Housing confidence hurt
U.S. homebuilding stocks have been shaken by weakening equity markets
September 7, 2001: 5:50 p.m. ET
NEW YORK (Reuters) - Shares of homebuilders dropped on Friday, a sign that investors were beginning to lose confidence in the housing market, which until now has been the final pillar of strength propping up a weakening economy.
While the latest housing figures show demand for new homes, and mortgages are cheap, investors questioned how long the housing market could stay strong as job losses mount and consumer confidence takes a hit.
The Standard & Poor's Homebuilding index dipped 6.70 percent on Friday afternoon, dragged down by components Centex Corp. (CTX: Research, Estimates), KB Home (KBH: Research, Estimates), and Pulte Homes (PMH: Research, Estimates). The homebuilding index, which soared to its all-time high of 198.61 in July, has fallen 23 percent since then.
"More and more people are saying, 'Can housing completely escape this overall economic weakness?' Investors are saying now that the risks outweigh the rewards," Goldman Sachs analyst Christopher Winham said.
Jim Glassman, senior economist with J.P. Morgan Securities, said that if companies keep cutting spending and slashing jobs, it is going "to continue to undermine confidence and spending, including interest rate-sensitive sectors like housing."
Adding to worries about the housing market are daily announcements of job cuts by companies. Earlier on Friday, the Labor Department said the U.S. unemployment rate swelled to 4.9 percent – the highest level in nearly four years – as businesses cut 113,000 jobs in August.
"It's obviously tough to get a mortgage without a job," Winham said.
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