Homebuilders Worried About Foreclosures

Lenders and community activists aren't the only ones worried about an avalanche of foreclosures -- so are the nation's homebuilders, who fear that an abnormal jump in repossessions could force even further price cuts and delay the housing recovery. The National Association of Home Builders believes the market will hit bottom sometime this summer, and that its members will start building more and more houses in the third and fourth quarters. The NAHB's forecast is for single-family starts to fall to 600,000 annually in the second quarter, about half of what the business was producing in 2004. But it expects starts to inch up to 640,000 in the third quarter and 690,000 in the fourth quarter. Based on demographics alone, the NAHB says builders could be starting two million houses a year by 2011. But if a big chunk of the 1.4 million 2/28 loans that are due to reset this year go into foreclosure, all bets are off, NAHB economist Gopal Ahluwaliah told the group's annual convention in Orlando, Fla. "That's the wild card," he said. "If that happens, it will really slow down the recovery." The economist said that "if it wasn't for subprime, the [housing] market would have rebounded long ago."