Home Builders Brace For Sales to Simmer Down

From the WSJ:

Home Builders Brace For Sales to Simmer Down

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.

Caveat Emptor!

Thanks to Michelle for sending this one in.

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8 Responses to Home Builders Brace For Sales to Simmer Down

  1. Anonymous says:

    Simmer Down. How about abrupt stop.

    A generation has been priced out of owning a house. Now it’s time for these first time buyers to just say NO. Will Not bail you out of your overpriced home so you can move up.
    I refuse to put my financials at risk.
    Say NO to just working to pay housing expenses.
    Just Say NO!
    When house prices drop to about 15 times yearly rental rates then maybe consider.Preferably 12 times but we all know this area is pricey. But Now at 22 times yearly rentals this is not the time.

  2. Anonymous says:

    Hello Anonymous who posted at 9:40 am. Can you please show me the formula on how I can calculate rental rates??? I apologize if it’s simple math but in any event I would like to know how..


  3. xSparta says:

    Years ago we were told when we bought a rental condo, it should return 1% per month of the buying price. Of course that translates to 12X the yearly rental rate. Now I have read that it should not exceed 20X the yearly rental rate. This is confusing as the expense of upkeeping property now is a lot more expensive than it was 20 years ago.

  4. Jason says:

    I love the last point made on this blog.To much blogging, back to writing my thesis on adjustable city kansas mortgage rate.Very tired,adjustable city kansas mortgage rate.


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