Homebuilders’ confidence at 16-year low

15 08 2007

NEW YORK (CNNMoney.com) — Builders’ confidence in the new home market fell to a 16-year low, according to a trade group survey conducted this month which reports buyers’ problems finding financing spreading beyond the subprime sector.

The National Association of Home Builders/Wells Fargo Housing Market Index fell two more points to a reading of 22, the lowest level since January 1991, when the nation was struggling with a recession, an energy price shock and the start of the first Gulf War. Any reading below 50 indicates more builders view sales conditions as poor than as good.

The index’s various components — view of current conditions, expectations for conditions six months from now and current level of traffic — all reached 16-year lows in the recent survey. Each region of the country reported overall confidence readings that were down or unchanged from historically low levels as well.

David Seiders, the group’s chief economist, said he doesn’t expect to see any pickup in purchases of new homes and new home building until next year at the earliest.

“There is no question that problems in the subprime mortgage sector have spilled over to other components of housing finance…delaying a revival of the single-family housing market,” said Seiders. “We now expect to see home sales return to an upward path by early next year and we expect housing starts to begin a gradual recovery process by mid-2008. From there, the market will have plenty of room to grow in 2009 and beyond.”

Who can’t get a mortgage right now

Brian Catalde, a homebuilder from El Segundo, Calif., and the group’s president, said not only are mortgage problems keeping some buyers from getting the financing they need to buy new homes, but they are prompting others to delay their decision to purchase a new home.

“Builders are responding by trimming prices and stepping up non-price incentives to bolster sales and limit cancellations, although we’re dealing in a difficult market environment,” he said in the group’s statement.

While new homes are only a fraction of the overall real estate market, they are closely watched due to their impact on the supply and prices of homes in the overall market, and the contribution to the U.S. economy made by the construction activity.

The nation’s six largest builders in terms of revenue — Lennar (Charts, Fortune 500), D.R. Horton (Charts, Fortune 500), Centex (Charts, Fortune 500), Pulte Homes (Charts, Fortune 500), KB Home (Charts, Fortune 500) and Hovnanian Enterprises (Charts, Fortune 500) — all have reported losses in at least their most recent quarter, and most are forecast to have losses continue into 2008.

The survey comes out the same day that another industry trade group — the National Association of Realtors –reported the price of a typical home in the United States continued to drop in the second quarter, the fourth straight period to see such a decline.

The report also comes the day before the Census Bureau is due to report on housing starts and building permits. Economists surveyed by Briefing.com forecast that starts fell to an annual rate of 1.41 million in July, down from 1.47 million in June. If starts come in just a little below that forecast, they would hit a nearly 11-year low.

Permits, which are also seen as a measure of builders’ confidence, are forecast to slip to an annual rate of 1.4 million from a 1.41 million pace in June which had been a 10-year low.




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