Jeff Parker views the industry as moving to a seller’s market with home prices and new construction costs increasing and inventory shrinking.
2016 Projection With interest rates and construction costs edging up, home sales and prices should increase 5-10 percent.
SBJ: What is the local housing market forecast?
Jeff Parker: We’re anticipating a good year, about the same. (Murney’s) market as a whole went from $145,737 up to $152,757 in average sales price, based on November to November. We think that can continue. Sales volume compared to 2014 through November is up about 34 percent. You look at that and think, “OK, that’s a great year,” – so when I say a 5-10 percent increase next year, that’s still a great year. New construction costs are going up, which usually means existing home sales will increase, too. When construction costs were low you could buy new or an existing home for comparable prices. Now, you’re looking at a cost differential in the new construction as opposed to the existing homes, so there is more demand for the existing homes. Our inventory is down, so there are fewer homes on the market. It was really a buyer’s market for a number of years, which kept prices down. Inventory is coming down, which really makes it a more stable market. I would even venture to say it’s closer to a seller’s market right now than it ever has been in the past since the boom. A lot of the foreclosures are gone, a lot of the distressed inventory and the short sales are gone, so there’s less competition and it’s fueling higher prices.
SBJ: Are new housing starts catching up with demand?
Parker: They are starting to even out. There’s a lot more new construction going in 2015 than we had in 2014, and I would anticipate it to continue in 2016. All the builders that I have are reporting a good year. I still see a strong demand for new construction, locally. There is no one particular new construction area I’ve seen. I’d say it’s well balanced throughout our marketplace.
SBJ: How will the market respond to the Federal Reserve raising the interest rate?
Parker: Such a slight increase, and then in anticipation of a slight increase in 2016 – if at all – I believe it will have a negligible effect on our market. If it goes up 1.5 (percentage points), you’re only at 5 percent. We thought there was strong demand at 7 percent, so it’s still a fantastic rate, historically. As buyers see it start to rise, they may jump in the market to buy something thinking it’s going to go up, but on the long haul, it’s going to have a negligible effect.
The commercial side is a little different. I do see a lot of money coming back into commercial. There were a lot of people that had cash that were staying out of the market, waiting to see what happened. Apartment complexes, duplexes – they’ve been pretty strong throughout 2015 and then into this year. The apprehension that investor buyers and the commercial buyers had has kind of gone by the wayside. They’ve seen prices are not going to get any better.
SBJ: Do you think the upswing will keep going?
Parker: There have been a few markets like Phoenix and Florida that have taken a big upswing, but those types of markets also have a big downswing. Springfield and our surrounding area has always been insulated from that: We’re a college area, we’ve got good hospitals and steady employment, so our increases and decreases are very slight and gradual. We’re not going to see a huge bubble and a huge crash. And that’s why I say, even the people that experienced that cash and were buyers that bought high are now kind of coming back out of the hole because our market just steadily goes along. You’re not going to make a ton of money – buy a house now, sell it three years later and make a half-million dollars – but you’re not going to get hurt on it either. The economy is better. People feel good about their jobs. They’re not scared to buy and they’re also not scared that if, “I get another job and I have to move or I have to leave in a year, am I going to be upside down?” Two years from now I don’t anticipate prices being lower than they are now. I anticipate they’ll rise, just not the way they did at the bubble.
Element Springfield South opened; Outlaw Gentlemen Barbershop added a second location; and wellness studio Stretch Zone launched.