Home construction industry picking up steam

The home construction industry across the country is beginning to improve after hitting new lows in the past couple of years, the chief economist for the National Association of Home Builders told Richmond area builders yesterday.

"Taking the foot off the brake may not seem like much, but it's a good start toward putting the foot on the accelerator," economist David Crowe said.

"After almost three years of seeing negative signs almost anything looks good," he said.

About 75 members of the Home Building Association of Richmond attended Crowe's outlook presentation at the association's offices in western Henrico County.

Some questioned whether the improvements could be sustained or whether the country is heading toward a double-dip recession.

Crowe, who referred to this downturn as the Great Recession, said he expects the housing industry will continue to improve, although slowly.

"We have passed the bottom in new home sales. There will be some hesitancy here and there, but we should see a continuous increase."

A builders' confidence index, as measured by the national association, stands at 18 on a scale on which 50 is considered healthy, neither too hot nor too cold.

The index number is lower than the previous low of 20 during the recession in the early 1980s but up sharply from a record low of 8 this past January.

The group will release its housing market index tomorrow.

Housing was brought down in part by people buying more house than they could afford, Crowe said. On average, people at the height of the housing bubble were buying homes at nearly five times their annual incomes, he said.

The ratio in the Richmond area never rose that high, but it came close, Crowe said. A historical barometer is to buy a house valued at no more than 2.5 to three times one's annual income.

Crowe credits the stimulus package and a first-time homebuyer's credit with helping the nascent recovery, providing possibly enough momentum to ride through any more bumps. However, future economic health depends on whether Congress can control spending, Crowe said.

Mortgage rates should continue to stay low at least through 2010, which will help with the recovery, he said.

The Federal Reserve is active in the mortgage market, buying mortgage-backed securities -- which is good for housing and for the nation, Crowe said. "The Fed realizes that housing is a critical component to the recovery."

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