November home builder sentiment at record low

By Lynn Adler

NEW YORK (Reuters) - Home builder sentiment stayed at a record low in November, weighed down by a record supply of unsold homes lingering on the market, an industry group said on Monday.

The National Association of Home Builders said its preliminary NAHB/Wells Fargo Housing Market index was unchanged at 19 in November, matching last month as the lowest reading since this gauge started in January 1985.

"The housing recovery is absolutely going to be measured in years, not in months," said Sue Woodard, executive vice president of Mortgage Market Guide, a real estate market information service in Holmdel, New Jersey.

With foreclosures on the rise and many banks forced to write off billions of dollars in losses on subprime loans, borrowers are having a harder time getting funding.

The rise in unsold inventory is attributed to potential buyers cancelling orders as the market worsens as well as increasingly tight-fisted lending practices.

October's index was revised up from a preliminary reading of 18, NAHB said. The November index had been expected to drop to 17, based on a Reuters survey of economists.

Readings below 50 mean more builders view market conditions as poor than favorable.

"Consistent with what builders said in last month's survey, many are reporting that their special sales incentives are having limited success in terms of getting buyers in the door," NAHB President Brian Catalde, a home builder from El Segundo, California, said in a statement.

Sales of existing homes sank in September to the lowest on record dating to 1999, battered by mounting foreclosures and tighter lending practices, according to the latest data form the National Association of Realtors.

Unsold inventory has swelled to record levels despite price cuts and other builder incentives.

"It looks grim," said Ron Litt, president of Market Kinetix in Houston, Texas, which analyzes borrower credit scores.

"The underwriting standards now for mortgage loans are so strict that credit's not really the killer," he added. "It's mortgage lenders demanding higher reserves, perfect documentation on employment history and salary, they want money down -- the day of the 100 percent loan is pretty much gone -- and people are having more trouble qualifying for loans on those grounds than they are on credit grounds."

The government's latest data on housing starts and building permits will be released on Tuesday. New lows are anticipated.

"Housing starts hit a new low for the cycle in September. At a 1.191 million annual rate, they were down 42 percent from the 2005 total of 2.07 million, and we forecast another decline in October," UBS economists said in a report.

A Reuters survey forecasts October starts fell to 1.170 million units and permits to build dropped to 1.200 million from 1.261 million.