Demand continues for new home construction

Matt Morrow, executive officer of the Home Builders Association of Greater Springfield, said the local home-building industry is, “Kind of like our overall economy - it doesn't have huge peaks or valleys but pretty reliable growth.”

While the National Association of Home Builders/Wells Fargo Housing Market Index for the Midwest, at 36, is the lowest in the country, “Locally, we just came off our strongest year for housing starts ever,” Morrow said. Greene County had 1,268 housing starts in 2005, 14 more than the previous record set in 2003.

The only downside, he said, is obtaining labor.

“If the houses sit for a week or two it's usually not because of the weather and it's usually not because of any economic condition other than just a shortage of labor,” Morrow said. “The subcontractors can only get to so many jobs so quickly.”

The national average Housing Market Index of 57 held steady for the second month in a row, indicating that the majority of the nation's builders consider conditions positive in their markets. While 57 is a positive reading, it is down significantly from the record peak HMI of 71 recorded in June.

The index, based on a monthly survey of builders, gauges builder perceptions of current single-family home sales and sales expectations for the next six months. Any number above 50 indicates that more builders view sales conditions as good than poor.

“Nationwide there's a little bit more caution than we've seen in recent years,” Morrow said. “There's a little bit of nervousness, maybe, about housing not being quite as strong as it has been.”

He added, however, “I think there are a lot of markets in the country - and ours is certainly one of them - where it's still a really good construction area, and there's a lot of good demand for new housing in particular.”

Demand

While starter homes and high-end custom homes have historically been strong in the Springfield area, Morrow said an emerging market locally is step-up homes. This is a change from recent years.

“Prices here have been relatively affordable, so when somebody gets ready to move out of their first home, they figure, 'Why not wait another year or two when I could be ready to move into a really good-size home?'” Morrow said. “There's a demographic there, growing families especially, that are looking for that second home, that step-up,” he added.

Also, while there is some demand for senior-friendly housing - single-level homes and patio homes - Morrow expects this will strengthen in the next 15 years as the baby boom generation retires.

Continuing issues

For local home builders, the biggest concern for the industry is maintaining affordability.

“We are at a threshold. We are right at the brink of losing affordability,” Morrow said.

If home prices increase in 2006 the way they did in 2004 and 2005, and if wages continue to grow at the same pace as they have in the last two years, “Then for the first time in history, the average home in the Ozarks will no longer be affordable to the average wage earner,” Morrow said.

To keep prices affordable, the local HBA will continue to combat efforts to attach new fees to home construction, and Morrow noted that NAHB is focusing on the materials end of the equation.

A recent agreement with the government of Mexico on imports of cement, a measure strongly supported by NAHB, should relieve the ongoing shortage of the vital construction component. That shortage has delayed projects and increased costs.

Meanwhile, NAHB is also lobbying for easing of tariffs on Canadian lumber.

The lumber tariffs have been an NAHB focus for years, and the association “is probably closer than we have ever been to getting those tariffs either reduced or eliminated,” Morrow said. (For other NAHB legislative priorities, see page 39.)

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