HOUSTON - The National Association of Home Builders issued a ``pretty quiet ... boring forecast'' for 1996 housing starts, but economists at the Builders' Show in Houston said boring is good. Builders will enjoy a solid, if unexplosive year, said David Seiders, NAHB chief economist. Seiders and two other economic forecasters said the U.S. economy has: little chance of going into recession; low interest rates that could go even lower; and low inflation. The building industry is marked by modest gains in the price of new homes. Low interest rates make it easier to move into trade-up homes.
NAHB is calling for 1996 housing starts to increase a modest 3 percent, to 1.39 million starts, from about 1.35 million in 1995. About 80 percent of all starts are single-family homes. The remainder comes from apartments, condominiums and other multifamily structures.
Remodeling, a key market for plastic products such as vinyl windows, siding and pipe, should also grow by about 3 percent this year, Seiders said.
In 1995, home building declined by about 8 percent. Seiders called slowing in early 1995 ``a pause that refreshes.''
``We avoided a real boom-bust period, which seemed like a distinct possibility last year at this time,'' Seiders said at the Jan. 26 news conference at the Houston Astrodome complex.
Another economist, James Smith, said: ``It hardly gets better than this.''
Avoiding a boom-bust cycle makes it easier for builders to plan business. Smith is professor of finance at Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.
Laurence H. Meyer, president of St. Louis-based Laurence H. Meyer & Associates Ltd., is calling for 2 percent economic growth this year, a bit below his long-term forecast of 2.2 percent a year. That prediction is based on stable, modest inflation.
The U.S. economy is enjoying a ``relatively benign, late-cycle performance,'' Meyer said.
A new house is the biggest investment most Americans will make. Beyond consuming construction products, building homes affects the entire economy, including the plastics industry, as consumers buy appliances and furniture.
One question mark remains: the federal government's move to a balanced budget. Regardless of how presidential politics changes the budget, Seiders said the government finally appears to be serious about balancing its books.
``A downward path has been put on the deficit process,'' he said.
Still, 1996 is an election year.
``Anyone looking for any enormous reduction in government in 1996 is looking at the wrong country, I believe,'' Smith said.
Calls for a flat tax also cloud the future. Some flat tax proposals would eliminate all deductions-including the home mortgage deduction. Builders say the mortgage deduction is a bedrock of the U.S. housing economy. Seiders said NAHB strongly opposes eliminating the deduction or any provisions that would stop the deduction for very expensive homes for the wealthy.
Speaking at the Builders' Show Jan. 26, U.S. Sen. Phil Gramm of Texas, a Republican candidate for president, criticized fellow candidate Steve Forbes' call for a flat tax that wipes out the home-loan deduction.
Seiders said some builders he spoke with seem glum. Home prices are growing at a slow rate. Low inflation makes some buyers wary of socking money into an expensive trade-up house because money invested in other ways will grow faster, he said.