Excluding sales of distressed homes, that is short sales and real-estate owned properties, prices declined -0.6% year-over-year in November, compared with a decline of -1.6% in October.

Including distressed sales, the biggest price drops occurred in Nevada (-11.2%), Illinois (-9.7%), Minnesota (-7.8%), Georgia (-7.7%) and Ohio (-7.2%). Excluding distressed sales, the largest declines occurred in Nevada (-8.8%), Arizona (-4.9%), Minnesota (-4.7%), Idaho (-4.1%) and Georgia (-3.6%)

Some states are showing home price appreciation as well. Including distressed sales, home prices improved the most in Vermont (+4.3%), South Carolina (+2.8%), District of Columbia (+2.1%), Nebraska (+1.9%) and New York (+1.7%). Excluding distressed sales, the five states showing the greatest price appreciation were Maine (+4.9%), South Carolina (+4.9%), Montana (+3.8%), Indiana (+3.3%) and Louisiana (+2.4%).

Paul Ausick

Recent earnings and forecasts from builders like KB Home (NYSE: KBH), D.R. Horton Inc. (NYSE: DHI), Toll Brothers Inc. (NYSE: TOL), Lennar Corp. (NYSE: LEN), and PulteGroup Inc. (NYSE: PHM) have been mixed, but the trend has been slightly positive for the first time in many quarters.

In the 20-city Case-Shiller index, the one-year decline in Atlanta was worst, at -11.7%, followed by Las Vegas at -8.5% and Minneapolis at -8.4%. The two cities posting one year price gains in October were Detroit, up 2.5%, and Washington, D.C., up 1.3%.

Only one city, Phoenix, posted a month-over-month gain in October, and that gain was a mere 0.3%. The largest decline month-over-month came in Atlanta, at -5%, with Detroit falling -3.3% in the month.

The Case-Shiller indices indicate a couple of things. First, the impact of foreclosed properties still weighs on home prices. And as more foreclosed properties hit the market now that lenders are ending their self-imposed moratorium on foreclosures, more pressure is expected on home prices.

Second, the recent good news on new orders and inventory levels from home builders could be more transient than many had hoped. Even the expected improvements in homebuilding were slight, and remained near recent lows.

Home prices have returned to their level in mid-2003, and the 20-city recovery from its most recent low in March 2011 is up 1.9%. That’s barely better than nothing.

Paul Ausick

Among the six homebuilders, only NVR had a significant jump in its target price since mid-October. The median target price for NVR is now $765, up from $728, and the stock price as of about noon today is $682.57, for an upside potential of 12.1%. That’s not a grand number, but it’s the best in the sector. Target prices for PulteGroup, D.R. Horton, Hovnanian, and Beazer did not change and the target price for Toll Brothers rose just $0.15, from $21.50 to $21.65. Not a big display of confidence in the sector.

Home Depot’s median target price rose from $40.00 to $42.00, and the stock’s current price of $40.51 implies a potential gain of 3.7%. Lowe’s median target price rose from $23.00 to $26.00, and at the current price of $25.13 the implied gain is 3.5%. Even though now is not a particularly good season for home improvement projects, either one or both of these stores could easily push through the new targets.

While the target prices did not change for five of the homebuilders, all but NVR saw share price gains of more than 30% in the last six weeks, with PulteGroup shares gaining 51%. Home Depot and Lowe’s shares are up 16% and 19%, respectively, in the same period. These share price rises for homebuilders indicate more investor interest in these stocks, analysts’ lack of enthusiasm indicates that caution remains the best policy.

None of these builders pays a dividend, with the exception of Beazer which offers investors a dividend yield of 1.2%. Home Depot’s dividend yield is 2.9%, and Lowe’s offers a dividend yield of 2.3%.

For investors who believe they have to participate in this sector, Home Depot remains the best choice, with Lowe’s the best alternative. Building — and selling — new houses is still a risky business.

