Concerns about the housing market grew deeper today as the National Association of Realtors issued a more pessimistic outlook and two major home builders said their profits will not meet expectations.
Wall Street became edgy on the news, and stock prices traded below Wednesday’s close.
The real estate group, which has been generally upbeat in its assessment of housing, said today that it expects home prices will temporarily fall below the levels of a year ago.
“This is a normal pattern during a market correction,” the association’s chief economist, David Lereah, said in a statement. “Buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned.”
The association’s forecast came after announcements by KB Home and Beazer, two of the nation’s largest home builders, that their profits this year would be lower than the companies first thought.
“Our earnings expectations,” said Bruce Karatz, chief executive of KB, “reflect an increasingly challenging housing market, where the supply of new and resale home inventories has built up in recent months.”
KB lowered its earnings guidance for the year to $8 to $8.50 a share, down from an earlier estimate of $10 a share. Beazer also said it expects earnings for the year of $8 to $8.50 a share, compared with its previous outlook of $9.25 to $9.75. Both companies said falling sales had caused them to dampen their expectations for the year.
Falling sales combined with falling prices are creating a tough environment for builders and sellers and a backlog of unsold homes.
Aggressive discounting by home builders and the rising number of homes on the market has increased the pressure on sellers to cut prices, said Ronald J. Peltier, president and chief executive of HomeServices of America, a subsidiary of Berkshire Hathaway that owns real estate brokerages around the country.
“It’s going to take the rest of this year at a minimum for that inventory to be liquidated,” he said. “This period of correction is going to take a little while but it’s healthy for the market.”
