Home builders were dealt a swift blow Thursday, as a barrage of
reports showed housing's recovery remains in the distance.
New-home sales might have climbed ever-so-slightly in April, but
the median price took another big tumble. Mortgage performance
continues to deteriorate, even for borrowers once considered safe,
deepening the foreclosure crisis.
This came as Freddie Mac (FRE) detailed price declines and
higher interest rates. The headlines weighted heavily on the
stocks. Ryland's (RYL) 10.55% decline led the sector's plunge,
followed by Centex (CTX) and Pulte (PHM) each seeing declines
topping 8%.
With none of the major builders in positive territory, the Dow
Jones U.S. Home Construction Index fell 5.05%.
"Stagnant. Stuck in the mud. Flatlining. All of these words sum
up the current state of the housing market," wrote Mike Larson,
real estate and interest rate analyst at Weiss Research.
Sales of single-family homes increased by 0.3% to a seasonally
adjusted annual rate of 352,000 compared to the prior month, the
Commerce Department said Thursday.
But March sales were revised lower, falling 3.0% to an annual
rate to 351,000, Thursday's data showed. Originally, the government
said March sales fell 0.6% to 356,000.
Economists surveyed by Dow Jones Newswires expected April sales
up 2.5% to 365,000. Year-over-year, new-home sales were 34.0% lower
than the level in April 2008.
"Obviously the results...were disheartening," said Pali
Research's Stephen East. "We had expected a better sales rate given
improved consumer sentiment, the California tax credit and a
favorable pricing environment."
For a new home, the median price dropped in April by 14.9% to
$209,700, down from $246,400 in April 2008, the Commerce data said
Thursday. The average price fell 19.2% to $254,000 from $314,300 a
year earlier. In March 2009, the median price was $202,200 and the
average was $257,100.
Prices are being hurt by a glut of unsold houses on the market.
At the end of April, there were an estimated 297,000 homes for
sale. That's down from the 310,000 for sale at the end of
March.
The National Association of Home Builders said it didn't take a
negative view of data.
"I think we're doing exactly what I expected, which is bouncing
along the bottom," said David Crowe, the trade group's chief
economist. "It's what we need to do until we can be sure that the
consumer is back in the marketplace in full force."
That might take some time, as the market is bedeviled by
foreclosures. Many buyers are gobbling distressed properties priced
cheaply, and passing up on new homes.
And the flow isn't expected to end anytime soon. The combined
percentage of loans in foreclosure and at least one payment past
due, meaning the percentage of mortgage holders not current on
their mortgages, was 12.07% on a non-seasonally adjusted basis -
the highest ever recorded in the Mortgage Bankers Association's
delinquency survey.
The foreclosure rate on prime fixed-rate loans has doubled in
the last year, and, for the first time since the rapid growth of
subprime lending, prime fixed-rate loans now represent the largest
share of new foreclosures, according to the association. And not
all of the borrowers can be helped.
"While mortgage modification programs will help save some
borrowers, others are just too far gone," Larson said. "They lied
about their incomes. They have no assets to fall back on. They're
upside down on their homes. And/or they're losing their jobs. So
we'll be coping with an elevated level of foreclosures for some
time."
Crowe agreed, adding that unemployment and falling home values
remain an issue: "I think we're going to see it get worse before it
gets better."
Indeed, Freddie Mac said its Conventional Mortgage Home Price
Index Purchase-Only Series, which excludes refinancings, showed a
5.3% annualized decline in house prices during the first quarter.
This comes after a downward revised 18.5% drop in the fourth
quarter.
Finally, Freddie said the 30-year fixed-rate mortgage averaged
4.91%, with an average 0.7 point, for the week ending May 28.
That's up from 4.82% last week.
According to Credit Suisse, the 30-year conforming mortgage rate
spiked 37 basis points Wednesday to 5.34%, the highest level since
February. While rates have fallen in recent months, any tick upward
could further impact the builders.
"The new home market will be the most impacted by the increase
in mortgage rates given the already worse affordability relative to
the existing home market," noted Credit Suisse analyst Dan
Oppenheim. "New home sales will suffer as buyers continue to focus
on the most affordable homes (primarily foreclosures) and as banks
are quicker to reduce pricing in response to higher rates, which
will create even further pricing pressure as homebuilders must
compete with lower foreclosure prices."
-By Dawn Wotapka, Dow Jones Newswires; 201-938-5248;
dawn.wotapka@dowjones.com
(Jeff Bater and Meena Thiruvengadam contributed to this report.)