New home market hammered
Sales of one-family houses slide more than expected in June as builders report large losses due to weak sales, charges to write down value of their holdings.
The battered real estate and home building markets took another body blow Thursday as a government reading showed a bigger than expected drop in new home sales, and the nation’s top builders posted large losses due to the weak market and took charges for the declining value of their holdings.
The news battered the overall stock market as it raised concerns that the crisis in home sales and building could be a bigger drag on the economy than previously expected. The Dow Jones industrial average was down as much as 322 points in midday trading.
New homes sold at an annual pace of 834,000 in the month, down 6.6 percent from the revised 893,000 rate in May. That left sales down 22.3 percent from year-ago levels.
It was the fourth slowest pace of sales since 1998, trailing only June 2000, September 1999 and March of this year.
Economists surveyed by Briefing.com had forecast sales would slow to only a 900,000 annual sales rate in June.
“I don’t’ find the number surprising, given all the weakness we’re seeing in the sector,” said John Tomlinson, a stock analyst with Majestic Research who follows the publicly-traded builders. “Our data points to things weakening further.”
The downturn in housing is battering results of leading home builders. Thursday morning D.R. Horton, the nation’s No. 2 home builder by revenue, reported a bigger than expected loss as it took pre-tax charges of $1.2 billion to recognize the lower value of its inventory and goodwill.
Beazer Homes, the No. 8 builder, also reported a loss, Thursday, and after the market close Wednesday, No. 3 builder Pulte Homes and No. 9 Ryland Group also reported losses, although some of the losses were less than forecast.
Late last month Lennar, the nation’s largest home builder by revenue, reported an unexpected loss in the most recent quarter, as did KB Home, the nations’ No. 5 builder.
David Seiders, chief economist for the National Association of Home Builders, said the group’s survey of members continued to show declines in July, so he thinks the weak June report is probably not the end of the slump.
… The report follows a reading from the National Association of Realtors on Wednesday that showed the pace of existing home sales falling to their lowest level since November 2002.
While new home sales make up only a fraction of the overall real estate market, Thursday’s report is closely watched as a more forward-looking reading than existing home sales, which are recorded at the time of closing, typically a month or two after a sales contract is signed.