Paul Ausick

According to the Mortgage Bankers Association, the number of mortgage applications fell by -10% last week. Of that total, there were -2.3% fewer applications for new purchases and -12% fewer applications for refinancing. Refinancing accounted for 77.3% of all mortgage applications last week, down from 78.6% in the previous week, which might be slightly better news for new home builders if the total number of applications for new homes had increased.

As it is, builders like KB Home (NYSE: KBH), Lennar Corp. (NYSE: LEN), PulteGroup, Inc. (NYSE: PHM), D.R. Horton, Inc. (NYSE: DHI), and Beazer Homes USA Inc. (NYSE: BZH) will continue to face the dual headwinds of higher inventory at lower prices and hard-to-get credit for new home buyers. The expected spate of foreclosed properties soon to hit the market is also expected to make matters even worse for the builders.

Home sales are reviving a bit in some markets, as we noted our story on the cities where people want to buy homes. All are in sunbelt cities where underwater mortgages and foreclosures have kept prices low, and where many Americans may be looking for a place to retire. One interesting side note to the uptick in home sales in these cities is that buyers may be making all-cash purchases, and foregoing the whole mortgage application process.

About 30% of US homes sold every month are purchased by all-cash buyers. Nearly 20% of buyers are investors who plan either to rent the property or to flip it as soon as possible. It’s probably no surprise that nearly all these all-cash deals are made on foreclosed or distressed properties. According to the National Association of Realtors, about 30% of all sales in September involved foreclosed or distressed properties.

Another interesting note on mortgages is the rise in 15-year refinancing loans. Last month, 28.8% of all mortgages were of that type. At existing low interest rates, homeowners wanting to stay where they are may be able to refinance and end up paying less per month on a 15-year loan than they are currently paying on a 30-year loan. That assumes, of course, that the homeowner can get approved for the loan.

In September, about 18% of all mortgage applications failed to get approval. Part of the problem has been a lowering of loan limits by lenders, which raises the cost to buyers in areas of  expensive homes where buyers need to get a more expensive jumbo mortgage that exceeds $417,000.

The SPDR S&P Homebuilders ETF (NYSE: XHB) is up nearly 2% over the past 12 months, although it has dropped about -1.5% in the first few minutes of trading this morning. The individual homebuilders shares are down anywhere from -1% to -2.25% in early trading as well.

Paul Ausick

The unofficial closing bells put the DJIA up more than 259 points to 12,153.46 (2.18%), the NASDAQ rose more than 53 points (2.04%) to 2,678.75, and the S&P 500 rose 1.95% or more than 24 points to 1,263.85.

There were several analyst upgrades and downgrades today, including Amazon.com Inc. (NASDAQ: AMZN) started as ‘neutral’ at Nomura. Other changes included Cameron International (NYSE: CAM) reiterated ‘buy’ with $73 target at BofA/ML; Melco Crown Entertainment Ltd. (NASDAQ: MPEL) maintained ‘neutral’ but cut target to $14 at JPMorgan; NVIDIA Corporation (NASDAQ: NVDA) reiterated ‘buy’ with $18 target at BofA/ML; SUPERVALU Inc. (NYSE: SVU) reinstated as ‘neutral’ at BofA/ML; and Regions Financial Corporation (NYSE: RF) started as ‘outperform’ at BMO Capital.

Here are today’s big post-earnings news reactions with prices during the last half-hour of trading: Dillard’s Inc. (NYSE: DDS) is down more than -13%, at $47.91; D.R. Horton, Inc. (NYSE: DHI) is down more than -2%, at $11.42; Bacterin International Holdings, Inc. (NASDAQ: BONE) is up more than 6%, at $2.90; Clean Diesel Technologies, Inc. (NASDAQ: CDTI) is down more than -3.5%, at $3.45; and The Howard Hughes Corp. (NYSE: HHC) is up more than 2.5%, at $47.25.

