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 JAN 18, 2007
Some Home Builders Still Feel the Market is Sliding
U.S. home builders continue to reduce the prices of current inventory to boost sales. This action adds fuel to the overall concern that the market has not fully reversed from its previous decline.


In 2006, home builder stocks lost an average of 25% of their value. This is according to Morningstar's industry index. Home sales showed slight improvement in October and November, which many analysts saw as a sign of a recovering market.

In spite of the slight increases experienced during those months, there remains a very high level of available inventory around the country. The U.S. Census Bureau reports that the percentage of vacant homes was at 1.5% in the third quarter of 2006. This figure is the highest percentage since 1965.

An analyst with Morningstar states that the home builders industry built far more homes in excess of the previous demand which has left them now with such high inventory levels.

Home builders are getting criticized for not reducing prices enough to help move out their existing inventories. It is speculated that as far as the market of new homes is concerned, until existing inventory is sold, this portion of the market has yet to even bottom out.

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