Home builder sentiment stuck at record low

Home builders' pessimism about the housing market was stuck at a record low in November, the National Association of Home Builders said Monday.

The association said Monday that its housing market index, which gauges builders' perceptions of conditions and expectations for home sales the next six months, came in at 19 in November, matching a revised reading for October.

The number for both months was at the lowest level since the index began in January 1985, but the November reading was a point higher than the consensus forecast of economists surveyed by Thomson/IFR.

Index readings higher than 50 indicate positive sentiment. The seasonally adjusted index has been below 50 since May 2006, and declined for eight straight months this year before remaining unchanged in November.

Tighter lending standards, rising defaults among borrowers with weak credit and falling prices for existing homes have meant fewer buyers for hard-hit home builders such as D.R. Horton, Pulte Homes and Centex. Many builders have been holding promotional sales with deep discounts — producing mixed results.

Earlier this month, Robert Toll, chairman of luxury builder Toll Brothers, was candid about the market's woes, telling investors that conditions around the country range "from miserable to outright purgatory." Toll is expected to report the first quarterly loss in company history next month.

The NAHB's president, Brian Catalde, a builder from El Segundo, Calif., blamed the news media for the market's troubles, saying media reports are "fueling unrealistic expectations" about how far prices will fall.

"Builders are worried that the national media has tended to report negative housing stories as if there is one real estate market, when, in fact, there is no such thing — all housing markets are local," he said. "As a result, some healthy markets are being unfairly impacted by this negative media coverage."

David Seiders, the trade group's chief economist, said a recovery in building activity is not expected until the second half next year as builders focus on reducing inventory of unsold homes.

Nationwide, new-home sales are projected to fall to 796,000 this year, down 24% from 1.05 million last year, the National Association of Realtors said last week. Sales are expected to drop further to 693,000 in 2008, according to the Realtors' group.