Homebuilders struggle as U.S. housing starts decline in May

Shares of U.S homebuilders are struggling in afternoon trading after construction of new homes unexpectedly fell in May, according to a report from the Commerce Department. HOUSING STARTS: Housing starts dropped 0.9% to 1.269M units in May as the construction of single-family housing units was muted. Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,269,000. This is 0.9% below the revised April estimate of 1,281,000 and is 4.7% below the May 2018 rate of 1,332,000, the Commerce Department said in a statement. Single-family housing starts in May were at a rate of 820,000, 6.4% below the revised April figure of 876,000. The May rate for units in buildings with five units or more was 436,000. ANALYSTS WEIGH IN: Raymond James analyst Buck Horne downgraded Lennar (LEN) and KB Home (KBH) before the market open on Tuesday. The analyst, in a move to highlight his increased near-term caution with the homebuilding sector, cited factors including above-average cyclical valuations amid declining earnings estimates across the industry, softening macro-economic data points and indicators of a late-cycle shift, and an analysis of recent MSA-level re-sale market statistics suggesting competitive inventory remains elevated into summer for the downgrade. PRICE MOVES: Shares of KB Home and Lennar are each down about 2%. OTHERS TO WATCH: Other publicly traded companies in the sector include Beazer Homes (BZH), D.R. Horton (DHI), Hovnanian Enterprises (HOV), M.D.C. Holdings (MDC) and Toll Brothers (TOL).