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Housing Takes Another Header by Seth Jayson

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Think we’ve seen the worst from housing? Think again.

The latest S&P/Case-Shiller Home Prices Index shows that home prices are not only dropping like rocks, in many places, the rate of drop is increasing. The figures, which cover the period ending July, 2007, detail a 4.5% year-over-year drop in the index’s 10-city composite, and a 3.9% drop in the 20-city composite.

That’s the worst performance since 1991, which is why you should click that link and see the whole story. Previously hot markets like Phoenix and Tampa were among the worst tracked, but areas that sat out the bubble, like Detroit, are also suffering. Near Fool HQ, the argument I often hear about home prices never falling (because there’s reliable government spending, big influx of population, blah, blah, blah …) is shown to be a complete fiction, as D.C. area prices tumbled 7.2% year over year.

Remember, the Case-Shiller index tracks differences in sale prices for the same homes, and it screens out data that would compromise the comparisons, such as major renovations and non-arms-length sales. It looks at existing home prices in a more detailed way than the likes of the National Association of Realtors, which today reported a year-over-year increase in median prices that is directly at odds with the slow pace of sales.

It’s going to be a long time before the excesses are wrung out of this market, and I anticipate more investors getting stung. We’ve already seen that the prices of new homes are just as vulnerable in the current market. Hovnanian Enterprises (NYSE: HOV) recently had a well-publicized “Fire Sale,” which knocked about 20% off the price of new homes.

With foreclosures on the rise, more fire sales are likely in the existing and new home markets. I expect to see builders like Pulte Homes (NYSE: PHM), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Centex (NYSE: CTX), and Lennar (NYSE: LEN) resort to similar desperate moves.

Technorati Tags: stock market, housing market

Stocks of Calif. homebuilder Standard Pacific shed 10.8 percent; analysts predict more bad news for the sector.
Housing stocks down – Sep. 24, 2007

Housing stocks posted sharp losses Monday ahead of sector data and two major earnings reports scheduled for Tuesday and Thursday.

Standard Pacific Corp (Charts). led the losses, shedding 87 cents, or 10.8 percent, to $7.23 in midday trading.

Investors sold the stock lower after the California homebuilder said it would stop paying a quarterly dividend and instead use the estimated $10 million a year to pay down debt.

The company also said it was issuing $100 million in convertible debt in a move to refinance existing obligations.

Meanwhile, existing home sales data for August is due Tuesday.

Bank of America analyst Daniel Oppenheim expects a 3 percent decline. He also expects inventory levels will rise sharply, meaning further price cuts are likely.

Also Tuesday, Lennar Corp (LEN). reports fiscal third-quarter earnings. Analysts expect the company to post a loss on major charges to write down the value of inventory.

Lennar shares hit a 52-week low of $24.43 Monday, and were off 56 cents to $24.76 in midday trading.

On Thursday, an industry group reports data on sales of new homes — which directly reflects homebuilder results.

Oppenheim expects an 8 percent decline because of tightness in the credit markets that made it difficult to get a loan.

KB Home (KBH) reports quarterly results later that day.

Wall Street anticipates a loss of 75 cents per share, also because of impairment charges.

KB shares slid 70 cents, or 2.6 percent, to $26.57 in midday trading.

Technorati Tags: housing stock, real estate stock market