Things keep getting worse for homebuilders

Housing starts continue to fall:

The National Association of Home Builders released its economic outlook yesterday at the International Builders Show in Las Vegas. Single-family-housing starts, which fell 40% to 617,000 in 2007, are expected to drop to about 441,000 this year — the lowest since records have been kept. That would be a nearly 75% drop from the industry’s highwater mark of 1.7 million single-family starts in 2005.

Builders are not only facing a large overhang of home inventory, there’s also the problem of the credit crunch. “Economists said lending remains so tight that many consumers won’t be able to take advantage of declining housing prices and mortgage rates,” Jim Carlton reports in today’s Journal.

Also, homebuilder sentiment has reached a new low:

U.S. homebuilder sentiment sank to a new low in January as concerns about the faltering economy and reluctant homebuyers hurt confidence in the market for newly built single-family homes, an industry group said on Wednesday.

The National Association of Home Builders said its preliminary NAHB/Wells Fargo Housing Market Index was 8 in January, down from 9 in December. That is the lowest level on record since the gauge was launched in January 1985.

Readings below 50 indicate more builders view market conditions as poor than favorable.

Foreclosed homes are selling briskly, though:

Foreclosures are the place to be. Low-priced, bank-owned homes are selling briskly, says market research firm MDA DataQuick. Newly-built homes, on the other hand, are sitting on the sidelines.