No housing bottom until '10: CP Morgan
NEW YORK (Reuters) - The chief executive of one of the largest privately owned U.S. home builders said on Thursday he doesn't see the struggling U.S. housing market's weak demand hitting a bottom until the middle of 2010.
"We believe there is another 2-1/2 years of the cycle that still has to play out, until it goes up," Tom Eggleston, head of C.P. Morgan Communities, said at the Reuters Housing Summit in New York.
"We think the bottom will be a prolonged period, and that the recovery would not be a sharp 'V,' but will be a soft recovery," he added.
Eggleston also expects one-half of the National Association of Home Builders' 75,000 members to be in financial distress within three years.
"I think survival is a question," he said, adding that many more builders are too small to be members of the trade group.
The U.S. housing market has been in decline since the second half of 2005, fueled by high prices and exacerbated by the meltdown in the subprime mortgage market and the resulting tighter credit markets. That has led to losses and write-downs at many public home builders.
However, some industry executives believe the end of the decline is near. Ara Hovnanian, the CEO of Hovnanian Enterprises Inc (HOV.N), said at the summit earlier Thursday he believed the weak demand should bottom out by year end.
C.P. Morgan, one of the top 30 largest U.S. home builders as rated by closings according to Builder magazine, saw revenue fall 20 percent to $406 million last year. Eggleston expects it to decline again in 2008. The company sold almost 2,700 homes last year.
"The American dream to buy your first house, to build equity and then trade up ... has been disrupted by recent events, and it has discouraged the first-time buyer," Eggleston said. First-time buyers account for about 80 percent of C.P. Morgan's sales.
Eggleston said the Indianapolis-based company will buy land if attractively priced opportunities present themselves.
He also sees U.S. home prices falling another 20 percent, while land prices fall 25 percent. Those prices will fall much less in markets his company operates in Indiana and by only half as much in the Carolinas, he said.
The company's spring-selling season has seen a lot of traffic but not many buyers, Eggleston said. The season typically starts after the National Football League's Super Bowl championship game in early February and runs until the beginning of April.
C.P. Morgan plans to expand into the Raleigh-Durham market in North Carolina, and will do the same if opportunity allows in such nearby southern markets as Virginia Beach, Virginia; Nashville and Knoxville, Tennessee; and Greenville and Spartanburg, South Carolina, he said.
"Our strategy is to enter the markets that will recover more quickly," Eggleston said.
C.P. Morgan has no plans for an initial public offering, but has been approached by many private equity and hedge funds concerning financing opportunities, he said. He declined to identify the prospective investors.
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Ben Klayman and Ilaina Jonas)
