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Gloomy forecast - for now - at International Builders Show in Orlando

A panel of economists at the International Builders Show offer their thoughts on what to expect in 2008.

By Judy Stark, Times homes and garden editor
Published February 23, 2008

ORLANDO - The brink of recession. The risk of recession. The recession that's already here.

Those were the forecasts of three economists who spoke last week at the International Builders Show in Orlando.

Usually there's some bantering and good-natured baiting when the three offer their annual reading of the tea leaves. This year the mood was bleak.

Here's a quick summary of what each of the panelists had to say:

- David Seiders, chief economist, National Association of Home Builders: "We should be able to avoid a formal recession. The first quarter is weak, the second quarter will be not so hot, economic activity should solidify in the third and fourth quarters. We should be past the recession threat in the second half of the year. . . . The Federal Reserve is a key player. I'm guessing they'll do a half-point rate cut on March 18 and another quarter point at the end of April, but they could do more. We should see interest rates of 5.4 percent on 30-year fixed-rate mortgages soon. . . . The vast bulk of the housing contraction is behind us, but recovery depends on the credit crisis and pricing."

Seiders offered a map that showed single-family permits down, from 2005 to 2007, by more than 51 percent in Florida, compared with a drop of 42 percent nationally, and by 41 to 50 percent in the Tampa Bay area.

"The question is, what part of the economy do we need to help to bring us back from the brink of recession? This easily could spiral downward as it feeds on itself."

- Frank Nothaft, chief economist, Freddie Mac: "There's a very strong risk of recession" - 50 percent, he said in his handout materials - "and some parts of the country are already there, like the Great Lakes. Recession or not, it doesn't feel like a good economy." He predicted weak economic growth in the first half of this year, better in the second half: "Two percent this year, but we need 3 percent. . . . We're not out of the trough yet. Foreclosures will get worse before they get better." He predicted sales down 10 to 15 percent this year. The only winners in this game: the same people who have always succeeded, those with good credit scores around 680, down payments and a property that appraises out.

- David Berson, chief economist for PMI Group, formerly chief economist at Fannie Mae: "For the last several years we've been pessimistic, but none of us was pessimistic enough. The recession began in December but it should be short and mild. Home sales should flatten in the second half of this year, but starts won't flatten until the first quarter of 2009. Builders need to sell their inventory." Coming gloom: "defaults on mortgages by people who can pay, but their mortgage is upside down, they owe more than the house is worth."

The taxpayer rebates signed into law last week by President Bush should help the economy in the third quarter, then start to fade in the fourth, the economists said. Seiders is waiting for the government to drop a second shoe: tax credits for buyers of inventory homes. That happened in the 1970s, he said, and almost overnight a huge inventory of available homes disappeared.

The builders are putting their money where their mouths are to pressure Congress to do more to stabilize the economy. In one of his last official acts as the 2007 president, Brian Catalde, a home builder from El Segundo, Calif., announced that NAHB was cutting off contributions to congressional candidates "until further notice."

"Over the past six months Congress and the administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward," Catalde said in a statement. "Housing and related industries account for more than 16 percent of the gross domestic product. More needs to be done to jump-start housing and ensure the economy does not fall into a recession."

There wasn't much joy elsewhere last week. Just look at the titles of some of the educational programs: "Accelerating When the Market Stalls," "When Survival Equals Success," "Finding the Silver Lining in Someone Else's Dark Cloud: The Pursuit of Unique Opportunities in Bankruptcy Cases," "Marketing Against Resales and Foreclosures."

The show attracted about 92,000 attendees, which the sponsor, the National Association of Home Builders, said was down 11 percent from last year. The aisles of the huge trade show seemed less jammed than in other years, and some vendors said they were seeing more current customers and fewer new sales prospects at their booths.

Part of the reason for the drop in attendance may be that this is the show's fourth consecutive year in Orlando. Those who have attended the past several years may have felt they've seen all of Orlando they needed to see and are saving their pennies for next year, when the show moves to Las Vegas. If you're going to roll the dice on an improving economy, you might as well do it there.

Judy Stark can be reached at jstark@sptimes.com or (727) 893-8446.

[Last modified February 21, 2008, 18:46:23]