'Good time' to buy a Home

Home construction in 2008 is expected to fall for the second year in a row, but consumers aren't likely to see prices this low for years to come, according to Metrostudy, a housing research and construction firm.

"The irony is, with all the scary stuff that's going on, it's a really good time to be a home buyer," said Metrostudy president Mike Inselmann, who spoke Monday at the Greater Houston Builders Association's forecast luncheon.

Developers are expected to build about 35,000 homes, down more than 11 percent from the 39,500 constructed in 2007. Most of the drop in construction will be in those properties priced below $175,000. That segment of the market, which includes so-called "starter homes" for first-time buyers, has felt the brunt of the downturn from the fall-off in subprime lending aimed at borrowers with spotty credit histories.

Houston in better shapeStill, Houston is in much better shape than other parts of the country where home prices soared rapidly and then fell just as dramatically, said Inselmann.
Houston's availability of land and relatively lenient building controls kept home prices from spiking artificially, which, in places like California and Florida, attracted investors who fled once prices fell.

The down housing market is a result of "a mismanaged mortgage industry" that made loans to unqualified borrowers who couldn't keep up with their payments and went into default, Inselmann said. While Houston-area home sales are expected to be slow again this year, prices should rise slightly, which will help keep a lid on foreclosures, said economist Jim Gaines of the Real Estate Center at Texas A&M University.

The higher end of the housing market has remained strong, picking up some slack in the lower end and boosting prices. Single-family home prices have appreciated 4.7 percent in the year ending in November, Inselmann said, citing data from the Office of Federal Housing Enterprise Oversight. Still, a decline in new home construction is likely to affect the local economy, but to what extent remains unclear, Gaines said.

So far, construction employment in the area hasn't changed much, likely due to a strong commercial building sector and immigrant workers who don't show up in employment data.
But last year's 21 percent drop in housing starts could hit Houston's economy by the middle of this year, because of a lag time of six to 18 months, Gaines said.

By NANCY SARNOFFCopyright 2008 Houston Chronicle, Jan. 8, 2008, 7:03AM