Housing market gets more bad news
— -- Countrywide Financial cfc got hammered on Wall Street Wednesday after a Merrill Lynch analyst raised the possibility that the nation's largest mortgage lender risks bankruptcy. The news underscored fears among home builders that turmoil in the mortgage industry could shut out more buyers.
The confidence level of home builders slumped to the lowest mark in 16 years, the National Association of Home Builders said Wednesday. The problems in the mortgage industry threaten to reverse the stabilizing trend in existing-home prices during the second quarter, the National Association of Realtors said.
The median price for an existing, single-family home rose in 97 metro areas across the country, though in many of them just barely, while 50 metro regions posted lower prices compared with the second quarter last year, the NAR reported. Nationally, the median price for existing homes fell 1.5% to $223,800. "Sales will continue to be weak due to the mortgage market disruption," said Lawrence Yun, NAR senior economist.
That's what is weighing on the minds — and stock prices — of members of the National Association of Home Builders. Their confidence index slipped to 22 from 24 in July, the lowest since January 1991.
"Builders realize that issues related to mortgage credit cost and availability have become more acute," said Brian Catalde, NAHB president.
Merrill Lynch analyst Kenneth Bruce cut his rating on Countrywide to sell and warned there's a risk of "effective insolvency" if the lender is forced to sell assets at depressed prices, or investors lose confidence in Countrywide's ability to raise cash.
"The company can survive a period of secondary market instability; however, the steps that it would take to preserve shareholder value would be expensive, likely leading to further share price declines," Bruce said.
Countrywide's shares fell 13% to $21.29.
Lenders have seen an increasing number of loan defaults in cities where prices are falling. The NAR report showed the decline in existing-home prices continued in Rust Belt cities, such as Detroit and Cleveland, that have lost a huge number of manufacturing jobs, and in cities that had the greatest run-up in prices during the boom, such as Palm Bay and Sarasota, Fla.
Elmira, N.Y., again saw the largest price decline, down almost 18% to $71,700, and remains the cheapest place to buy of the 149 metro areas the NAR tracks.
The Silicon Valley remains the most expensive place in the country; the median home price rose almost 9% in the quarter to a $865,000.
Contributing: Reuters