Home Builders Wonder: Will They Come?
Market Concerns Palpable at Yearly Trade Show

By Allan Lengel
Washington Post Staff Writer
Friday, February 15, 2008

ORLANDO -- The cavernous convention center, the site of this week's International Builders Show, is lined row after row with slick display booths and polished sales reps peddling retro-style ovens, state-of-the-art foam insulation and a vegetable-oil-based product that plugs leaky ponds.

But the crowd is a bit thinner than in the past, and the mood among the gathered home builders is noticeably different as their industry drags through the worst market in years.

"A few years ago, everyone was very happy and smiley," said Douglas Jones of Keystone Builders in Richmond. "Last year it was a touch off. This year it's a little more serious. It's perceptible."

With housing sales foundering, inventory way up and the future of the industry hazy, the show, with 1,900 exhibitors and nearly 100,000 attendees, is more angst-ridden as builders look for ways to stay afloat until there's a turnaround. Attendance is expected to be down about 5 percent.

"There's a deep sense of concern about the market right now," said David Seiders, chief economist for the National Association of Home Builders, after sitting on a panel of experts who delivered a sobering talk on the state of the industry.

"This time last year, it looked like the demand side of the market was stabilizing. Our forecasts were that, yeah, 2007 will be a down year but it won't be that bad," he said.

"Then the entire subprime debacle hit, other shocks to the financial system hit. A lot of builders are frankly bewildered as to what in the world has happened. I can't go 15 feet without being grabbed by somebody trying to talk about it."

Seiders now predicts a turnaround in the latter half of this year, but other less-optimistic economists see no improvement until 2009 or later.

U.S. home construction last year plummeted at a rate not seen since 1980, according to the Commerce Department. Some home builders have filed for bankruptcy protection. Others have posted huge quarterly losses while laying off workers, cutting production and selling off land. In the fourth quarter of 2007, Lennar of Miami lost $1.2 billion, and KB Home of Los Angeles lost $772.7 million.

Not everyone here is worrying.

Tim Hensley of the Hensley Custom Building Group of Cincinnati said his company, which builds homes for up to $3 million, has taken steps to survive by cutting overhead, reducing prices on unsold homes and sticking to building homes under contract. Things have been looking up lately, he said.

"We had a pretty brisk November, December and January," he said. "We've bottomed out and we're headed back up. I'm an optimist. We're of the opinion the higher-end buyers come back first."

Clark Wilson, chief executive of Green Builders of Austin, which started up last year, also said he is doing just fine.

He said that the inventory of new homes for sale in Austin has remained low and that the appetite for green homes in Texas is no longer limited to celebrities.

"We're definitely an anomaly" compared with other builders around the country, he said. "We're in a fresh market with a fresh concept."

He admits, though, that other builders he has talked with here are "pretty down."

"Some of these guys think the good days are behind them," he said.

Some exhibitors noted that while attendance is down this year, builders are searching out unusual products to help them stand out.

"While the volume has been down, the quality of people has been excellent," said exhibitor Jason Caulk, director of product and data management for Masonite, a Tampa company that manufactures doors. "There's a better concentration of the right people. The right builders are here looking to differentiate themselves; they're looking to stand out in the market that's down."

Richmond builder Jones, whose company works in five states, said he remains cautiously optimistic, though he is concerned about just when things will turn around.

"I guess last year people were saying things would get better in the first quarter [of 2008], then they said things would get better about mid-year, and now they're saying the end of the year."

He said, "Let's hope it doesn't go any further out than that."