Home builders pare down to weather storm

By Ilaina Jonas

NEW YORK (Reuters) - There is no good news for some the largest home building companies in the United States.

"We do think if you're dumb enough to buy a home builder (share), you ought to buy us," Ryland Group Inc.(RYL.N: Quote, Profile, Research) Chairman and Chief Executive Officer R. Chad Dreier, told an investor audience at the JP Morgan Basics and Industrials Conference this week.

Against a backdrop of plunging sales and rising contract cancellations, there was little talk of a turnaround or a bottoming out of the housing market.

Since reaching a high in July 2005, the Dow Jones U.S. Home Construction Index .DJUSHB, a yardstick that measures home builder performance, has lost half its value.

The meltdown in the subprime mortgage market has exacerbated the home builders' pain, even though those buyers with checkered credit history account in most instances less than 5 percent of the U.S. home builders' customers.

"The indirect impact has been substantial because of this anchor or weight around consumer confidence," Pulte Homes Inc.(PHM.N: Quote, Profile, Research) CEO Richard Dugas Jr. said.

Reflecting the industry's struggles, the Mortgage Bankers Association reported on Thursday that loans in the process of foreclosure rose to a record level in the first quarter.

Most U.S. home builders have taken defensive positions looking to generate cash. They have also been selling unsold homes, land positions, paring debt, laying off employees and cutting prices to generate sales.