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Homebuilders Remain Gloomy

Written By Brian Hicks

Posted June 16, 2008





Here’s the latest reading on how the the homebuilders themselves are feeling about their industry these days.

It turns out they are gloomy lot.

Here’s the skinny.

From Bloomberg by Timothy R. Homan entitled: Homebuilder Confidence Index Unexpectedly Fell to 18

“Confidence among U.S. homebuilders unexpectedly dropped this month, signaling the housing slump may worsen.

The National Association of Home Builders/Wells Fargo sentiment index fell to 18, matching a record low, from 19 in May, the Washington-based group said today. The index first reached that level in December. Readings under 50 mean most respondents view conditions as poor.

Stricter lending rules and rising foreclosures are hurting sales, prompting construction companies to cut back on new projects. Declining demand may also force builders to drop prices even more, adding to mounting losses.

“The imbalance between housing demand and supply has grown as sales continue to fall and inventory remains high,” Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, said before the report. “We expect residential investment to be a drag on growth though year-end.”

The measure of current single-family home sales was unchanged at 17, also the lowest ever. Projections for sales six months from now were also unchanged at 28 in June.

“Housing still occupies a major place in this ongoing, rather unique and rather strange economic slowdown,” David Seiders, chief economist at the builders’ group, said in a conference call. “I do expect the sales volume to erode somewhat further in the months ahead.”

Tomorrow, a Commerce Department report may show housing starts in the U.S. dropped 0.5 percent to an annual pace of 980,000 in May, according to the median forecast in a Bloomberg survey of economists. Starts reached a 17-year low rate of 954,000 in March.”

So are the home builders attractive buys at thier current levels?

Well not hardly if you take a realistic look at their future numbers.

In fact, at this point they still look like they are nothing more dead money value traps.

By the way, here are my 2009 projections for the share prices 6 of the biggest homebuilders in the country: Home Builder “Value Trap” Stocks