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Grim US housing outlook in 2008

(CHICAGO) US homebuilders said the housing market probably will weaken in 2008 as foreclosures rise and banks tighten lending standards.

Demand has deteriorated in many markets, limiting the prospect of a rebound in new home sales, chief executive officers for D R Horton Inc and Beazer Homes USA Inc. said on Tuesday at a JPMorgan Chase & Co conference in Las Vegas.

Next year ‘is going to be worse than ’07 for us and for the industry in general’, said Donald Tomnitz, CEO of Fort Worth, Texas-based D R Horton, the fourth- largest US homebuilder.

The housing slump that began in 2005 has erased about US$36 billion in stock market value for the largest 15 homebuilders this year.

New home sales dropped 23 per cent in the year through September and home delinquencies have reached a five-year high.

The California and Florida housing markets continue to weaken and the Las Vegas market is ‘soft’, Mr Tomnitz said.

New home sales in Phoenix will probably get worse in 2008, he said.

Stephen Scarborough, Standard Pacific Corp’s CEO, said at the conference that his company isn’t planning on filing for bankruptcy.

Shares of Standard Pacific have fallen 91 per cent this year on concern the company can’t pay back its debt.

‘There’s no effort on our part and nothing is in process as far as filing for bankruptcy protection,’ Mr Scarborough said. ‘That is not our present intent. We have a multifaceted approach to conserve cash and generate cash,’ he said.

Homebuilders are cutting jobs and trying to reduce their construction costs to boost cash flow to pay off debt. They’re also selling land and writing down property values.

 

Source: Bloomberg (Business Times 29 Nov 07)

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