Several other standouts from today are as follows…

Pinnacle Data Systems Inc. (AMEX: PNS) is up more than 105%, at $2.36. The company has accepted a takeover offer from Avnet, Inc. (NYSE: AVT) worth $2.40/share.

Alimera Sciences, Inc. (NASDAQ: ALIM) is down nearly -74%, at $1.94. The company failed to get FDA approval for its eye pain drug.

pSivida Corp. (NASDAQ: PSDV) is down more than -46%, at $2.11. The company had licensed to Alimera an element of the drug that failed the FDA test.

Molycorp, Inc. (NYSE: MCP) is down more than -13%, at $33.43. The company missed earnings and revenue estimates.

Hovnanian Enterprises Inc. (NASDAQ: HOVNP) is down more than -9%, at $1.40. The company did not have any news today, but likely suffered from the earnings report from D.R. Horton.

Tanzanian Royalty Exploration Corp. (AMEX: TRX) is up more than 20%, at $2.75. The company’s shares were halted earlier, and the company issued a statement that there was no particular event responsible for the heavy trading in the stock.

Except for short-term Treasury Bill auctions, there are no events scheduled for Monday.

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Paul Ausick

D.R. Horton, Inc. (NYSE: DHI) reported fourth fiscal quarter EPS of $0.11 on revenue of $1.1 billion this morning, short of the consensus EPS estimate of $0.14, but in-line with the revenue estimate. For the company’s full fiscal year, EPS came in at $0.23 on revenue of $3.5 billion. For 2010, Horton posted EPS of $0.77 on revenue of $4.3 billion. That hardly looks like the start of a recovery. Other homebuilders like PulteGroup, Inc. (NYSE: PHM), Lennar Corp. (NYSE: LEN), Toll Brothers Inc. (NYSE: TOL), and KB Home (NYSE: KBH) have posted, at best mixed results. Even home improvement giants like Home Depot, Inc. (NYSE: HD) and Lowe’s Companies (NYSE: LOW) have been mixed.

PulteGroup posted an EPS loss of -$0.34 in its quarter ended in September, but is expected to post EPS of $0.06 for the December quarter. Lennar beat EPS expectations by a penny in its August quarter and Toll Brothers crushed expectations by posting EPS of $0.25. For their current quarters, Lennar is expected to report EPS of $0.17 and Toll Brothers is looking for EPS of $0.05. KB Home put up a better-than-expected EPS loss of -$0.13 in its August quarter and is expected to post EPS of $0.02 for its November quarter.

Home Depot reported EPS for its July quarter of $0.86, beating estimates, and is expected to report EPS of $0.58 next Tuesday. Lowe’s also beat estimates in its July quarter and is expected to post EPS of $0.33 when it reports earnings next Monday. Home remodeling got a boost this year, up 29% year-over-year in August, but that number should begin to decline as the remodeling season is now behind us. Lowe’s announced last month that it would close 20 stores and fire about 1,950 employees, costing the company about $0.17-$0.20 in EPS.

In its quarterly report, Horton noted that its sales backlog had grown nearly 18%, from 4,128 new homes in September 2010 to 4,854 this past September. However, the company also said that its cancellation rate for the quarter was 29%. That backlog can hardly be considered safe, especially given that a surge of foreclosed properties for sale is expected to hit the market sometime in the next few months.

In the earnings release, Horton’s chairman said that the company is positioned “for a stronger start to fiscal 2012.” That’s good, but how the company finishes is more important. There are so many headwinds to new homebuilding that it is hard to be too confident that 2012 will be much better than 2011.

Paul Ausick

Worse, there is not much expectation that the market will turn around, at least until 2013. More foreclosed homes coming on the market will continue to depress prices, and until inventories of unsold homes are cleared, there simply cannot be a significant recovery. The homebuilders we are looking at include NVR (NYSE: NVR), Toll Brothers (NYSE: TOL), PulteGroup (NYSE: PHM), Hovnanian Enterprises (NYSE: HOV), D.R. Horton (NYSE: DHI) and Beazer Homes USA (NYSE: BZH).

