KB Homes posted a bigger-than-expected quarterly loss on Tuesday as prices and demand for its houses sagged. How should you play the homebuilding sector? Eric Landry, analyst at Morningstar, discussed his strategies.
“The results today from KB didn’t really cause me to change my opinion all that much,” Landry told CNBC.
“The company looks like it lost a little bit of momentum, but I still think KB , Lennar and all the homebuilders are in the catbird seat right now.”
Landry explained that if the housing market continues to stay depressed, the smaller competitors will soon go out of business—and if the demand picks up, the homebuilders will all be back in business.
“It looks as if existing home inventory is increasing rapidly,” he also noted. “In fact, over the past 4 to 6 weeks, we’re seeing increases we haven’t seen since 2007 and it appears that the non-distressed sellers are coming back to the market in mass.”
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No immediate information was available for Landry or his firm.