For the last three years, David Seiders has been talking about the impending slowdown in the housing sector. And he should know. After all, he's chief economist at the National Association of Home Builders.

In the spring of '97, Seiders warned that housing was likely to falter as the Federal Reserve Board began to tighten monetary policy. Then, in the fall, he fretted that the world economic crisis would bring the market to its knees. A year later, it was the Russian debt default that had the economist pulling out his hair. And last year, it was something else again.

But a funny thing happened on the way to the debacle. Growth in the housing sector didn't slow. It actually accelerated. An estimated 2 million units a year have been built since 1997, a level that by Seiders' own admission is well-above demographically-based estimates of sustainable growth.

"And this massive amount of production didn't go into inventory, either," the housing prognosticator also points out. "They all were sold or rented." In fact, the backlog of unsold homes is actually below average.

So, is Seiders now ready to give up the ghost? Not a chance, he says. "A slowdown is coming," he continues to warn, "it's only a question of how soon." And just how soon might that be? "Really soon, perhaps even in the second half" of this year.

The reason: "The Federal Reserve Board cannot be beaten," the NAHB economist explains. "It is bound and determined not to be beaten by the stock market and the resilience of the normally interest-sensitive components of aggregate demand, including housing."

For that reason, Seiders expects the Fed to ratchet up the rate it charges member institutions not once but twice more in the second quarter and twice more again in the third, driving the all-important Fed funds rate to 7 percent.

Since the prime rate banks charge their best customers is usually 3 percentage points above that, if Seiders is on target this time, the prime rate would rise in fairly short order say, by as soon as early October to double digits. And that, the economist says, is "pretty serious money" to builders.

The good news, Seiders also predicts, is that rates consumers pay for their home loans probably won't rise as much, perhaps only about half-a-point, to 8.75 percent by the end of the year.

Nevertheless, he believes that the "added jolt in the interest rate structure, along with some modest negative impacts on consumer and business spending from higher energy prices and lower stock valuations, should be enough to produce the long-awaited downslide in housing market activity."

Even at that, however, production shouldn't falter by much, according to the NAHB's latest figures. Total housing starts for the year will slide only to an annual pace of 1.5 million, which Seiders says is "still very, very good" and "not a matter for tremendous concern." And of that number, 1.2 million will be single-family starts, which the economist insists is "still an excellent, excellent performance."

Published: May 1, 2000

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.