Home improvement stores have also had to struggle over the past several years. Shares of Home Depot (NYSE: HD) and Lowe’s Companies (NYSE: LOW) are both lower today than they were five years ago.

Share prices were pegged at about noon today, and all data comes from Yahoo! Finance.

NVR has a median target price of $728.00 from four brokers. Shares are trading today at $620.99, for an implied gain of $107.01, or 14.7%. NVR’s forward P/E is 17.6 and the company does not pay a dividend. The stock’s 52-week trading range is $554.71 to $804.31, and at today’s price that is about 12% above its 52-week low and 23% below the 52-week high. NVR’s share price has risen about 12% since October 2006, and of all the homebuilders, it is the only one that can point to a gain over that period. The company’s consensus EPS estimate for 2011 has dropped from $28.02 to $26.45. There might be an opportunity here, but it is a pretty slim one.

Toll Brothers has a median target price of $21.50 from 14 brokers. Shares are trading today at $15.29, for an implied gain of $6.21, or 28.9%. Its forward P/E is 49.35 and the company does not pay a dividend. The stock’s 52-week trading range is $13.16 to $22.42, and at today’s price that is about 16% above its 52-week low and 32% below the 52-week high. Toll Brothers is expected to post EPS of $0.20 for its 2011 fiscal year ending this month — and that is up from an earlier EPS estimate of just $0.02. The company’s position at the luxury end of the market has been something of a prop to the share price, but the U.S. economy is not minting many new millionaires right now.

PulteGroup has a median target price of $6.50 from 15 brokers. Shares are trading today at $4.14, for an implied gain of $2.36, or 36.3%. PulteGroup’s forward P/E is 32 and the company does not pay a dividend. The stock’s 52-week trading range is $3.29 to $8.69, and at today’s price that is about 26% above its 52-week low and 52% below the 52-week high. PulteGroup was one of the 10 worst performing stocks in the recently completed quarter, losing 45% of its value. There is nothing about the homebuilding industry or PulteGroup’s recent performance that justifies the forward P/E ratio of 32. Hope is not a strategy.

Hovnanian Enterprises has a median target price of $1.38 from eight brokers. Shares are trading today at $1.20, for an implied gain of $0.18, or 13%. Hovnanian’s forward P/E is negative and the company does not pay a dividend. The stock’s 52-week trading range is $0.89 to $5.00, and at today’s price that is about 35% above its 52-week low and 76% below the 52-week high. Hovnanian is asking debt holders to exchange old notes for new ones carrying a lower interest rate and a longer term. The offer is scheduled to end next week. The company’s corporate debt rating is CC, just two notches above default. Debt holders are unlikely to ride to the company’s rescue.

D.R. Horton has a median target price of $13.00 from 14 brokers. Shares are trading today at $9.62, for an implied gain of $3.38, or 26%. Horton’s forward P/E is 19.3 and the company pays a dividend yield of 1.5%. The stock’s 52-week trading range is $8.03 to $13.50, and at today’s price that is about 59% above its 52-week low and 29% below the 52-week high. Horton is expected to post EPS for the quarter just ended of $0.14, and full-year EPS of $0.20 for the year ended in September. The consensus estimate for 2012 full-year EPS is $0.50. If the market is getting weaker, as many believe, the company has exactly no chance of meeting that 2012 number.

Beazer Homes USA has a median target price of $3.00 from seven brokers. Shares are trading today at $1.81, for an implied gain of $1.19, or 39.7%. Its forward P/E is negative and the company does not pay a dividend. The stock’s 52-week trading range is $1.35 to $6.23, and at today’s price that is about 12% above its 52-week low and 81% below the 52-week high. Beazer’s biggest trouble is that it is a builder of entry-level homes, the sector that is hardest hit by the number of foreclosed properties coming on the market. One thing that could help Beazer a little is that home owners have begun taking their houses off the market because they are unwilling to sell for the current low prices. Inventory is still high, but it was lower in September than in August.

