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I visited the Building Industry Association of Southern California’s annual trade show in Long Beach, Calif. yesterday. This is the big show for Southern California homebuilders, where suppliers of everything from appliances to Astroturf pitch their wares.

Folks tried to inject a little fun into the event. The Hooters girls were meeting and greeting at one booth. A company called Universal Truss was handing out Nerf dart guns (Hari Kari anyone?) But the most popular booth was one from Suncoast Framing which had a working bar set up. The theme for the show was “Setting the Stage” for a recovery. Drowning your sorrows was more like it.

In one of the conference rooms, Lisa Grobar, a professor of economics at Cal State Long Beach, predicted the recovery would come next year. Foreclosures will peak in the first half of the year, she said, but not before a second wave of people loses their homes, due to unemployment, not toxic mortgages.

Steve Johnson, of the research firm Metrostudy, made a convincing case that the California market must be bumping pretty close to a bottom. The number of new houses starting construction, for example, is just 13,000. That’s about 20% of what they were two years ago. The state hasn’t seen this little new construction since the 1950s. “We have virtually turned the engine off,” Johnson said.

That wasn’t news to the panelists at an afternoon session on “Surviving a Down Market.” Of the four panel members, three had either changed or lost their jobs just since the show program was printed. The only one who was still at the same company was executive recruiter Kipp Gillian who said he’s gone from getting a 100 resumes a month to 100 a day. Brandon Clements, who recently got laid off from builder Toll Brothers, says he’s been using the free time taking classes to get licensed as a real estate broker and a construction contractor.

Mike Hunter, a land acquisition specialist, said this was now his fifth down cycle in Southern California real estate since he got in the business in the late 1960s. During one he said he didn’t collect a commission check for four years. He had these words of encouragement for those in the audience. “Every single downdraft I’ve been in, we’ve come back better than the previous one.”

The state’s filings have dropped for two straight months because of a new law that requires lenders to make a number of attempts to contact homeowners and then wait 30 days before issuing default notices. This has slowed down the number of foreclosures and will likely just delay the inevitable.

Despite the drop in the California rate, foreclosures nationwide increased 5% from the previous month and 25% from Oct. 2007, RealtyTrac said.

And the worst is likely on the way. Rick Sharga, RealtyTrac's vice president of marketing, told me today that he expects a sharp increase in coming months as the economy worsens and more and more people lose jobs.

"Another wave right now is about to come, driven by the economic downturn," Sharga said.