Wednesday, 17 October 2007

Home builders index explores new lows

Home builders' index falls to record low in October

U.S. home builders grew even more pessimistic in October, hit by a triple whammy of tight credit, abundant supply of homes for sale and falling prices.

The seasonally adjusted housing market index fell to a record low of 18 in October from 20 in September, the National Association of Home Builders reported Tuesday. It's the lowest reading in the index since its inception in 1985.

No surprises there, there is very little for homebuilders to be optimistic about at the moment. D.R. Horton attested to that with net sales orders down 39% and cancellation rates at 48% for the September quarter.

D.R. Horton's quarterly orders slip 39%

D.R. Horton Inc., one of the nation's largest home builders, said Tuesday that net sales orders for the fourth quarter fell 39% from a year earlier and that it sees signs of tighter mortgage availability.

The Ft. Worth, Texas-based company said it had sales of 6,374 homes for the three months ended Sept. 30, down from 10,430 units the final quarter of fiscal 2006.

Its cancellation rate for the quarter was 48% as buyers continue to remain nervous that home prices have not yet hit bottom. The company didn't announce any land-related impairment charges ahead of its fully quarterly report, scheduled for Nov. 20.

Muppet Paulson does a complete 180.

Yesterday Treasury Secretary Henry Paulson called the housing decline "the most significant current risk to our economy." That this guy can even show his face in public let alone keep his job is amazing.

As recently as late July Paulson was saying that the sub-prime market would be "largely contained" Now the havoc unleashed by the subprime debacle is the most significant risk to the economy. Remember in late May when Builders laughed at Paulson's suggestion that the housing slump was contained?

One would probably be wise to stay away from US Homebuilding stocks for a while however since Paulson is now paying attention maybe it's a good contrarian indicator.