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Home Prices Will Fall Another 15%: Analyst

NEW YORK (TheStreet) -- The already-struggling housing market has another 15% decline in home prices already priced in, according to Stifel Nicolaus analyst Michael Widner.

Toll Brothers

Widner believes the sentiment is "overly pessimistic," but "it is unclear to us what near-term catalyst might improve visibility." He added that "unusually unclear visibility and lack of willingness to own the group given that lack of clarity" has kept valuations among homebuilders cheap across the sector.


The analyst explained that most homebuilders, including Toll Brothers (TOL), which posted a 54% quarterly profit rise though revenue missed expectations, are trading at unusually low multiples because of market expectations for "a further 15% decline in national home prices by our estimates."

Widner had a hold rating and $15.35 price target on Toll Brothers shares following its earnings report Wednesday morning,

Homebuilders are clearly in a rut and signs for near-term improvement are few. Data released Tuesday showed that sales of newly built homes dipped 0.7% in July -- the third consecutive month of declines -- to a five-month low.


"Unfortunately, none of the data we see suggest that there will be a significant turnaround anytime soon," Mike Schenk, vice president of economics and statistics with CUNA, told TheStreet recently. "While mortgage interest rates are near all-time lows and housing affordability is near all-time highs, consumers remain cautious, builders remain dejected ... and permit activity suggest very little new construction on the horizon."

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