Ahead of the Bell: Builder Sentiment

Ahead of the Bell: Builder Sentiment

	Published : Tue, 16 Oct 2007 11:06 By : Agencies Print this Story

WASHINGTON (AP) - A measure of sentiment about the new home market is forecast to drop for the eighth straight month, falling to a record low as builders slash prices amid weak demand.

The National Association of Home Builders/Wells Fargo housing market index for October is scheduled to be released at 1 p.m. EDT Tuesday. It is based on a survey of about 400 residential developers nationwide, tracking builders' perceptions of current market conditions and expectations for home sales over the next six months.

The index is expected to drop by 1 point to 19 in October, according to the consensus forecast of Wall Street economists surveyed by Thomson/IFR. The index last month tied an all-time low reached in January 1991.

Index readings higher than 50 indicate positive sentiment about the market. The seasonally adjusted index has been below 50 since May 2006, and has fallen every month since March.

Tighter lending standards, rising defaults among borrowers with weak credit and falling home prices have meant fewer buyers for struggling homebuilders such as D.R. Horton Inc., Pulte Homes Inc., Lennar Corp., Centex Corp. and Toll Brothers Inc.

Nationwide new home sales are projected to fall to 805,000 this year, down 23 percent from 1.05 million last year, the National Association of Realtors said last week.

If that forecast is accurate, it would be the worst year since 1997, when 804,000 newly constructed homes were sold. Next year, 752,000 new home sales are expected, a drop of 6.6 percent from this year's forecast, according to the Realtors group.

On Friday, Wachovia Securities analyst Carl Reichardt forecast that eight out of the 13 publicly traded builders his firm tracks would post losses in calendar-year 2008. Reichardt reduced earnings forecasts across the sector and projected most sales would coming only with sharp price discounts.

In another sign of the housing slump's impact on builders, Dallas-based Centex Corp. said Friday home sales fell 13 percent in its fiscal second quarter and said it would charge nearly $1 billion against earnings to write down the value of land and other holdings.