Building forecasts not sunny

Washington —- Home builders hoped for good news from their top economist on Wednesday —- and got nothing.

“Things are a lot worse than anyone anticipated,” said David Seiders, chief economist for the National Association of Home Builders, who presented his forecast at the trade association’s Fall Construction Forecast Conference.

“The key word is risk,” he warned. “The momentum is still definitely downward.”

He offered chart after chart to back up his pessimism. On one tracking single-family building permits, the squiggly black line traced the ups and downs of economic boom and bust cycles in the 1960s, 1970s and 1980s. It showed a nearly straight-up trajectory from the mid-1990s to the peak in September 2005, when permits were running at a record annualized rate of 1.8 million.

By last September, the rate had crashed to just 530,000 permits.

“The numbers go off the edge of the cliff,” Seiders said. The decline is “world-class in terms of the degree of contraction and the speed of contraction.”

He clicked through slide after slide, each showing drops in key data: gross domestic product, payroll growth, housing market index, home sales for large builders, single-family housing starts and more.

As each set of statistics appeared, Seiders would comment.

“This is a really dreadful decline,” he said.

“This is awfully downbeat.”

“This is down pretty disastrously.”

NAHB vice president Bernard Markstein presented slides showing the home-building downturn is bad across the country, but particularly severe in Georgia, Florida, California and a handful of other states, where new home inventories remain huge.

In those hard-hit states, current new-home production is less than 20 percent of what it was in booming 2005. For the country as a whole, production is 28 percent of what it was three years ago, he said.

Georgia’s problems are a somewhat “surprising” turn of events, given the state’s strong population growth, Markstein said. “They were clearly overbuilding.”

But even if single-family home construction is weak, might there be other areas of strength in the housing sector?

No. Since 2005, “the condo market has been moving down systematically,” Seiders said.

For manufactured homes, “the market fundamentally has been drifting downward,” he said. “It’s essentially dead in the water.”

Seiders expects life to return to the market in mid-2009 and sales of new single-family homes to rise 6 percent for the year. But he concedes he’s not confident.

Given how bad the global financial crisis has gotten, Seiders says his prediction for next year may be overly optimistic. “I’m starting to worry about it more and more,” he said.

While government economists are still gathering data, he believes the chances that the country is in a recession are “probably 100 percent.”

Other economists gave the builders their assessments of the credit and housing markets, and they weren’t exactly day-brighteners either.

“We’re still in a panic” in the financial markets, said Mark Zandi, chief economist for Moody’s Economy.com Inc. With credit remaining so tight, “I expect housing prices to drop at least another 10 percent by July 15,” he said.

As depressing as the presentations were, they did not come as any shock to the builders at the conference. “Every time they make a prediction, the reality has been worse than they said” since 2005, said Dennis Morrison, an independent builder from Rustburg, Va.