Although the crisis in Asia and speculation about its implications have been in the headlines for months, home builders aren't worried about a weaker domestic economy.
A survey released at last week's National Association of Home Builders annual convention in Dallas said that housing affordability, consumer confidence, and credit availability are of little concern to home builders.
They are more worried about a shortage of labor and affordable lots on which to build-both possible consequences of last year's building boom.
Well before the Asian financial crisis developed, economists had forecast a slowdown in housing starts and sales this year from the heated levels of 1997.
Economists are still predicting a slowdown-but for slightly different reasons now. They had thought building and sales activity would decline because the Federal Reserve would raise interest rates to ward off inflation.
Now many economists believe the Asian slowdown has done the Fed's work for it by letting the steam out of the U.S. economy. Growth will be slower because exports to Asia are smaller and U.S. companies will face tougher competition at home from cheap imports.
Interest rates in the United States are lower than last year because investors worldwide have flocked to U.S. bonds. The lower rates mean more Americans can afford larger houses.
For the housing sector, these developments are all good news.
Fewer than one home builder in five cited interest rates or consumer confidence as significant concerns for the coming year; 13% said credit availability was a significant challenge, and only 10% mentioned credit for construction.
The group's chief economist, David F. Seiders, predicted 1.1 million housing starts in 1998-down 4% from last year's estimated total. New-home sales were projected at 767,000, down from an estimated 802,000 last year.
"The housing downswing hits bottom in late 1998 and recovers to a 1.4 million annual rate by late 1999, a pace that should be sustainable in the early years of the next century," Mr. Seiders predicted.
Asia, he said, is the wild card in the housing forecast.
"We're not really exactly sure how deep and how long Asian problems will last," Mr. Seiders told reporters in Dallas. Right now he is betting that the slowdown in the U.S. economy will be offset by the stimulus of lower interest rates.
David A. Wyss, research director at Standard & Poor's DRI in Lexington, Mass., also listed the Asian crisis as a big unknown in his upbeat forecast for the U.S. economy and housing market.
The risk in Asia, Mr. Wyss said, is a long recession that could be triggered if governments there try to control exchange rates and currency flows, precipitating a crisis of investor confidence.
Flat-tax proposals in Washington could also pose a threat to the housing market, Mr. Wyss said. If enacted, a flat tax would eliminate all tax advantages given to the housing sector, he said, and would be "a disaster" for the housing market.
But for now, he said, "this is a great economy, and by and large, it'll stay a good economy this year."
