Housing market bottom hoped for, not expected

By Ilaina Jonas - Analysis

NEW YORK (Reuters) - Investors hope the next round of results from U.S. home builders, starting on Thursday, will show that the slump in the housing market is abating, but realistically they expect no sign of a bottom yet.

In fact, many investors and analysts expect the market downturn -- caused by a glut of homes for sale, tighter lending standards and weak demand -- to worsen until at least the second half of this year.

"I think it's a pretty severe downturn," said Robert Curran, Fitch lead home building analyst. "Could it be more severe still? Obviously."

JMP Securities analyst Jim Wilson said he does not expect to see any sign the market for new homes has reached bottom.

"The builders are the last ones to see that, because the resale market drives the new home market," he said.

The resale market is comprised of foreclosed houses; homes of subprime borrowers, which have poor credit histories, nearing foreclosure; and "regular people who need to move," Wilson said. These homes comprise about 85 percent of the U.S. housing market.

"You have to start seeing (that) the resale market is seeing less inventory, and so far it's not. It's seeing more," he said.

The supply of homes on the resale market rose in February, the most recent month for which information has been compiled, to 6.7 months worth of sales from 6.6 in January, according to the National Association of Realtors.