Only long thaw will help icy new-home starts
Seiders says home builders found
themselves in a similar situation many manufacturers
do when they overproduce -- too much product
and not enough buyers. But, unlike other manufacturers,
home builders couldn't ship their way out of
"We just can't move inventory around like the auto industry -- housing is where it is. We just have to wait it out," he says.
David Lereah, chief economist for the National Association of Realtors puts it another way.
"Builders at the end of the boom got caught with their financial pants down," he says. "They had excess inventory as the market turned down. When that happens you lose sales."
Home builders are now in the tough position of watching
as consumers nibble away at the excess housing
stock, but not taking a big enough bite out
of it to justify getting their crews back to
work building more.
Everyone in the industry is now
watching closely to see whether the worst truly
is over. That's because some skeptics aren't
sure sales really did bottom out or whether
another dip might be coming when spring arrives.
When April and May come around, construction
crews will get a chance to resume work on ongoing
projects -- potentially dumping even more inventory
on saturated housing markets.
But Seiders says he is confident that won't happen.
That's because when the market flattened out
late last year, the nation was enjoying an unseasonably
warm early winter. Had builders wanted to resume
work, they could have taken that opportunity
to do so. "So, I think it was a true bottom,"
If the sales have truly bottomed,
the next step is to watch as consumers continue
to whittle down the inventory.
At the current rate, Seiders says he suspects new home sales will begin to accelerate this quarter and continue through the end of the year. He says trends such as household growth and population increases might help things along. But even then, he doesn't expect the new construction market to get back to a healthy trend until 2008 or 2009.
Contractors sitting idle is bad news for the nation's economy, but Seiders says that if everything stays on track, he could see housing starts rebound by midyear.
But even then, he says, the hiatus
home builders are now forced into will likely
put a chill into the nation's economy through
the end of 2007.
Michael Giusti is a freelance writer based in New Orleans