Home Depot has a median target price of $40.00 from 22 brokers. Shares are trading today at $34.97, for an implied gain of $5.03, or 12.6%. Home Depot’s forward P/E is 13.14 and the company pays a dividend yield of 2.9%. The stock’s 52-week trading range is $28.13 to $39.38, and at today’s price that is about 24% above its 52-week low and 11% below the 52-week high. Research firm BuildFax reports thats home remodeling projects increased by 29% in August compared with August 2010. The firm attributes the increase to refinancing of existing homes at current low interest rates. With the peak remodeling season behind us for another year, this growth could begin to slow down.

Lowe’s Companies has a median target price of $23.00 from 20 brokers. Shares are trading today at $21.09, for an implied gain of $1.91, or 8.3%. Its forward P/E is 11.93 and the company pays a dividend yield of 2.7%. The stock’s 52-week trading range is $18.07 to $27.45, and at today’s price that is about 17% above its 52-week low and 23% below the 52-week high. Lowe’s announced this morning that it was closing another 20 stores across the U.S. and expects to take a charge of $0.17 to $0.20 against second-quarter EPS. About 1,950 employees will lose their jobs. Lowe’s performance has been weaker than Home Depot’s for a couple of years now, and this year the share price is about flat, compared with Home Depot’s share price gain of 15%.

Paul Ausick

According to today’s report, the seasonally adjusted annual rate of sales of new single-family homes in August is -2.3% lower than in July, but 6.1% higher than August 2010.  The number of new homes sold in August 2011 was 295,000 new homes, compared with 278,000 in August 2010. That’s okay, except August 2010 monthly sales were the lowest on record. Pretty weak.

Last week both KB Home (NYSE: KBH) and Lennar Corp. (NYSE: LEN) reported weak earnings. KB did note a jump of 40% in new orders, once again a hopeful sign until compared with the same period last year which couldn’t have been much worse. Other homebuilders PulteGroup, Inc. (NYSE: PHM), D.R. Horton, Inc. (NYSE: DHI), Toll Brothers Inc. (NYSE: TOL), NVR Corp. (NYSE: NVR), and Beazer Homes USA Inc. (NYSE: BZH) have all struggled during the past twelve months, with only NVR showing a share price drop of less than -10%. This is not an industry on the mend.

The Commerce Department also estimates that the US housing inventory increased slightly in August to a 6.6 month supply at the current sales rate. Of that, the Department estimates that 60,000 new homes are completed and ready for sale and another 77,000 are under construction. Another 27,000 are permitted but construction has not yet begun. The total inventory at the end of July was 163,000 houses with 26,000 sold in August. At the end of August, 164,000 new houses were for sale. That’s not an improvement.

The best thing to be said for new home sales is that they are not getting worse even though the absolute numbers are very low. If this data indicates a recovery or any sign of better days ahead for homebuilders, then one is looking at the numbers through rose-colored lenses.

Shares of KB Hoe are down more than -6% in the early afternoon, at $5.55, in a 52-week range of $5.09-$16.11.  Lennar shares are down about -1.5%, at $13.20, in a 52-week range of $12.39-$21.54. Pulte shares are down nearly -2%, at $3.97 in a 52-week range of $3.40-$8.99. The other builders are also trading lower, and the SPDR S&P Homebuilders ETF (NYSE: XHB) is up a fraction at $13.45, in a 52-week range of $13.02-$19.21.

