Data add to gloom in US housing
By Doug Cameron in Chicago and Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: June 26 2007 17:08 | Last updated: June 26 2007 23:38
The head of one of the largest US housebuilders on Tuesday warned that prices have further to fall in order to restore consumer confidence in the troubled sector.
The glut of existing homes has become an increasing concern for builders, who have cut construction and increased discounts in an effort to clear an inventory of single-family houses now at its highest level since 1992.
“Consumer confidence is going to have to be restored so that purchasers believe again in the value of homes,” said Stuart Miller, chief executive of Miami-based Lennar, the second-largest US builder.
While average prices have fallen over the past three months, he said the values of existing homes – which account for 85 per cent of the market – remained “stickier” and would have to fall to clear the inventory overhang.
Mr Miller said the housing market might deteriorate through the rest of the year despite Lennar increasing average home discounts to 15 per cent in the quarter to May 31.
Sales of new and existing homes dropped year-on-year in May, the end of a traditionally strong spring selling season that failed to ignite.
Ian Shepherson, chief US economist at High Frequency Economics, said: “The supply problem may now be stabilising but it remains huge...the inventory overhang will keep downward pressure on prices. There is no reason to think a proper recovery will start any time soon.”
An index of builder confidence this month fell to its lowest level since 1991, despite a more benign economy, amid concern that potential buyers are being deterred by the uncertain pricing outlook and tougher lending conditions.
The closely watched Case-Shiller index for May showed that prices for single-family homes fell by 2.1 per cent from the year before in 20 metropolitan areas.
Lennar reported a net loss of $244.2m (€180m, £122m) in the May quarter, reversing the $324.7m profit of a year earlier.
Separately, US consumer confidence in June has fallen to its lowest level since August, pointing to slower economic growth this year. Worried by the state of the job market and fears of deteriorating business conditions, consumer confidence dropped to 103.9, according to the Conference Board’s index, from a reading of 108.5 last month. Economists had predicted a rating of 105.5 for June.
“Lingering high [petrol] prices, volatility in the stock market and the jump in interest rates all appeared to weigh on confidence this month,” said analysts at Action Economics in a note.
However, consumer confidence remains at a historically healthy level.
Additional reporting by Eoin Callan in Washington