Little Hope For Homebuilder Profits

Homebuilder stocks took a tumble after an analyst said there was little reason to believe they would have profits before 2011.

Why is the housing market still so depressed with little hope of turnaround? There’s a tax credit for buying a new home as a primary residence. Mortgage rates are low. But there are still a large number of foreclosures and little reason to believe that this stream will narrow.

High unemployment rates and little prospect of sustained economic growth means that comparatively few people are in a position to buy homes.

The Washington Post says:

NEW YORK — Shares of U.S. homebuilders slid Monday after an analyst cut his estimates on several companies and said most in the industry won’t turn a small profit until late 2011.

Deutsche Bank analyst Nishu Sood said he expects the housing market to remain weak as benefits from a federal tax credit disappear, unemployment continues to rise and the housing supply grows on a jump in foreclosures. Mortgage rates will also rise when the Federal Reserve stops buying mortgage-backed securities, he said.

To prop up the housing market and help the economy recover from the worst recession since the 1930s, the Federal Reserve has been engaged in an extraordinary level of support, spending $1.25 trillion on mortgage-backed securities, which has driven down rates on home loans.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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