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The once-galloping pace of home construction in the Albuquerque metro area is slowing considerably this year.

But you'll find nothing but optimism from leaders in the home building industry, who are predicting a quick rebound.

"I think Albuquerque will be relatively quick to right itself, certainly by later this year," said Bernard Markstein, senior economist and director of forecasting for the National Association of Home Builders.

The 1,420 residential building permits issued in Albuquerque as of April this year represent a 42 percent drop from a year earlier, when around 2,400 permits were issued, according to data from the National Association of Home Builders.

Between May 2006 and April of this year, an average of only 431 home building permits per month were issued in the metro area, according to statistics from DataTraq, a firm that tracks local home building data. Compare that to a year before, when the metro area averaged 753 permits a month between May 2005 and April 2006.

"I don't think there's much question that housing starts are down in Albuquerque, and that's true across the country," said Jim Folkman, executive vice president of the Home Builders Association of Central New Mexico.

Part of the slowdown, both locally and nationally, came from overbuilding in the period between 2004 and 2005, Markstein said. That includes the more than 9,500 housing starts in the Albuquerque area in 2005, Folkman said.

The boom was fueled, in part, by a rush of investors buying property as a means of either reselling at a quick profit or entering the rental market.

But as the market has slowed, those investors are mostly gone, leaving the metro area with an abundance of inventory to sell off before the building pace can pick up again, both Folkman and Markstein said.

The inventory of existing homes on the market as of April hit 4,990, more than double the number from a year earlier, according to data from the Albuquerque Metropolitan Board of Realtors.

"The investors are disposing of those investments, and two years later, as a result of that it's produced some supply that we probably didn't anticipate," Folkman said.

Nowhere should the slowdown in the home building market be more of a concern than in Rio Rancho, where gross receipts from home sales account for 42 percent of the city's $33.6 million in gross receipts revenue entering the final month of the fiscal year.

The city is expected to issue only around 1,200 permits for single-family homes for fiscal year 2007, a significant drop from the 2,851 issued in 2006, said Dick Kristof, the city's director of fiscal services.

As a result, gross receipts taxes from construction - a one-time revenue source collected when a home is built - are also expected to drop.

But Kristof is optimistic that the drop won't be a calamity.

"In looking at the budget next year, I expect construction to be lower. But retail is going to be much stronger." Kristof said. "I think we're not going to take a hit because we've got retail growing strong."

Retail gross receipts taxes - a more coveted revenue source since it recurs over time - account for 33.3 percent, or $10.8 million, of the city's $33.6 million in gross receipts taxes collected in the first 11 months of fiscal 2007, Kristof said.

With a month to go in the fiscal year, retail revenue is already $2 million more than in 2006, he said.

And it's only expected to keep growing as the city adds more retail, like a development planned along Loma Colorado Drive that will be anchored by a Lowe's home improvement store, he said.

While the growing retail tax receipts may not completely cover the revenue gap from the slowdown in home construction, "it's going to be pretty darn close with all of the activity that's coming," Kristof said.

Meanwhile, the housing market nationally is expected to bottom out by the fall, before it begins a slow improvement, Markstein said.

Helped by Albuquerque's strong employment rate, and the city's success in recruiting new companies, the housing market should rebound - albeit moderately, Markstein said.

"We're not going to see a huge housing boom," he said. "We'll see a good, solid, but slow growth. We don't want to go back, nor should we go back, to the overbuilding of 2004."