Anderson, a spokesman for the Scottsdale, Arizona-based homebuilder. Houston represents about 11 percent of the company’s closings, he said.
“Until the rain stops and it drains, we’ll have at least a week of inactivity,” Anderson said. “Beyond that, it’s impossible to say.”