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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Mick Mørmøny who wrote (41722)	9/21/2005 8:43:31 PM
From: Mick Mørmøny	Read Replies (4) \| Respond to of 306849

Homebuilding Slowing Despite Katrina Boost Wed Sep 21,12:57 PM ET NEW YORK - The boost from rebuilding efforts after Hurricane Katrina won't be enough to stop homebuilding activity from slowing soon, experts say. Homebuilders should still do relatively well, although price corrections in certain key markets could pinch profits next year as buyers begin to balk at higher home valuations. Dave Seiders, chief economist for the National Association of Home Builders, said the national pace of homebuilding should moderate, even though a good portion of the 200,000 homes in New Orleans alone are at risk of being beyond repair after the hurricane. Housing starts, which have been running above a 2 million annual rate for the past five months, are probably going to "give a little bit back" and dip below 2 million heading into 2006, he said in a conference call this week. The most recent data on new home construction, released by the NAHB Tuesday, showed that August starts dropped 1.3 percent from the prior month to a seasonally-adjusted annual rate of just over 2 million units. Meanwhile, builder optimism about home sales dipped this month, according to the NAHB's latest gauge, with the index for sales of new, single-family homes down to 65 in September from 67 in August. When the housing market index is above 50, it means more builders see "good" sales than see "poor" sales. Seiders said that buyer resistance to higher home prices — in particular at a time when fuel prices are crimping home budgets — is starting to feed through to builders. "The price boom creates its own affordability issues," he said. "It leads to its own correction." Still, his forecast is for price gains to slow down, not to drop, in 2006. Home prices have been soaring in recent years in what has been one of the largest and longest-lasting housing booms in U.S. history. Low mortgage rates and an easing of lending standards has helped create more homeowners than at any other time, keeping homebuilders busy and profitable. Though there has been alarm about the possibility of a housing bubble, the NAHB and some equity analysts who cover homebuilders expect the expansive market to correct slowly rather than burst. "Fundamentals are still very strong across the U.S.," said Stephen East, an analyst of homebuilding and building products companies for Susquehanna Financial Group, an institutional research, trading and brokerage firm headquartered in Bala Cynwyd, Pa. "I think what you're seeing is pricing is starting to moderate," East said. "Demand is sustainable but pricing is not sustainable." Not that the homebuilding industry can be completely complacent. The activities of the largest homebuilding companies are heavily concentrated on both coasts — in areas where home-price appreciation has far outstripped income growth in recent years. The 19 Standard & Poor's-rated homebuilders who sold about 25 percent of the nation's approximately 1.6 million new single-family homes in 2004, earn about 50 percent of their revenue in just three states — California, Texas and Florida, according to S&P analyst James Fielding. What that means for homebuilders is that even if "small" regional house-price bubbles pop, the location of the bubble makes all the difference. "The bursting of a 'tiny bubble' in suburban Fresno, Calif., likely would hurt more than the bursting of a 'tiny bubble' in the increasingly pricey resort town of Big Sky, Mont.," Fielding wrote in the report. History indicates home-price corrections in the 10 percent to 20 percent range are possible, Fielding said. Home prices declined 13 percent in California during a six-year period in the early-to mid-1990s, and in Texas, they fell 15 percent in the early 1980s. "Looking forward, the proliferation of condominium units in certain Florida markets and recent double-digit price increases may foreshadow a similar correction," Fielding said in the report. news.yahoo.com