
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, February 3, 1991                   TAG: 9102040390
SECTION: HOMES                    PAGE: D-5   EDITION: NEW RIVER VALLEY 
SOURCE: By IVER PETERSON THE NEW YORK TIMES
DATELINE:                                 LENGTH: Medium

BUILDERS DEVELOPING STRATEGIES TO SURVIVE HOME MARKET DOWNTURN

With real estate prices falling and buyers treating the new-home market like it has a wet basement and no rooms with a view, many builders are struggling to stay alive until the next upturn in sales.

Three builders, operating in different regions, have come up with survival strategies that seem to be working.

In New Jersey, K. Hovnanian Enterprises is pulling back from the overbuilt condominium market to concentrate on mid-priced houses for baby boomers who are moving out of apartments.

In Southern California, Ira Norris has rethought his housing production system and is forcing supplier prices and his own profits down to where the market will buy.

In Boston, Tony Green is working for the banks finishing and selling developments that have been foreclosed.

"This is strictly a holding action," Green said. "We're just trying to keep our team together until the market comes back."

The country's home builders have seen their business go from the richest of times, in the mid-1980s, to some of the bleakest.

Some builders have gone back to their old standby, the home-improvement trade; others are wondering what they will do after completing the houses on order. Membership of the National Association of Home Builders has tumbled to 158,000, from 161,000 last April.

In 1986, the industry's best year, 1.8 million single-family homes and apartments were built. In 1990, 1.2 million single-family homes and apartments were built, the lowest number since the recession of 1981-82. The industry also experienced a 33 percent drop in business from 1989 On Jan. 2, the Commerce Department reported that residential construction spending in constant dollars had dropped for the eighth month straight to the lowest level since 1983.

"We have worked ourselves into a real recession," said Kenneth Colton, executive vice president of the home builders group.

The White House has predicted a short, mild recession, but withbuyers already paying more for fuel and more taxes, lenders arewary of making new real estate development loans. Builders and industry analysts are pessimistic about an early upturn in their business.

They point to the baby bust as evidence that the golden age of residential real estate is unlikely to return.

Yet the market is not completely dead. An estimated 1.2 million new households are expected to be formed each year in this decade, down from 1.5 million a year during the 80's.

Mortgage rates, at a three-year low, have begun to lift the rate of housing sales slightly in recent months.

by CNB