From the WSJ:
On the surface, business appeared to be better than ever at last week’s annual International Builders Show. A record 1,600 exhibitors touted everything from Mr. Steam towel warmers to Synlawn synthetic grass to 10-foot-high Marvin double-hung windows. Attendance also was a record. Just over 105,000 people crowded into this city’s Orange County Convention Center. That was up sharply from the 66,000 who attended the show 10 years ago.
But below the surface, there was an air of caution, which stemmed from an industry slowdown that began in the fourth quarter and uncertainty over what it will mean for home construction, as well as the overall economy. Hundreds of builders packed into an auditorium to hear three industry economists predict the first downturn in U.S. housing starts in five years.
David Seiders of the National Association of Home Builders predicted housing starts would fall by between 6% and 7% from last year’s torrid pace of about 2.1 million units — amid high home prices and rising mortgage rates. Although Mr. Seiders, the association’s chief economist, characterized the projected drop as only a “simmering down” of the white-hot housing market, his forecast included what he called the remote possibility of “sizable house-price declines” if the investors and short-term-interest borrowers who have helped fuel the boom start rushing for the exits. “The real question,” he told the audience, “is where do we go from here.”
One pessimist, Ed Sullivan, chief economist of the Portland Cement Association, suggested a recession-like housing spiral isn’t so far-fetched. He pointed out that the disparity between incomes and home prices is at its greatest level in at least a quarter century, and that the upward trend in rates could make it harder for adjustable-rate borrowers to keep up on their payments.
Thanks to Michelle for sending this one in.