Home builders hurt by credit crunch

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By Julie Haviv

NEW YORK, Aug 28 (Reuters) - Tighter lending standards in recent months have hurt business at two-thirds of the nation's home builders that were already suffering from burgeoning inventories, an industry association executive said on Tuesday.

A survey by the National Association of Home Builders found that 62 percent of builders saw more stringent requirements on mortgages affecting their business, up from 33 percent in March, NAHB Chief Executive Jerry Howard said in a "credit crunch" conference call.

The subset of the largest home builders was hit even more, with 88 percent reporting that business is affected as lenders pull back on credit to borrowers, he said.

Another down leg in the U.S. housing market will occur in the second half of this year as tighter access to credit impacts the hard-hit sector, the NAHB, a leading industry trade group, said on Tuesday.

David Seiders, chief economist at the NAHB, expects the U.S. Federal Reserve to start cutting its target federal funds rate by 25 basis points in September and October. The Fed has kept the fed funds rate at 5.25 percent since late June 2006.

New U.S. home sales should bottom at the end of 2007, down a whopping 38 percent from the peak in the third quarter of 2005. Housing starts will take longer and reach a bottom by the middle of 2008, a peak-to-trough decline of an astonishing 43 percent, he said.

"I am worried that it might even go further than that, given the condition of the mortgage markets," he said in the conference call. "These are major contractions"

The overwhelming majority of credit quality and mortgage market problems stem from adjustable-rate mortgages, he said.

(Additional Reporting by Albert Yoon)

((Reporting by Julie Haviv; Editing by Jan Paschal; Reuters Messaging: rm:// julie.haviv.reuters.com@reuters.net; E-mail: julie.haviv@reuters.com; Tel: +1 646 223 6153)) Keywords: USA ECONOMY/NAHB

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