As housing sales drop, builders try to cope

LAS VEGAS - Randy Bryant traveled here from Overland Park, Kan., in search of ways to survive the worst downturn he's seen in the new-home market in the 18 years he's been a builder.

"So far, nothing," he said yesterday outside Professional Builder magazine's Show Village Home in the parking lot of Las Vegas' convention center.

An estimated 60,000 fellow builders came to this year's International Builders Show looking for the same thing - some clue on how to get business rolling again.

Bryant, who builds houses priced in the range of $800,000 to $1.5 million, said prospective buyers still showed up to look, but "there haven't been a lot of deals lately."

He has not been building much, but he could not start a house if he wanted to "since lenders don't want to finance spec homes." So he watches and waits, "doing a few remodels and a commercial loft project. . . . I'm not turning anything down."

It was a story told often as the Commerce Department was dropping another bomb yesterday - that December housing-start numbers showed a record monthly drop of 15.5 percent, to an annual rate of 550,000 units.

The number of single-family homes, the figure every builder here was watching, fell to a 398,000-unit annual rate, another record low.

Starts are expected to drop an additional 24 percent before some economists see a bottom to the market.

"No matter when that happens, I won't be ready for a recovery," Bryant said. "I'm not building houses or even planning any until credit eases."

Builder confidence is at an all-time low, as was much in evidence at the show yesterday. Adding to the downbeat was Freddie Mac's announcement that fixed-interest rates rose to 5.12 percent this week from 4.96 percent last week as bond yield rose for the first time in more than a month. Any increase in interest rates makes housing less affordable.

Yet because her company, In Laws Construction L.L.C., of Candia, N.H., was fairly diversified before housing nose-dived, Chantal Demanche said, the soft new-home market in her state has not hurt business so badly.

"We build everywhere in New Hampshire and do everything," she said. "Even before this happened, we were trying to do everything, including remodeling and commercial, and we've seen a big jump in both."

Though remodeling in many markets is softer than anyone had predicted - the Joint Center for Housing Studies at Harvard University projects a further 12.1 percent decline in spending on such projects through the third quarter of this year - Demanche said her firm was doing more big-ticket jobs, such as additions and kitchens.

Prices did not rise or drop precipitously in New Hampshire during the housing boom, she said, and there seems to be credit available for renovations, especially energy-efficient and green or sustainable construction.

The search for more sustainable products "is one of the big reasons why I'm here," Demanche said. She seemed to be one of the few exceptions, though energy efficiency still seems to ring a bell with homeowners.

Remodeler Devon Hartman of Hartman Baldwin Inc., of Claremont, Calif., said his customers were willing to replace older, less efficient heating and cooling systems with smaller, more efficient ones.

"I just replaced four older systems in a single house with one more efficient a quarter of its size," he said.

But, as Bryant noted, it is not the present that offers the biggest concerns for builders - it is the future. Home prices in most areas of the country are expected to continue their slide, though the fall will be more precipitous some places than others.

In a report issued yesterday, Wharton research fellow Kevin Gillen said prices for single-family houses (excluding condos) in Philadelphia fell 3.3 percent in the fourth quarter compared with the same period in 2007, bringing the total citywide decline to 10.1 percent since the market peaked 18 months ago.

That's still well below the national median. In harder-hit markets such as Las Vegas and California, price declines, fueled by foreclosures, have averaged as much as 40 percent.

And in the market-rate multifamily apartment and condo segment of the construction industry, whatever protection existed in the earlier stages of the economic downturn seems to have eroded.

Financing is the reason, said Steve Lawson, of the Lawson Cos., of Virginia Beach, Va. Traditional lenders are unwilling to ease credit rules, and even sure-fire projects go begging for loans.

"Multifamily projects take longer to design and build than single-family homes, so it's important to have a development pipeline," Lawson said. "In the next few years, the people now in their early 20s will be entering the housing market, and they won't be able to find apartments."