Home builder sentiment at new low, buyers demur

By Lynn Adler

NEW YORK (Reuters) - Pervasive recession fears and financial market upheaval hammered U.S. home builder sentiment to a record low in November, a trade group said on Tuesday, dealing a significant blow to an already flailing housing market.

The NAHB/Wells Fargo Housing Market index slumped five points to 9 in November, the lowest since the measure was started in January 1985, according to the National Association of Home Builders. Readings below 50 mean more builders view market conditions as poor than favorable.

"These are awful numbers," said David Sloan, chief economist, North America, for 4CAST in New York. "This suggests a weak housing market is taking a significant fresh hit from the credit crunch so we're going to see even more extreme weakness in the housing sector in the next few months."

It was the largest one-month drop in the confidence measure since August 2006, when it fell to 33 from a reading of 39.

Economists polled by Reuters had forecast the index would stay at 14 in November, the previous all-time low.

"Today's report shows that we are in a crisis situation," NAHB Chairman Sandy Dunn said in a statement. "Tremendous economic uncertainties have driven consumers from the housing market, and it's going to take some major incentives to bring them back," she said.

Even as fear of unemployment escalates and saps consumer confidence, the housing market battles a burdensome supply of unsold homes inflated by mounting foreclosures.

Lenders also have pulled back the reins in offering new loans. At the same time, many potential consumers resist buying now what could cost less later.

"One thing that has been made very clear is that there is no silver bullet to 'save' the housing market," said Michelle Meyer, economist at Barclays.

"There's been a plethora of initiatives put forward by the government to encourage mortgage modifications and new home ownership," she noted. "But the major problem is that we're in a recession that appears to be deepening, there's a big confidence shock to consumers, rising unemployment which impacts future income, and there's evaporating wealth both on housing and financials."

PRICES, CONFIDENCE GROPE FOR FLOOR

Existing U.S. single-family home prices in metro areas fell 9 percent in the third quarter compared with the same quarter last year weighed down by foreclosure sales, the National Association of Realtors reported earlier on Tuesday.

U.S. home prices through August sank more than 20 percent from their peak in the summer of 2006, according to Standard & Poor's/Case-Shiller home price indexes. Many economists are looking for an additional 10 percent price erosion.

Where there appears to be a burgeoning demand, sales are being driven by deeply discounted prices on foreclosures.

In Southern California, for example, home sales jumped 67 percent in October from a year earlier, with foreclosures accounting for half of that business while depressing prices.