After last year, many builders believe '92 has got to be better

February 09, 1992|By Jim Johnson | Jim Johnson,McClatchy News Service

Builders have a variety of reasons for optimism this year.

Despite a bump up in recent weeks, mortgage rates still hover near their lowest levels in nearly two decades; President Bush has proposed a tax credit for first-time buyers to stimulate sales; and 1991, builders figure, was probably as bad as it could get. It was the worst year for housing starts since the end of World War II.

Thus, perhaps, it isn't surprising that most of the builders who participated in a survey at their recent convention in Las Vegas, expect both the economy and their business to improve this year.

There's another reason for optimism found among the builders surveyed: the absence of those hit hardest by the recession, said Kent Colton, executive vice president of the National Association of Homebuilders.

"We tend to attract builders to the convention who are more positive and successful . . . the ones that can afford to come here," he said.

More than 60 percent of the builders polled believe that they will increase production in 1992. A year ago, only 17 percent of residential builders surveyed forecast a boost in housing starts, and their outlook proved accurate.

Slightly more than 1 million units were produced in 1991 -- about 200,000 fewer than the previous year and the fewest since 1946, said Mr. Colton. All areas of the country were affected, he added.

Last year, an overwhelming majority of those queried (75 percent) rated the economy during 1991 in categories ranging ++ from "very poor" to "average." This year, 81 percent put it between "average" and "excellent."

The NAHB has projected that starts will total 1.2 million this year, and has estimated that the $5,000 tax credit could boost housing starts by an additional 200,000.

Whether the credit is passed, builders believe the fact that it will be discussed in Congress will boost consumer confidence. And last year, they indicated, the lack of that confidence was the biggest problem facing their industry.

Builders from the South (over 70 percent) feel the most positive about the coming year. Those from the Northeast region were least confident, with a little more than half of them predicting a better year in 1992.

The Western region, represented primarily by California builders, also showed lower expectations than in recent years, although the majority still expect some improvement over 1991.

"California will have a tough year in 1992," Mr. Colton said, indicating that it appears to be coming out of the recession more slowly than other areas.

Land acquisition has been hurt most by the credit squeeze, according to those surveyed. One-fourth of those queried said they could get no financing to buy lots, and 51 percent said it was available only at high cost.

Builders overall expect the price of the houses they produce to increase an average of 6.5 percent this year. And despite a recent surge in the numbers of first-time buyers in many parts of the country, most builders look for trade-up buyers to account for a growing share of the market.

But one of their big worries this year, they indicated, is that move-up buyers may be unable to sell the houses they already own.

Another sign of builders' optimism about 1992 was reflected in attendance figures at their 48th annual convention.

"Attendance exceeded our expectations," said the NAHB's Colton.

An estimated 60,000 builders, spouses, suppliers and others connected to the industry visited the convention and exposition, Mr. Colton said.

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