Monday, September 18, 2006

Homebuilder confidence hits 15-year low

Homebuilder confidence hits 15-year low
Association says builder optimism has dropped as the number of unsold houses has risen.
September 18 2006: 2:27 PM EDT

NEW YORK (Reuters) -- U.S. homebuilder optimism sank for an eighth consecutive month in September to the lowest level in more than 15 years, with a surge in the backlog of unsold homes putting development on ice, an industry survey showed on Monday.

The National Association of Home Builders said its index of homebuilder sentiment sank 3 points in September to 30, the lowest since February 1991, when the economy had slipped into recession. August's figure had been revised upward to 33 from 32.

The NAHB said its gauge of sales expectations for the next six months fell 4 points to 37, indicating members see further downward momentum in the housing industry. The measure for current sales of new homes declined 5 points to 32.

"It's about a degree of oversupply and how builders will work it down," including cutbacks on new construction, said NAHB Chief Economist David Seiders. Many buyers on the sidelines are unmoved by "substantial incentives," so price cuts are becoming more frequent, he said.

A reading below 50 means more builders view sales conditions as poor rather than good.

Builders continued to report increases in cancellations of sales contracts and inventories of unsold homes, especially for the bigger companies, Seiders said.

Inventories of existing homes have soared 40 percent over the past year to 3.86 million units, or a 7.3 months' supply at the current sales pace, according to the National Association of Realtors real estate group.

Seiders last week told Congress that the slump in home sales and production will not bottom out until mid-2007, even though growth in jobs and income is supportive of the sector. House prices are expected to be flat in coming months and declines are a "distinct possibility," he said.

The NAHB's gauge of prospective buyer traffic was unchanged at 22 in September. While stable, the level does not indicate stabilization in the market, Seiders said.

"Builders are adopting an increasingly cautious attitude in their near-term outlook for new home sales," he said.

Shares of the nation's leading home builders traded mixed Monday, including Lennar (down $0.24 to $46.15, Charts), KB Home (up $0.00 to $45.70, Charts), Toll Brothers (down $0.17 to $27.92, Charts), and Beazer Homes (up $0.45 to $40.05, Charts).

No comments: