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.
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."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV