The homebuilders probably aren't crying in their beer, but they're anything but a happy lot. And, as you no doubt suspected, they're not anywhere near as busy as they once were, a status that doesn't appear likely to change for a good long time.
Let's start with their mood. Not good. Monday, the National Association of Home Builders told us that its index of builders' sentiment -- which is also sponsored by Wells Fargo (NYSE:WFC) -- remained stuck at 19. That's the same level as in the prior month and the lowest reading since the series began at the beginning of 1985. It's a simple index: A reading above 50 indicates that the builders are happy, while tipping lower is a sign of pessimism.
At the same time, Fools are all smart enough not to be surprised that the builders also have progressively less to do. On Tuesday, the Commerce Department told us what we easily could have predicted: Construction of new homes and apartments dropped by 3.7% to a seasonally adjusted annual rate of 1.187 million units in November.
That percentage was far less important than the 24.2% drop from a year ago. Also, the overall number was less significant than the construction rate for single-family homes, which fell 5.5% in the month. Beyond that, applications for building permits dropped for the sixth month in a row.
David Seiders, the NAHB's chief economist, believes that the world of housing -- or at least the world of homebuilding, which isn't the same thing -- will turn, "most likely by the second half of 2008."
Perhaps, but that's not likely. As I've noted before, the folks at the likes of Centex (NYSE:CTX), D.R. Horton (NYSE:DHI), Pulte (NYSE:PHM), and Toll Brothers (NYSE:TOL) can be pawing-the-ground ready to supply new houses to a throng of eager buyers. But if inventories remain high, the economy is still soft, and the decimated world of mortgage lending isn't ready to provide adequate financing, all those good intentions will go for naught.
The next year will almost certainly see rafts of houses dumped on the market by foreclosures, and the critical mass of mortgage lenders is a shadow of its former self. Those conditions won't be rectified overnight, so I'm inclined to nudge Seiders' forecast back by at least a year, maybe two.
For related Foolishness:
- Dueling Fools: Homebuilder Bull Rebuttal
- You Can't Find a Bottom in the Dark
- 3 Myths About the Turbulent Market
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