September 20, 2010 / 2:17 PM / 7 years ago

Homebuilder sentiment stays in doldrums

WASHINGTON (Reuters) - Home-builder sentiment remained stuck at a 1-1/2-year low in September, the latest suggestion the sector is in for a painful and prolonged climb back to health.

<p>Construction workers continue work on a new subdivision of homes in San Marcos, California April 23, 2010. REUTERS/Mike Blake</p>

The National Association of Home Builders and Wells Fargo said on Monday that their Housing Market Index for single family homes held for the second straight month at 13 -- the lowest level since March 2009. Economists had expected the index to edge up to 14.

A reading above 50 indicates that more builders view sales conditions as good than poor. The index has not been above 50 since April 2006.

“Homebuilders continue to be pessimistic about current housing market conditions. That’s not a good sign in the absence of efforts by Washington to prop up housing,” said Alex Hoder, an economic analyst at FTN Financial in New York.

Financial markets ignored the data as investors speculated on whether the Federal Reserve would announce a new round of monetary easing to spur the economy at Tuesday’s meeting.

The S&P 500 .SPX closed at a four-month high on Monday as a long-awaited break above a technical range and a flurry of positive corporate news increased investor optimism.

The Dow Jones industrial average .DJI added 145.77 points, or 1.37 percent, to 10,753.62. The Standard & Poor's 500 Index .SPX was up 17.12 points, or 1.52 percent, at 1,142.71. The Nasdaq Composite Index .IXIC was up 40.22 points, or 1.74 percent, at 2,355.83.

Many analysts believe the Fed will resume large-scale purchases of longer-term U.S. government bonds in coming months in an effort to keep borrowing costs low.

The central bank already has cut overnight interest rates to near zero and pumped more than $1.7 trillion into the economy with purchases of Treasury and mortgage-related debt.

U.S. home sales and building activity have fallen sharply since the expiration of a popular homebuyer tax credit earlier this year. Economists had expected a soft spot after April’s credit expiration, but the weakness is proving long-lasting and more fundamental.

The housing sector’s collapse was the main trigger of the longest downturn since the Great Depression of the 1930s, which on Monday was officially declared to have ended in June 2009.

With the unemployment rate at a lofty 9.6 percent, few Americans have the wherewithal to buy a new home despite historically low mortgage rates.

The survey’s current sales conditions gauge also held at 13, a 17-month low reached in August. The sales expectations index for the next six months held at a 1-1/2 year low of 18, while the index reflecting prospective buyer traffic fell a point to 9, also the lowest since March 2009.

The index is the first of many reports to be released this week giving the latest assessments of the U.S. housing market.

“You have way too much surplus and not enough people who qualify for loans, meaning housing numbers will remain weak for a while,” said Cliff Draughn, president and chief investment officer at Excelsia Investment Advisors in Savannah, Georgia.

Data this week are expected to show some gains in new home construction and sales, but probably not large enough to pull the housing market out of its soft patch.

Another report is expected to show sales of previously owned homes rebounded in August from July’s 15-year low.

Despite the general sense of pessimism surrounding the housing market, homebuilder Lennar Corp on Monday reported a higher-than-expected quarterly profit and a decline in orders that was less severe than Wall Street had feared.

Shares in the nation’s third-largest homebuilder rose more than 8 percent.

Additional reporting by Lucia Mutikani and Emily Kaiser in Washington and Ryan Vlastelica and Helen Chernikoff in New York; Editing by Andrea Ricci and Dan Grebler

Our Standards:The Thomson Reuters Trust Principles.
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