Builder index at record low

U.S. home builder sentiment stayed at a record low in November, weighed down by the supply of unsold homes lingering on the market, an industry group said Monday.

The National Assn. of Home Builders said its preliminary NAHB/Wells Fargo Housing Market index was unchanged at 19 in November, matching last month as the lowest reading since this gauge started in January 1985.

“The housing recovery is absolutely going to be measured in years, not in months,” said Sue Woodard, executive vice president of Mortgage Market Guide, a real estate market information service in Holmdel, N.J.

With foreclosures on the rise and many banks forced to write off billions of dollars in losses on sub-prime loans, borrowers are having a harder time getting funding.

The rise in unsold inventory is attributed to potential buyers canceling orders as the market worsens as well as increasingly tight-fisted lending practices.

October’s index was revised up from a preliminary reading of 18, the home builders association said. The November index had been expected to drop to 17, based on a Reuters survey of economists.

Readings below 50 mean more builders view market conditions as poor than favorable.

“Consistent with what builders said in last month’s survey, many are reporting that their special sales incentives are having limited success in terms of getting buyers in the door,” association President Brian Catalde, a home builder from El Segundo, said in a statement.

Sales of existing homes sank in September to the lowest on record dating to 1999, battered by mounting foreclosures and tighter lending practices, according to the latest data from the National Assn. of Realtors.

Unsold inventory has swelled to record levels despite price cuts and other builder incentives.

“It looks grim,” said Ron Litt, president of Market Kinetix in Houston, which analyzes borrower credit scores.

“The underwriting standards now for mortgage loans are so strict that credit’s not really the killer,” he added.

“It’s mortgage lenders demanding higher reserves, perfect documentation on employment history and salary. They want money down -- the day of the 100% loan is pretty much gone -- and people are having more trouble qualifying for loans on those grounds than they are on credit grounds.”

The November builder sentiment index is less than half what it was at the year’s peak of 39 in February, and well below the 33 reading in November 2006.

The unchanged November reading follows eight straight months of declines in the index.