Fewer Exhibitors at Builders Show

LAS VEGAS, NV - Bankruptcy fears, economic anxiety and credit markets dominated discussion during the International Builders Show held Jan. 20-23 at the Las Vegas Convention Center. Event organizers braced for a 40 percent drop in attendance from last year's 100,000 mark, as the industry grapples with a deepening recession and shifting market.

Single-family housing starts are forecast to fall 40.4 percent to a record low of 441,000 this year, said David Crowe, chief economist for the National Association of Home Builders, a Washington D.C.-based industry trade group with 200,000 members. The projection marks a nearly 75 percent drop from an industry high of 1.7 million home starts in 2005. One homebuilder magazine editor derisively dubbed the show the "International Builders' Memorial Service."

Exhibitors this year struggled with reduced marketing budgets; some would-be exhibitors skipped the show and instead spend money on targeted, direct-to-customer promotions. Booths were smaller and offered fewer free tchotchkes such as pens and lanyards, which are common convention staples used to lure foot traffic. Home improvement giants Lowe's and Home Depot, like some others, sublet space to preferred vendors at this year's show, offering tool companies like Bosch and DeWalt cheap alternatives to purchasing stand alone booths, while also subsidizing larger and otherwise unaffordable exhibit space.

Subprime reset schedules are expected to accelerate foreclosures through 2009, and state deficits will top a combined $100 billion by 2010, which is nearly five times the level recorded from 2002 to 2003, reported the Portland Cement Association, a Skokie, Ill.-based trade group. Tightened lending standards, meanwhile, are preventing homebuyer qualification and developer financing.

"The crisis is deeper and longer than we expected. We are dealing with some political realities here," association Chief Economist Edward Sullivan said. "We are still at very low levels, even with (President Barack Obama's) stimulus (plan)."

Housing is seeing small foreclosure-related fix-it work as bank repossessions prompt disgruntled homeowners to destroy residences and steal fixtures before leaving, said Ed Marshall, a Lowe's commercial sales specialist in Las Vegas. This vandalism means homes need more repairs before they can be listed for sale.

Home improvements are increasingly cosmetic, with landscaping and paint topping Lowe's most popular project list, as owners seek affordable ways to boost sale prices. Many upgrades are now being financed on credit cards, which are both offered by Lowe's and Home Depot. "Money is tight," said Brian Milla, director of retail sales for Honeywell. "But our digital programmable thermostats sales have been up."

Yet the temperature on the show floor remained cold. Kohler, for instance, the plumbing fixture giant, said foot traffic was off by at least 20 percent. "There have been more questions about how we are doing as a company rather than questions about our new products," one Kohler representative said.

In general, the number of press conferences and product announcements at the show declined steeply. Companies that survive the downturn will be well positioned for a market rebound in the future, attendees said; a growing number of economy-related casualties will leave fewer competitors.

Demand remains strong for apartments, but not for single-family homes. Multifamily housing starts will dip 35.8 percent this year, primarily because of frozen credit markets, the National Association of Home Builders said. Foreclosures and high unemployment have increased demand for rental housing. But affordable housing developers face an uphill battle to land financing. Fannie Mae and Freddie Mac, for instance, are no longer buying low-income housing tax credits, which accounted for one-third of the market.

"We have had to change our financing model," said Robert Greer, president of The Michaels Co., a Marlton, N.J.-based multifamily housing national developer. "It now takes five to six sources for money, as opposed to one or two in the past."

Developers, in response, are buying existing properties to expand their portfolios. There are still 188,000 multifamily starts forecast for 2009, a 100,000 unit drop from last year. That figure could sink lower if credit markets don't soon thaw, Bernard Markstein, the National Association of Home Builders' vice president of forecasting and analysis warned.

"Everybody in the (homebuilding) industry was hoping that multifamily would be a bright spot, but that's not happening," said Steven Lawson, president of The Lawson Cos., a Virginia Beach, Va.-based based multifamily builder. "The credit market has turned things upside down."