Some Think the Housing Market Is Still Sliding

Daily Real Estate News | January 17, 2007
Some Think the Housing Market Is Still Sliding
Home builders continue to announce inventory write-downs, fueling concern that the U.S. housing market hasn't reversed its decline.

Last year home builder stocks lost 25 percent of their value, according to Morningstar’s industry index. In October and November, home sales improved slightly and many took that as a sign that things were improving.

But those small increases don’t erase the fact that there are a historically high number of homes on the market. The percentage of vacant houses for sale compared to total housing units was over 1.5 percent in the third quarter, higher than at any time since 1965, according to Census Bureau data.

"The building industry built far in excess of demand in the past two years," says Eric Landry, an equity analyst with Morningstar. "What it's gonna take is sopping up this excess demand."

Home builders haven’t reduced prices enough to move the inventory, says Wachovia Capital Markets analyst Carl Reichardt.

Landry is also skeptical that a recovery is in sight. “The amount of non-performing land on these companies' balance sheets is still very high. It just doesn't appear to us that it's bottomed."

Source: Associated Press, Jeremy Herron (01/16/07)