Builders urged to wait for bounce

This year will be a tough one for homebuilders, but if they can hang tight through 2009, next year should be much better.

"Once we get out of the recession, we expect to see a bounce back," said economist Christine Chmura of Chmura Economics & Analytics in Richmond, a speaker at yesterday's forecast meeting of the Home Building Association of Richmond.

Growth in housing starts could jump more than 30 percent in 2010 and 2011. Today they are at the lowest levels in 20 years, she said.

"If we can make it through this year, we should see pretty good growth."

Meantime, unemployment is likely to rise in Virginia as it is nationally, which will keep the brakes on housing.

The Richmond area has been hit hard in this recession, shedding 31,100 net jobs in the past 12 months, a decline of 0.8 percent from the previous year.

On the positive side, Fort Lee in Petersburg will expand by 7,700 people by 2011. And Rolls-Royce is on track to open in 2010 a jet engine plant that will employ 445 people in Prince George County.

Demand for housing is rising, as builders have cut way back on construction. But that pent-up demand is being offset by a high number of foreclosures, she said.

High inventory levels propped up by foreclosures are pushing prices down, she said.

At today's sales pace, it would take more than 10 months to clear all the houses for sale in the Richmond market, she said. A four-month supply is considered healthy.

Hanover County has the highest number of homes sitting on the market, followed in order by Chesterfield and Henrico counties and Richmond.

Chmura said she expects to see inventory levels fall here to a four-month supply by April 2010.

"The problem last year was an oversupply -- we were building too many houses," Chmura said.

Now, people are dealing with mortgage debts that are higher than their house values.

An estimated one in six homeowners, or as many as 12 million people nationwide, are underwater on their mortgages, owing more than their houses are worth, Chmura said.

"The Fed is working hard to bring mortgage interest rates to 4.5 percent on 30-year fixed-rate conventional mortgages," Chmura said. The rate now is 5.28 percent.

Lower rates will continue to spur refinancing, giving people more money in their pockets, and should help with purchases, she said.

Still, "We are not looking for the housing market to pick up until the economy turns around." People need to feel secure about their jobs to make major purchases, she said.

Speaker Lloyd Poe, president of LifeStyle Builders & Developers Inc. in Midlothian, said the country is worried about the auto industry and workers.

Homebuilders "are having it much worse than they are," he said, pointing to data that show 3 million housing industry jobs were lost last year. "For the first time in history, we have lost the ability to sell housing as a great investment."

Consumer buying trends have changed, he said. Say goodbye to the McMansion. People want smaller, energy-efficient houses.

High on the priority list are oversized showers, energy-efficient appliances, large kitchens and home offices, he said.

Forget the walk-out basement, wine cellar, pool and four-car garage. Also on the option chopping block is the home theater, which was hot a few years ago.

"The theme this year is very austere," Poe said.

Contact Carol Hazard at (804) 775-8023 or .