By Scott Malone
NEW YORK (Reuters) - For anyone waiting for a rebound in the slumping U.S. housing market, the industry's top executives have a piece of advice: Don't hold your breath.
Home builders at the Reuters Real Estate Summit in New York this week said they didn't expect any improvement until 2008 at the earliest. And even then, their expectations are modest.
"'08 is probably not going to be a year of strong recovery," said Larry Sorsby, executive vice president and chief financial officer at No. 6 U.S. home builder Hovnanian Enterprises Inc. (HOV.N: Quote, Profile, Research, Stock Buzz)
"Our hope is that it stays no worse than we are today," Sorsby said. "We're not predicting any significant recovery."
After several years of torrid growth and rising prices, the U.S. home market has stalled, with rising interest rates now deterring prospective buyers. New home sales in May fell 1.6 percent, a sharper-than-expected drop, according to data released on Tuesday.
Robert Toll, chairman and chief executive of luxury U.S. home builder Toll Brothers Inc. (TOL.N: Quote, Profile, Research, Stock Buzz), said he expected no pickup this year.
"I see no reason to expect a change in confidence until probably April '08, when the candidates will fairly well be settled for the presidential election, and we'll start to listen to speeches about how we'll get better," Toll said.
Reinforcing this grim view were quarterly losses reported this week by No. 2 U.S. home builder Lennar Corp. (LEN.N: Quote, Profile, Research, Stock Buzz) and fifth-ranked KB Home. (KBH.N: Quote, Profile, Research, Stock Buzz)
The financial woes have weighed on home builder shares. The Dow Jones U.S. home builder index .DJUSHB is down about 25 percent so far this year. The index is has lost about half its value since its July 2005 peak.
FLORIDA GONE SOUTH
Within the United States, the markets hit hardest by the downturn have been the ones where investors speculated heavily on properties where they did not plan to live. Home builder executives cited Florida, which saw a flurry of building in 2004 and 2005, as the worst housing market in the United States.
Even with discounts of $100,000 on some homes, builders said they had realized that some developments simply would not sell and were opting to just hold onto the land for a few years in hopes of a market pickup.
Toll had one word to sum up the Florida market: "Bad."
"There was a tremendous rocket ride up in Florida during the boom times," said Toll. "You had tremendous speculation in Florida, tremendous numbers of condo purchasers who had no intention of moving in, but just flipping the contract or flipping the real estate."
Hovnanian bought into Fort Myers, Florida, in August 2005, just as the market crashed. Continued...
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