Bob Pisani is off; this post was written by CNBC producer Robert Hum.
Despite a fairly decent earnings report out of Toll Brothers this morning, some concerns linger over the state of the housing industry.
Toll Chief Executive Robert Toll pointed out that the speed of a housing recover has been “hard to discern” due to “unevenness in demand” the homebuilder has seen since September.
He also cautioned that the housing market is “still in choppy waters, but the seas are getting calmer.” But after a flurry of housing-related data today, uncertainty remains on whether it will be smooth sailing for both the builders and the industry in the coming months:
1) Sales Slump
The Commerce Department’s January New Home Sales report was flat out terrible this morning. Dropping over 11 percent from the prior month, the drop was significantly worse than the 3.5 percent RISE economists had expected. Falling for the third straight month, the level of new home sales (309,000) was at the lowest levels on record.
Even more discouraging, traders note that this hefty decline occurred despite the current extension of the homebuyer tax credit.
2) Pricing Pressure.
a) The Commerce Department also reported that the median price for new homes last month fell 5.6 percent from the prior month. At $203,500, the median price now sits at its lowest levels in over 6 years.
b) Reaffirming the lack of price momentum, Toll Brothers also saw Q1 home prices fall slightly on a sequential and year-over-year basis (down 1.2 percent from Q4 2009, down 3.3 percent from year-ago quarter). As mentioned earlier, its 2010 outlook for average selling prices of $540,000-$560,000 falls slightly below levels from last year.
3) Inventories Edge Up
Contrary to hopes of getting supply levels down further, inventory levels of new homes have been slowly creeping up. The Commerce Department saw 9.1 months supply in January, up from 8.0 months in December and 7.8 months in November. However, keep in mind, inventories are still way below the record high level of 12.4 months supply set back in January 2009.
4) Mortgage Applications Fall
Earlier this morning, the Mortgage Bankers Association (MBA) also reported notable weakness in mortgage applications for purchasing homes. Its index that tracks mortgage applications for purchases of homes fell 7.3 percent to its lowest level in nearly 13 years. While it argued harsh, snowy weather was a factor, the Association maintained that it’s “another indication that housing demand remains relatively weak.”
5) Mortgage Rate Fears
Another potential impediment to sales in the coming months: the fear of higher mortgage rates after the Fed ends its program of purchasing mortgage securities in March.
As for the homebuilding stocks, they’ve held up fairly well over the last several months. They’re one of the better sectors since the markets’ lows in March, rising 89 percent in that period. Some of the individual stocks have even lurked near new 52-week highs this month, which could pose a challenge to their share prices if there is indeed more disappointing data in store for the industry.
Over the last two days: Lennar down 7 percent, Pulte Homes down 5 percent, D.R. Horton down 5 percent, Ryland down 4 percent, Toll Brothers down 4 percent.
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