Distressed property prices are still haunting home builders, based on interviews with builders and economists who attended the International Builders Show held in Las Vegas, Nevada.

Despite predictions of recovery in 2010, the confidence levels of home builders fell in a January survey. They said that among other factors, price pressures from distressed sales will continue to hurt new-home prices and sales volumes.

Ed Sullivan, head economist of the Portland Cement Association, said that there are still a lot of factors pointing to continued difficulties in the home building industry. He added that even if single-family starts increase by 20 percent this year, the final numbers would still be very low because the basis of calculations – housing starts in 2008 – is extremely low.

Nevertheless, David Crowe, head economist of the National Association of Home Builders, predicted that home starts will increase to 700,000 in 2010, a projected rise of over 25 percent.

Based on Commerce Department data, a total of 554,000 housing starts were recorded in 2009, down by 39 percent from the 906,000 houses started in 2008 and the lowest number since 1945. Single-family housing construction starts in 2009 dropped to 444,000, the lowest number since 1959.

Sullivan of Portland also said that builders cannot rely on reports of distressed property declines in 2009 because various moratoriums and foreclosure mitigation programs made it appear that foreclosures declined. In reality, he said, lenders are going to step up this year their foreclosure actions which they suspended last year because of pressures from various sectors.

Sullivan also said that serious delinquency rates are still to peak. Based on past experiences, he said, mortgage defaults peak several months after the start of employment recovery.

According to Sullivan, there are six factors that would impede housing recovery in 2010: high unemployment rate, expiration of the federal tax credits, increase in foreclosures, price declines, tight lending policies and increase in mortgage rates.

Sullivan, however, expressed optimism for 2011 and the next years. He predicted that the housing demand suppressed last year and this year will be released starting in 2011.

Jody Kahn of John Burns Real Estate Consulting said that new home sales picked up after the holidays and that more high-priced homes were sold. She also said that distressed property prices are weakening their impact on prices, stabilizing prices in four major housing markets – Southern Florida, Southern California, Texas and the Midwest.

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