U.S. home builder woes reach into other industries

By Ilaina Jonas

NEW YORK (Reuters) - The anemic U.S. housing market has hurt various industries from makers of air conditioners to earth movers, with several manufacturers reporting their top lines have been bruised by the slowdown.

Still, several investors remain positive about the long- term outlook for U.S. home builders, although a rebound may be years away.

"It won't really be until 2010 before we start seeing normal levels of activity in most parts of the country," said Mark Zandi, chief economist of Moody's Economy.com.

Most experts agree 2007 has been, and will continue to be, a washout for the U.S. housing market and things will keep declining for most of 2008.

Among the optimists, Robert Toll, chief executive of luxury home builder Toll Brothers Inc (TOL.N), said last month he sees a quick and dramatic rebound -- but he does not see it any earlier than April 2008.

Those in a more pessimistic mood include Jeffrey Mezger, chief executive of KB Home (KBH.N), the No. 5 U.S. home builder.

Mezger, whose company counts first-time home builders as a large block of its buyers, expected the market to deteriorate well into 2008 and stabilize at the end of the year. It should bump along the bottom for most of 2009 and U.S. home builders should be able to achieve some pricing power by the end of that year, he said.

Zandi's views more or less put him the company of Mezger.

He said 2008 "is going to be a year of stabilization."

"(By 2009) we're going to see some improvement, but it's going to be a middling kind of year and then I think in 2010 we'll see the industry will be back up and running again."

The current year is going to be the worst, Zandi added.

Various reports support that view. Home-builder sentiment in July reached a low unseen since 1999. Building permits in June fell to their lowest in 10 years and sales of existing homes hit a four-year low that month.

"The worst of the drag is happening right now," Zandi said. "It's the change of activity that matters the most for growth and the change is most negative right now."

Since reaching a high in July 2005, the Dow Jones U.S. Home Construction Index .DJUSHB, a yardstick that measures home the performance of builder stocks, is off 53 percent.

"I think once people are comfortable with the bottom, they'll get more constructive on some of the stocks," said Thomas Leritz, portfolio manager, Argent Capital Management in St. Louis.