Home builders remain upbeat about economy

ATLANTA - With the recession already fading, home builders are anticipating new home starts will remain at high levels in 2002.

"Nationwide housing numbers for last year turned out to be excellent and made you wonder where the (down) cycle was for housing," said Dave Seiders, chief economist with the National Association of Home Builders, which is holding its annual exposition this weekend in Atlanta. "And we expect the housing numbers to be pretty much the same this year."

Single-family home starts reached a near record 1.275 units in 2001. The NAHB told builders on Friday that single-family starts should add up to another 1.263 million units during 2002.

Housing economists who spoke at the International Builders Show said the recession is turning out to be the weakest on record.

"The recession is probably over already," said David Berson, top economist with Fannie Mae.

Economist David Wyss with Standard & Poor's also remarked on the strength of the residential building sector.

"Housing starts usually drop below 1 million units during a recession," he said. "But in this recession, they have gone up."

That's because of low mortgage costs.

Mortgage companies originated a record volume of $2 trillion home loans last year.

But with mortgage costs inching higher, the refinancing wave which accounted for more than half of last year's residential lending is probably over.

"We think there will be a substantial drop in mortgage originations this year as refinancings dwindle," Berson said. "But we still expect originations to be around $1.6 trillion this year -- the second highest figure ever."

Those mortgage originations and home sales could be lower if interest rates rise too fast.

The Federal Reserve recently halted its downward pressure on interest rates.

"I think the Fed will begin tightening interest rates by midyear," Berson said. "Will that kill the housing market? I think the answer is no.

"But by the end of the year, (long-term mortgage rates) will be perhaps 7.5 percent," he said. "Those are rates that are still affordable."

And all the worries about the recession may not be over, economists warned the builders.

"Things could happen that could make this recession a lot longer than we think," Wyss said.

Another terrorist attack or a hike in oil and gas prices could cause another downturn, he said.