People are too afraid to buy homes right now. They fear they will lose money out of the gate, so to speak. Not good. Housing Rebound Elusive as Market Fails to Reduce Lost Deposits By Kathleen M. Howley http://www.bloomberg.com/apps/news?pid=20601109&sid=a8d4MWhHmDN0&refer=home March 7 (Bloomberg) -- Scott and Kerry Bingham put down a deposit three weeks ago on a new $321,000 house at Heritage Bay, a development set on a golf course about seven miles from the ocean in Naples, Florida. Two days later, they abandoned the deal. Like other prospective new-home purchasers, they were nervous about falling home prices across the country and the prospect their new property could tumble in value. ``We don't want to buy if prices are going down,'' said Scott Bingham, 41, an electrician who owns Power Systems Electric LLC in North Andover, Massachusetts. ``At this point, we're in a holding mode. If we wait, we might be able to get closer to the ocean and get a better deal.'' A year after the housing slump began, the spring selling season is off to a rocky start with a glut of unsold properties and buyers like the Binghams putting off purchases, thwarting any chance of a recovery. The National Association of Home Builders in Washington now expects sales to fall for the sixth consecutive quarter after last month predicting a gain. The biggest stock market rout in four years last week, a jump in subprime mortgage failures and concerns about a possible recession are keeping consumers on edge. About 10 percent of subprime loans were more than 60 days delinquent or in foreclosure as of Dec. 31, up from 5.4 percent in May 2005, according to data compiled by Friedman Billings Ramsey Group Inc. of Arlington, Virginia. The rate was the highest in seven years, according to the report. Toll's Flip-Flop Builders are bracing for another tough year after seeing 2006 sales plunge 17 percent, the most since 1990. For some, such as Toll Brothers Inc., the largest U.S. builder of luxury homes, the lackluster spring market is a surprise. Chairman and Chief Executive Officer Robert Toll told investors three months ago the market may be poised to rebound. It didn't happen. ``We're all a little more disappointed than we were two weeks ago,'' Toll said Feb. 22 on a conference call, responding to questions about February sales. ``We didn't have anywhere near the bump up that we usually see.'' The same day, Horsham, Pennsylvania-based Toll Brothers cut the number of homes it expects to build to 6,000 to 7,000, the second reduction in four months. In August, the company's estimate was 7,000 to 8,000 homes. Toll Brothers also lowered its fiscal year profit outlook on Feb. 22. Miami-based Lennar Corp., the biggest U.S. builder by revenue, expects new home deliveries to tumble 20 percent this year. Hovnanian Enterprises Inc. of Red Bank, New Jersey, the industry's sixth-largest company, reported a fiscal first-quarter loss after the number of contracts signed slid 23 percent. Decline in Deposits Buyers who wrote a deposit check to reserve a Toll Brothers house -- at an average price of $676,139, three times the national median -- declined 5.8 percent during mid-February's Presidents Day holiday weekend, usually the busiest time, the CEO said on Feb. 22. While homebuilders track the number of visitors they get at their model units, they typically don't divulge the data. Toll Brothers broke with that tradition. The company said it took 276 deposits during the holiday weekend, Feb. 17 to Feb. 19, down from 293 deposits in the same period last year. ``That's disappointing,'' Toll told investors on the conference call. The comment was a reversal from Dec. 5, when he said the home market seemed to be ``dancing on the bottom or slightly above.'' That remark helped spark a 2.4 percent rally in homebuilding stocks. Since Jan. 1, a Standard and Poor's index of 16 home construction companies has declined 11 percent. Overpriced Homes When the Binghams started their search a year ago in Sarasota, Florida, they were disappointed. That market was full of overpriced houses, said Scott Bingham. They moved their search to Naples, two hours south, and found things weren't much better. ``I'd say about 70 percent of the homes aren't priced competitively to sell at this time,'' Bingham said. ``I don't want to be the guy who pays too much and then watches the value of my real estate fall through the floor.'' He and his wife had negotiated a $321,000 price for a 1,400- square-foot house with two bedrooms, a den and a garage at Lennar's Heritage development. After putting down a $1,000 refundable deposit, they