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
, 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
-- 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
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."
Data released earlier this month showed that
. The National Association of Home Builders (NAHB) reported that
as the usual suspects -- an oversupply of homes, inaccurate appraisal values and tight lending -- kept home purchasers at bay.
Last Thursday, the National Association of Realtors reported that sales of previously occupied homes unexpectedly fell 3.5% in July as potential homebuyers cancelled more contracts.
"Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers," said NAR chief economist Lawrence Yun. "Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs."
Stocks in the homebuilder sector were mixed Wednesday, including the
SPDR S&P Homebuilders
iShares Dow Jones US Home Construction
exchange-traded funds that tracks the sector. The ETFs remain around 70% and 80%, respectively, off their early 2006 peaks.
Among individual builders,
, largely considered a leader among the homebuilders, shed 1.1% and small-cap builder
rose 2.2% and
Written by Miriam Marcus Reimer in New York.
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