Paul Ausick

According to online foreclosure tracker RealtyTrac, foreclosure filings topped 228,000 in August, a 7% jump over July filings.  One in every 570 US housing units is now in foreclosure. This puts even more pressure on new homebuilders like Toll Brothers Inc. (NYSE: TOL), D.R. Horton Inc. (NYSE: DHI), NVR Inc. (NYSE: NVR), Lennar Corp. (NYSE: LEN), PulteGroup, Inc. (NYSE: PHM), M/I Homes Inc. (NYSE: MHO), Ryland Group, Inc. (NYSE: RYL) and Beazer Homes USA Inc. (NYSE: BZH).

The builders have managed to stay afloat by cutting costs and shedding real estate and a myriad of other financial finagling, but they’re not making money building houses. And the more houses that are foreclosed, the weaker that housing prices get as banks are willing to take just about any reasonable offer to get rid of the foreclosed properties they own.

New default notices in August totaled nearly 79,000, up 33% since July and the largest one-month increase since August 2007. The peak month for notices of default was April 2009, when more than 142,000 notices were filed.

The well-publicized robo-signing issue and other documentation problems are finally being settled and there is plenty of reason to believe that more foreclosures will begin to work their way through the system. Freddie Mac has said that it expects the delay in filing foreclosures to last through the end of this year, but the August report could signal that the move is already on.

Just a month ago ratings on NVR, PulteGroup, M/I Homes, Ryland, D.R. Horton, and Beazer were raised at one research firm from ‘Sector Perform’ to ‘Outperform’. It’s difficult to understand why. What’s not difficult to understand is that the shares in these firms all jumped  by about 20%. Since then most of the companies have given it all back as reality takes over.

Lennar, which reports earnings on Monday, is expected to post EPS of $0.10 on sales of $810.2 million. Last year’s EPS in the same period was $0.16 and revenues totaled $825 million. The stock’s target price is $21.81 and it closed at $13.72 yesterday, an implied upside of nearly 60%. Anyone who believes that probably believes in the tooth fairy.

Paul Ausick

For the quarter, Toll Brothers sold 693 units, down from 803 in the same period a year ago. Contracts increased slightly year-over-year, from 701 in 2010 to 713. Backlog also increased, from 1,636 units in the same period a year ago to 1,780. Toll Brothers builds higher-priced homes and has been somewhat insulated from the turmoil at the lower-priced end of the market. However market volatility in the last few weeks could cause the company some more problems going forward.

Toll Brothers was not among six builders that received ratings upgrades earlier this month. NVR Inc. (NYSE: NVR), PulteGroup, Inc. (NYSE: PHM), M/I Homes, Inc. (NYSE: MHO), Ryland Group, Inc. (NYSE: RYL), D.R. Horton Inc. (NYSE: DHI), and Beazer Homes USA Inc. (NYSE: BZH).

The number of foreclosed homes either on the market or in the line to come onto the market remains very high. There has been a delay in processing foreclosures, and once that delay ends, the number of foreclosed homes is expected to jump again. Pricing pressure on new homes will follow.

The sort-of good news for the homebuilders is that this flow of foreclosures is not expected to hit the market until 2012. That’s some help to the builders for the rest of this year, but not much.

Toll Brothers guided deliveries for the full fiscal year at 2,475-2,675 homes, compared with an earlier estimate of 2,300-2,800. The company’s first estimate for new home sales was 2,100-2,900. In the 2010 fiscal year, Toll Brothers sold 2,642 units, a drop of -11% from 2009.

The market for new houses is weak, and there is really no good reason for optimism. A slow-growth economy combined with high unemployment and an abundance of foreclosed properties don’t forecast a sunny outlook for the homebuilders going into 2012.

Shares of Toll Brothers are up about 0.4% in the pre-market this morning, at $14.80. After posting a new 52-week low yesterday, the stock’s 52-week range is $14.59-$22.42. To indicate the abiding hope for the housing market, Toll Brothers trailing P/E ratio is nearly 41. The SPDR S&P Homebuilders ETF (NYSE: XHB) closed yesterday at $13.49, near the bottom of its 52-week range of $13.05-$19.21.

Paul Ausick