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 at the Greater Houston Builders Association's forecast luncheon.
Most of the drop in this year's construction, Inselmann said, will be in those properties priced at the low end of the housing market. That segment, 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.
The higher end of the housing market has remained strong.
Demand will regain strength as more federal lending programs take the place of some of the subprime loans that are no longer available.
On Tuesday, an industry group said the pace of the nation's home sales will pick up significantly in the second half of 2008, bringing total sales for the year marginally higher than in 2007.
The monthly forecast from the National Association of Realtors said resales of existing home sales will increase 0.7 percent this year to 5.7 million, up from a projected 5.66 million last year.
For now, builders are cutting back their construction plans.
Some builders are offering discounts of up to $40,000, as well as decorator allowances and other perks to unload their unsold inventory, said Jim Holcomb of Holcomb Properties, a subdivision developer.
In the Houston area, developers are expected to build about 35,000 homes, down more than 11 percent from the 39,500 constructed in 2007.
Still, 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.
"The big variable here is going to be a recession and whether or not we have one," said Jim Gaines, of the Real Estate Center at Texas A&M University.