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Investments

Fears of prolonged government freeze shock HW 30

Homebuilders, title insurers take hit after recent rally

frozen money

The HW 30 — HousingWire’s exclusive list of housing stocks — dropped 0.59% by market close on Thursday, as the nation's top stock indices tumbled on growing concerns over the nation's debt ceiling and government shutdown.

Homebuilder stocks took a heavy hit, as D.R. Horton (DHI), Lennar Corp. (LEN), and Toll Brothers (TOL) experienced stock price declines of 2.41%, 1.05% and 1.93%, respectively.

The push down on homebuilder stocks arrives at a time when the market is finally realizing the government shutdown could take longer than a few days. A longer shutdown essentially creates delays for entry-level builders.

Sterne Agee analyst Jay McCanless says a shutdown will spark more concerns among investors if Congress fails to make a decision within a month.

"If it lasts a month, it could have a business impact on all of my builders, but it may be especially troublesome for the ones who I have identified as focused on the entry-level buyer," he said.

The lingering issue for all of these homebuilders is the possibility of processing delays at the Federal Housing Administration.

On a similar, yet separate note, some homebuilder experts believe homebuilder stocks and the entire housing sector is trading below expected levels because of growing concerns on how long the shutdown will last.

"We seem to have a dysfunctional government that is incapable of getting anything done," said Odeon Capital Group analyst Robert Grimm.

He added, "I expect Washington will pass some stopgap measures, which in my mind is no solution at all, and eventually we will all be paying for this in ways we never anticipated."

 As the market dives deeper, the mortgage industry is beginning to experience delays.

Specifically, lenders are dealing with closing risks.

Mortgage Bankers Association CEO David Stevens criticized the shutdown Thursday, saying any disruption in time-sensitive mortgage deals could create interest rate disparities from the time of closing to the time the loan is securitized.

"For these reasons there must be a resolution so that borrowers and lenders are able to return to business as usual," Stevens said.

Title insurers also saw their stocks roll downward.

Fidelity National Finance (FNF) saw a steep decline Thursday, ending the day down 0.57%, while Radian Group (RDN) tumbled 0.64%.

Additionally, Stewart Information Services (STC) fell a slight 0.09% on the HW 30, even though it rose 4.40% over the past month.

The only title insurer that remained unscathed Thursday was First American Financial (FAF), closing the day up 0.69%. On a more impressive note, the company is up 14.06% for the month. 

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