Housing News Turns The Stock Market To Mush
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It's been a rough week for the housing market. Homebuilder confidence is in
the gutter, existing home sales fell substantially and the bad news emanating
from the subprime debacle continues top headlines. Now we have new home
sales and builders reporting earnings.
Sales of new one-family homes in June, 2007 were even more disappointing than
the report on sales of existing homes announced by the National Association
of Realtors (NAR) earlier this week.
The U.S. Census Bureau in conjunction with the U.S. Department of Housing and
Urban Development published statistics on Thursday showing that sales of single-family
properties were at a seasonally adjusted annual rate of 834,000. This was 6.6
percent below the downwardly revised rate of 893,000 for May. The original estimate
for May was 915,000 units. Wall Street analysts had been expecting a June figure
of around 895,000 units. The estimate for June 2007 is 22.3 percent below the
estimate for June one year ago when 1,073,000 new homes sold.
The median price of new homes sold in June was $237,900 and the average was
$315,200. One year earlier the median price was $243,200 and the average was
305,900.
Inventories of new homes continue to rise even as housing
construction slows. In June there were 537,000 new homes on the market, a 7.8
months supply at present absorption rates. In May there were 538,000 homes for
sale comprising a 7.4 month backlog.
The time necessary to market a new home is also increasing. In June homes were
on the market for a median time period of 6 months. In May the median was 5.7
months but one year ago it took only 3.6 months to sell a house.
In other new home news, a growing roster of major homebuilders
is reporting a reversal of fortunes. In the last few days the list of those
reporting that their profits are being eaten up by impairment charges has continued
to grow. Impairment charges are basically write-offs representing the decreasing
value of land and inventory.
- D.H. Horton will be showing a quarterly loss of $823.8 million ($2.62
per share in the second quarter compared to income of $292.8 million or $0.93
per share for the same quarter in 2006.
- Beazer Homes reported a 2nd quarter net loss of $123 million ($3.20
per share) against a profit of $102.6 million or 2.37 per share during the 2nd
quarter last year.
- Pulte Homes announced that its revenues plunged 40 percent from one
year ago.
- Centex Corp. saw its revenues fall 31 percent for the quarter.
- Ryland Group Inc. reported a quarterly loss as revenues fell 38% from
the prior year.
Some analysts felt that the homebuilders might be acting proactively by taking
impairment write-offs early when their stocks were already under assault and
that some of the charges might be reversed later. Still, housing news along
with some other weak economic reports caused the Dow to plummet nearly 311 points.
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