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Homebuilder sentiment stuck at record low

U.S. homebuilders continue to be pessimistic about the housing market, as November’s reading of a sentiment index remained at lowest level since it began in January 1985.
/ Source: The Associated Press

U.S. homebuilders continue to be pessimistic about the housing market, as November’s reading of an index that tracks their sentiment remained stuck at a record low.

The National Association of Home Builders said Monday its housing market index, which gauges builders’ perceptions of conditions and expectations for home sales the next six months, came in at 19 in November, matching an upwardly revised reading for October.

The number for both months was at the lowest level since the index began in January 1985, but the November reading was a point higher than the consensus forecast of economists surveyed by Thomson/IFR.

Index readings higher than 50 indicate positive sentiment. The seasonally adjusted index has been below 50 since May 2006, and declined for eight straight months this year before remaining unchanged in November.

Tighter lending standards, rising defaults among borrowers with weak credit and falling prices for existing homes have meant fewer buyers for hard-hit homebuilders such as D.R. Horton Inc., Pulte Homes Inc. and Centex Corp. Many builders have been holding special promotional sales with deep discounts — producing mixed results.

Earlier this month, Robert Toll, chairman of luxury builder Toll Brothers Inc., was candid about the market’s woes, telling investors that conditions around the country range “from miserable to outright purgatory.” Toll is expected to report the first quarterly loss in company history next month.

The trade group’s president, Brian Catalde, a builder from El Segundo, Calif., blamed the news media for the market’s troubles, asserting that media reports are “fueling unrealistic expectations” about how far prices will fall.

“Builders are worried that the national media has tended to report negative housing stories as if there is one real estate market, when, in fact, there is no such thing — all housing markets are local,” he said in a statement. “As a result, some healthy markets are being unfairly impacted by this negative media coverage.”

David Seiders, the trade group’s chief economist, said a recovery in building activity is not anticipated until the second half of next year as builders focus on reducing inventory of unsold homes.

Nationwide, new-home sales are projected to fall to 796,000 this year, down 24 percent from 1.05 million last year, the National Association of Realtors said last week. Sales are expected to drop further to 693,000 in 2008, according to the Realtors’ group.