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Home builders and real estate agents say the next boom in their industry could be just around the corner--if first-time home buyers can light the fuse.

While home sales are expected to grow this year at a healthy rate, industry officials say that growth could turn into a hugely successful year with one simple catalyst: The first-time home buyer must buy existing homes.

Ron Babb, president of Babb Construction Inc., says that when the first-time buyers gobble up those secondhand homes, new ones must be built, and that starts the toppling of the dominoes.

"We need those first-time home buyers to get the cycle going," says Babb, "so that the person in the $70,000 home can move up to a $90,000 house and so forth. The whole domino effect starts at the bottom with the first-time home buyer."

Once the first-time home buyer gets in the loop, everyone in the industry benefits, agrees Buddy Webre, of the Baton Rouge Home Builders Association.

"I think we're going to see some first-time home buyers in the market again," Webre says. "We've got to understand the needs of the first-time home buyer, we've got to be able to sell them the land at a price on which they can build a $70,000 home and we've got to get the whole transaction to the point where the builder can make money."

According to a survey by the trade magazine Professional Builder and Remodeler, "there is a growing market for starter homes: 30.6 percent of consumers are first-time (new residential construction) home buyers, signaling a real opportunity for the builder."

John Glascock of LSU's Real Estate Research Institute says the Baton Rouge market has not yet caught on to the trend.

"As a matter of economics, most builders aren't building that $50,000 to $70,000 home for the first-time home buyer. Most first-time home buyers buy a used home just like most young people just graduating buy a used car."

Webre agrees with Glascock's assessment, adding that until more builders construct entry-level homes or more people sell homes and "move up" to a more expensive residence, the housing industry in the Capital City area will continue to show just modest growth.

Herb Gomez of the Baton Rouge Board of Realtors says hard cash is the stimulus needed to get the ball rolling. He says the problem for the first-timers is scraping together the cold cash needed for a down payment.

"Whether they can accumulate that down payment or not is always the biggest question," he says. "Everyone was enthusiastic with President Bush's plan for the $5,000 tax credit for first-time home buyers. That's fine and dandy, but it didn't give the first-timers any money up front for the down payment. They've got to have that cash to get the expansion of home building and buying going."

Despite that perception, there are several local builders who do specialize in starter homes, including Clara and A.P. Dodson.

"We've always built in the beginner range," says Clara Dodson, who has been building homes for more than 20 years. "Right now, we're constructing homes in the $60,000 to $75,000 range in Shenandoah Hills, a garden-home, zero-lot-line subdivision off Jones Creek."

"Now that the interest rate is down and there's a possible tax credit in the wind for the first-time home buyer, we see a lot of people coming out of apartments and buying a home for about the same monthly outlay. We're also seeing older couples who don't need or want that big house anymore," she adds.

Webre says many homeowners would like to "move up" to a bigger, more expensive home, but may not be able to do it because they are saddled with a high-interest-rate mortgage. That high rate figured into the selling price puts the home out of reach of the first-timer.

"The people who bought a few years ago at a high price also got stuck with high interest rates. If you've got an arrangement to refinance your note, you should do it right now," he advises. "In Baton Rouge, we have a very low inventory of second-hand homes. That means it's a healthy time now to look at selling your home. There could be a brisk market now for second-hand homes. There are just barely enough houses on the market right now."

Gomez says the dearth of solid, older homes for the first-timers is nearing the crisis stage.

"If you take everything in that price range and sell it, and we don't get another home to sell from today on, we'd be totally out of houses in six months," he warns.

Dan Mackey, general manager of Coldwell Banker Mackey Co. and president of the Baton Rouge Board of Realtors, says even in this seller's market, the lower-end homes are staying on the market longer--again because the first-time buyer has more trouble securing a loan.

"The housing that's less than $70,000 is probably staying on the market a little bit longer, but it is selling," relates Mackey. "Those properties that are in good condition and have a good price are selling just as fast as new houses."

Mackey says the recession that gripped Louisiana for almost a decade has had a positive impact on the housing market.

"It's definitely a lot more realistic market today. Although we were growing robustly in the early '80s, we had a lot of inventory as well. It was a false sense of security back then," he says.

Webre says there are fewer companies building homes because of the recession, but those which survived are creating a better product.

"There was a time when an opportunistic builder could build a bad project and sit on it, and inflation would eventually make him look like a genius," says Webre. "That just isn't happening any more."

Mackey offers another positive benefit from the recession.

"Everybody is more aware and more careful today before they buy. People are making more informed decisions. Everybody wins in a situation like this," Mackey says. "The buyer is making a well-informed decision when he buys. The seller is getting a good, fair market value price for his house."

Gomez says a prime initiative in real estate now is more consumer-friendly rules for the buying and selling of property. Last year, the state real estate association enacted a new rule that requires agents to disclose their relationship with the seller of the home and with third parties who might have some monetary interest in the property.

He says the association may take that initiative a step further this year.

"What we're looking into this year is something called 'seller disclosure,' where the seller has to disclose the condition of the property to the buyer," he says. "We've had a voluntary disclosure statement on our forms for a number of years. At this point, we're considering whether to make that disclosure statement mandatory under state law."

Another key area of concern for builders and agents is the possibility that Congress may strip the federal income-tax deduction for interest payments on home mortgages.

"If the feds do that, it will have a devastating effect on the home building industry," says Webre.

Gomez warns that if the deduction disappears, the number of home owners in the nation will drop dramatically in a matter of a few years. The federal government already has modified the mortgage interest rules as they apply to people who buy a second house as an income producer.

"We want to make sure that the percentage of people owning homes goes up, or at least stays at the same level," he says. "We don't want to see this country become a nation of renters."