decided they could do better. As 2007 began, the housing rebound proved elusive. U.S. new- home sales fell in January by the most in 13 years, the Commerce Department said last week. The annualized rate dropped to 937,000, lower than any economist had forecast in a Bloomberg survey and down from the 1.12 million pace in December. No Rebound in Sight The time a completed home stood empty before being sold reached a record 4.8 months, the highest in almost seven years. The time it would take to sell all available properties was 6.8 months, compared with 5.3 months in January 2006. ``The first quarter has slipped back to some degree,'' David Seiders, chief economist of the Washington-based National Association of Home Builders, said in a March 1 interview. ``All this flap about the subprime market going belly up and mortgage lending standards being tightened further up the credit scale might effect sales.'' Seiders predicted a month ago that the first quarter would be the start of a housing revival. Now he's saying the first three months of this year will be the bottom of the slump, with sales falling to an annualized 1 million from 1.04 million in the fourth quarter. Sales probably will rise next quarter to match the rate of the last three months of 2006 and continue to gain through 2007 and 2008, Seiders said. That won't mean the hard times are over, he said. `Sizable Drag' ``Housing will continue to be a sizable drag on economic growth, even if sales have bottomed, because the builders are working off a large inventory,'' Seiders said. ``I expect starts activity to continue downward even after sales begin to rise.'' The spring selling season for new houses typically begins in February, earlier than the market for previously owned homes, which see the bulk of sales from April through June. It typically takes five to six months to complete a new house. Buyers put down a refundable deposit to reserve a property, then give a non-refundable deposit of 5 percent to 20 percent of the home's price when they sign a purchase contract. The house isn't sold until it's finished. Families with children tend to plan household moves to occur before the start of the U.S. school year in September. To guarantee an August move, they have to sign a contract for a built-to-order house by February or March. Buyers `Wary' ``People are looking at the prices of new homes, and they're wary,'' said Nick Rioux, owner of Buyer's Broker Co. in Shrewsbury, Massachusetts. ``The builders aren't adjusting the prices that much because they've sunk so much money into the properties.'' Overall confidence among U.S. consumers rose to the highest in more than five years in February, lifted by rising wages and an expanding job market, the New York-based Conference Board said last week. At the same time, the percentage of consumers planning to purchase a home in the next six months fell to 3.1 percent from 3.3 percent in January, according to the report. ``It's not clear at this point whether the housing market is going to see a bottoming out or if there's going to be a prolonged weakness,'' said Lynn Franco, director of the board's consumer research center. ``The spring selling season will be the telling sign.'' Median Prices Fall The median U.S. price for a new home will fall for most of 2007, said David Berson, chief economist of Fannie Mae, the largest U.S. mortgage finance company. That would make for five consecutive quarterly declines, according to his Feb. 21 forecast. In the current quarter, the median probably will fall 4.5 percent from a year earlier to $233,700, he said. The second quarter's median may decline 4.7 percent, followed by a 2 percent drop in the third quarter, he said. The last three months of the year probably will see a 0.1 percent gain, followed by at least four quarters of increasing prices, he said. For the year, the median new-home price probably will drop 2.8 percent to $238,400, Berson said. The median increased 1.8 percent last year after gaining 9 percent in 2005 and 13 percent in 2004, he said. ``Some people are waiting on the sidelines trying to time the market and buy at the absolute bottom, just like the people who tried to time the top perfectly,'' said Tom Doyle, a real estate agent with Naples Realty Services Inc. in Naples, Florida. Homebuyers seeking clues about the pace of the recovery should look to buyers like the Binghams. They say they're in no hurry to sign a contract to buy a home. ``Prices are going to drop, but it could be nine months before they drop to a level that makes us comfortable about buying,'' said Scott Bingham.