Mr. Curran: This has been a long, robust housing cycle. It began in the early 1990s. A key measure of housing activity is housing starts. Total starts were 1.01 million in 1991 and then advanced or held steady every year since, except in 1995 when starts declined 7%. Total starts apparently peaked at 1.67 million in 1999. Single-family starts troughed in 1991 at 840,000 and ultimately reached 1.34 million last year. I anticipate moderate weakness in starts this year with the total declining 3.9% to 1.60 million and single-family starts decreasing 3.3% to 1.29 million. Total volume could drop a further 1.3% in 2001, with single-family off less than 1%. Nevertheless, whether by the current cycle's standards or by broader historical measures, the absolute housing levels this year and next are expected to be quite robust. Many building-related companies have consistently benefited from the strength of this cycle ' homebuilders, materials and components producers, and distributors ' and they are still prospering today. That's particularly the case for the larger public homebuilders. Those large builders, which I focus on, will all report double-digit increases in their homebuilding profits in the current fiscal year despite spectacular gains last year. As a group they should also report at least a high single-digit increase in earnings next year as well. Although there are a variety of factors that influenced housing demand and supply this cycle, I would single out a consistently growing economy, steadily rising employment and low mortgage rates, especially by historical standards. Mortgage rates at present are below 8% and off approximately 70 basis points from their high earlier this year. So at present affordability is reasonably good, despite some fairly substantial home price appreciation, especially in recent years. And the Fed has steered the economy into a soft landing, which probably means the economy can grow at a reasonable clip over the next year plus and yet inflation can remain subdued. That's a pretty good environment for housing in general and these large builders in particular.
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