No Light At The End Of The Tunnel

Pundits have long said that the financial sector isn't going to recover until housing does, but the recent carnage in the banking space is likely to make it much harder for a housing rebound to happen.

"As long as the economy founders, there can be no recovery in the housing market. This makes homebuilders a risky bet for banks," said Vicki Bryan, a senior yield analyst for corporate bond research firm, Gimme Credit. Bryan added that since banks aren't in a position to make risky bets, credit will be harder for homebuilders to obtain at a time when they need it most.

"What little credit that is available to the sector today will probably diminish further," Bryan said, forecasting that the amount homebuilders will be allowed to borrow will fall in relation to declining property and home values. In such an environment, the ability to generate cash is a key strength, Bryan said, singling out Lennar, Centex, Hovnanian Enterprises and Pulte Homes as companies she expects to outperform the beleaguered housing sector.

It's hard to see the light at the end of the tunnel for the U.S. housing market. In August, housing starts fell 6.2% to an annual rate of 895,000--the lowest since January 1991 and 33.1% lower than last year for the largest year-over-year drop since March. Despite government intervention, housing prices aren't stabilizing, forcing home builders to sell land at a loss and increase financial incentives on already-lowered home prices. Courtesy of Forbes with additional information provided by Reuters.