Transcripts

Lennar Drags The Housing Slump Down Lower

SUZANNE PRATT: Fresh evidence out today that the U.S. housing market continues to deteriorate. Sales of existing homes fell to their lowest level in five years and home builder Lennar reported its worst quarterly loss ever. As Stephanie Dhue reports, some experts think the housing recession will deepen in the coming months.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Home sales were down across the country in August. National Association of Realtors economist Lawrence Yun says some home buyers simply walked away as mortgages became either unaffordable or unattainable.

LAWRENCE YUN, ECONOMIST, NATIONAL ASSOCIATION OF REALTORS: In the high cost region where they had relied on the jumbo loans, jumbo rates had increased significantly during the credit crunch and as a result, the buyers of high-end homes, they are just pulling away.

DHUE: The National Association of Realtors says sales of existing single family homes dropped 4.3 percent in August to their slowest pace in five years. As homes sit on the market, inventory has increased. There is now a 10-month supply of existing homes for sale. Prices in most metropolitan areas are falling. The S&P/Case-Shiller home price index shows the price of an existing single family home in its 10-city composite fell 4.5 percent in July from a year ago, the steepest decline in 16 years. Standard & Poor's David Blitzer expects the trend to continue.

DAVID BLITZER, CHIEF INVESTMENT STATEGIST, STANDARD & POOR'S: I think every month for the last six or eight months, I've been digging through the data, looking for that proverbial light at the end of the tunnel and I haven't found it yet. So given that, yes, I think we have more declines to go before we even see clear signs of stability to say nothing of an increase.

DHUE: Lower prices, nervous buyers and tighter credit are taking a toll on home builders. The nation's second largest homebuilder, Lennar, reported its worst-ever quarterly results. In the third quarter, the company lost $3.25 a share as its sales fell 44 percent. In a conference call, CEO Stuart Miller said 32 percent of people who signed contracts for new homes backed out.

VOICE OF STUART MILLER, PRESIDENT & CEO, LENNAR: Relative to mortgage cancellations, there is no question that there was a spike upward in cancellations in the month of August. August really seemed to be a melting pot of all things negative.

DHUE: Lennar says it has stopped short of selling homes at fire-sale prices, but with rivals like Hovnanian offering discounts of up to 30 percent, analysts say small price tweaks may not be enough to attract buyers. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.