Houston housing construction facing slowdown

NANCY SARNOFF
Houston Chronicle

The number of homes built in the Houston area is expected to drop in 2007 for the first time in more than 10 years.

Builders are projected to construct roughly 40,000 homes this year, a slowdown of about 20 percent from last year, when home building reached its peak here, said housing analyst Mike Inselmann today at the Greater Houston Builders Association mid-year forecast luncheon.

The reasons for the slowdown have to do with public builders cutting back production nationwide and a meltdown in subprime lending, loans to borrowers with bad credit.

Still, this slower pace has not been the result of a sluggish economy, but rather brought on by the industry itself, Inselmann said.

"Things are just fine," he said. "They're not as good as we want them to be, but there's a recovery in our future."

Lower-priced homes — which are more often financed with subprime mortgages than higher-end ones — will be the hardest hit during the coming months.

Subprime loans amounted to nearly 17 percent of all the mortgages in the Houston area last year, compared to 14 percent nationwide.

"These buyers are being shut out of the market right now. It's going to take a while until we see a resolution to that issue," said Inselmann.

Other parts of the local market are strong, including move-up homes — higher-priced properties geared toward buyers purchasing their second or third homes.