Housing: First to feel the pinch of a slowdown

NEW YORK (AP) -- The least appealing of the various ways to describe the home is that which is sometimes used by cold-hearted economists. The home, they say, is where the slowdown begins.

And it has begun. Potential buyers looked and admired and dreamed of owning the new houses on display in every suburb in April and May, and then went back home and decided they couldn't afford to buy.

The biggest impediment wasn't price; builders have overbuilt in some areas and, eying their inventories, aren't inclined to overprice. The decision not to buy came when shoppers scanned the mortgage rates.

It was no coincidence that after a steady, full point rise in the cost of 30-year mortgages over the past year, April new-home sales fell 5.8 percent. Or that the median price in April fell 2.2 percent.

A decline in home buying is usually the first strong confirmation of a planned economic slowdown, which is the Federal Reserve's goal in raising interest rates. Homebuyer dreams inevitably give way to affordability.

It is one thing for consumers to ignore higher interest rates when they are buying such things as appliances. But houses are the biggest financial commitments of their lives. And they can take 30 years of payments!

For a while, said Richard Curtin of the University of Michigan's consumer survey, consumers thought that buying a home early to avoid rising rates was a good strategy. ''Now, they are more likely to postpone planned home purchases,'' he said, citing the May finding that ''one in three consumers now think home mortgage rates or home prices were likely to postpone planned purchases.''

If you judge from experience, a decline in housing -- assuming it continues -- presages a slowdown in other areas, so many other areas of the economy that it would take many sheets of paper just to list them, or several computer screens.

As the National Association of Homebuilders is anxious to tell you, the creation of 1,000 single-family houses generates 2,448 jobs in construction and related industries, accounts for nearly $80 million in wages and provides governments nearly $42.3 million in taxes and fees.

The breadth is vast, involving industries in lumber, siding, roofing, plumbing, concrete, aluminum , tile, energy, asphalt, sheet metal, landscaping, heating, air conditioning, painting. You get the idea.

But it doesn't stop there. In the first 12 months after buying a newly built home, according to the homebuilders' group, the owners spend an average of $6,500 to furnish, decorate and improve their homes. And so you involve also the makers of cabinets and drapes and, since new homeowners tend to show off their new home, a variety of other businesses, including food vendors.

The impact spreads, locally and then to distant points. And as the houses not built or bought grow in number, so of course does the impact. Multiply 1,000 houses by 100 or 200 and it amounts to real money.

What can't be as accurately measured is the impact on the spirits of the people who, having finally come within days of their dream, are forced to turn away in frustration and defeat. And among them -- in fact, the most quickly and traumatically affected -- are the poorest of the aspirants.

But there is good news too, if not for individuals forced to forego buying in the year 2000, then for the economy as a whole.

Housing is like the first robins in the spring, announcing the arrival of brighter times. Home building and buying are likely to play an early and equally huge role when the economy next speeds up.