A recovery in U.S. housing will have to wait at least until next year.
The outlook for the home market dimmed last week as residential construction and mortgage applications fell and loan delinquencies reached a record.
"I don't think the housing crisis is over," Mark Zandi, chief economist with Moody's Economy.com, said in an interview. "I think we're going to see another leg down."
Sales of new homes may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury home builder, but sales of existing houses may take longer. Residential construction and property sales led the way out of the previous seven recessions going back to 1960, said David Berson, chief economist at the mortgage insurer PMI Group in Walnut Creek, Calif.
Mortgage applications for home purchases fell to a 12-year low this month, and foreclosures rose to record highs in the third quarter, according to reports from the Mortgage Bankers Association.
An index measuring November home-builder confidence came in lower than the median forecast of 45 economists last week. The Commerce Department on Nov. 18 said residential building dropped 11% in October, to the lowest level since April's all-time low.
"Market conditions in the home-building industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tight credit for homebuyers and weak consumer confidence," said Donald R. Horton, the chairman of D.R. Horton Inc., the nation's second-largest home builder. The company last week reported a fourth-quarter loss of $231.9 million on $1 billion in sales, missing analyst estimates.
The $8,000 federal tax credit for first-time buyers, which President Obama extended this month, helped drive sales of existing homes to a two-year high in September. At the same time, a 26-year high in unemployment is keeping many buyers out of the market and pushing homeowners into foreclosure.
U.S. companies have shed 7.3 million jobs since December 2007, the biggest contraction since the Great Depression, and the unemployment rate jumped to 10.2% in October, the highest since 1983, according to the Bureau of Labor Statistics.
The jobless rate probably will peak at 10.4% next quarter, even as the U.S. economy continues an expansion that began in the third quarter, said Douglas Duncan, chief economist at Fannie Mae, the largest mortgage financier.
"You don't pay a mortgage with economic output — you pay a mortgage with a paycheck," said Jay Brinkmann, the MBA's chief economist.
The share of all types of home loans with one or more payments overdue climbed to a record, seasonally adjusted 9.64% in the third quarter, the MBA said last week.
The Standard & Poor's Supercomposite Homebuilding Index of 12 companies tumbled almost 5% in the six days through Thursday as negative housing data crushed hopes of a recovery.
Still, there are signs that pockets of the market are rebounding.
California, among the states where the housing bust started, is beginning to recover.
October home prices in Orange County, San Diego and the San Francisco Bay Area increased from a year earlier, according to MDA DataQuick. The number of sales also increased in the Bay Area and Southern California.
"We have to be aware that the stabilization that we've seen so far is tenuous at best," Stuart A. Miller, the chief executive of the home builder Lennar Corp., said this month at a conference in New York sponsored by UBS AG.
Home builders and investors will get a better gauge next quarter of whether housing demand is stabilizing, said Robert Toll, the chairman and CEO of Toll Brothers.
The spring selling season for home builders typically begins in February, earlier than the resale market because families with children want to move into a home before September's start of school. It can take up to six months to build a home, and up to nine months to build the larger houses sold by Toll Brothers.
"My prediction is we'll probably recover on a seasonal basis," Toll said last week at a conference in New York. "It's generally accepted that the home-building industry is off the mat and on the road to recovery."