(Updates with closing stock price.)

By Dawn Wotapka

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- The new housing law may be crafted as an industry lifeline, but Centex Corp. (CTX) detailed Wednesday the type of pain among builders that's unlikely to dissipate quickly.

As the nation grapples with rising foreclosure, interest, oil and unemployment rates, Dallas-based Centex doesn't expect market conditions to improve this fiscal year. In a conference call explaining its wider first-quarter loss of $ 1.21 a share, it added that consumer traffic "slowed more this quarter than any quarter in the past several years. Consumer confidence is at the lowest level in over 15 years and is directly affecting volume." That's one of the most telling descriptions to come recently from builders, as they work overtime to weather the worst housing downturn since the Depression - one that has already shuttered numerous competitors.

Like its peers, Centex, the nation's third-largest builder by revenue and closings, is working to reinvent itself. It is halting speculative construction in favor of a build-to-order model, emphasizing stronger markets including Austin and San Antonio, winding down its retail mortgage branches that competed with other brokers for outside business, and dramatically reducing the number of owned and optioned lots.

It is also focused on cash, boasting a balance of $1.24 billion as of June 30, which it expects to swell this year. Conserving that strong position is " critical" and cutting the dividend - its quarterly dividend of 4 cents a share was announced earlier this month - is possible.

"We're actively evaluating every internal opportunity to bolster our capital position in this difficult operating environment, including our dividend," Chief Executive Tim Eller said in the call, adding no decision has been made.

But even losing a modest dividend, along with no imminent end to the housing decline, must have spooked investors. Centex's stock jumped at the open, only to lose the gain. It closed down 2.7% at $13.52, and rose 7 cents after hours.

The Dow Jones US Home Construction Index slipped 1.4%, and is down 15.25% for 2008.

The sector's losses follow President Bush's signing of a mammoth housing law engineered to stop housing's history-making downward spiral. The new law - quietly inked after months of debate - creates a new regulator for troubled mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), expands the Federal Housing Administration's ability to guarantee mortgages and provides funding to buy and rehab foreclosed homes.

Such measures will help builders, but industry watchers say it won't be enough to save them. While it aims to tempt first-time buyers off the sidelines with a $7,500 tax credit for new and existing homes, the deal is essentially a 15-year, interest-free loan that carries income limits of $95,000 for individuals and $ 170,000 for joint filers.

But even worse for builders: In October, it will halt seller-funded down- payment assistance programs, controversial because they help buyers get into a home with little or no money down. Buyers without equity are more likely to walk away from their mortgage.

Such assistance has been key to sales: Industry giant Lennar Corp. (LEN) recently said one-third of the mortgages it originated had tapped the assistance, while Centex said 25% of its sales did. The Wall Street Journal reported Wednesday that the elimination could bar as much as 10% of the nation's buying pool and as many as 25% of buyers in lower-priced markets, such as Texas.

Even so, Centex thinks the change is probably a good thing "over the long term."

"The end of DPA will probably pressure industry sales in the near term, but over time our buyers and the market will adjust," said Cathy Smith, Centex's chief financial officer. "We continue to believe that a return to more normal qualification standards is a very good thing long term, even if it carries with it a little short-term pain."

-By Dawn Wotapka, Dow Jones Newswires; 201-938-5248; dawn.wotapka@dowjones.com

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  (END) Dow Jones Newswires
  07-30-08 1819ET
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