Glut of lots on the market

Though housing starts gained ground last year, an oversupply of lots is slowing the pace of residential development, area home builders say.

“In most of the Springfield metropolitan area, we are really not overbuilt. We have a normal supply of homes,” said Matt Morrow, CEO of the Home Builders Association of Greater Springfield. “Where we are oversupplied is in lots.”

Morrow says estimates show it would take eight years to fill the area’s current inventory of lots, assuming all those lots are marketable.

From a home builder’s perspective, Sam Clifton of Millstone Custom Homes, said that developers want to finish selling lots in existing subdivisions right now. The trend is probably best described as infill.

“The idea is we want to sell our lots before we start another subdivision,” Clifton said.

Springfield Business Journal research shows that the area’s 26 largest subdivisions with lots available have a total of 1,145 vacant lots.

Among those subdivisions with available lots this year is Ron Stenger Co.’s Lakes at Wild Horse, which now has 172 lots sold and 59 available. Developers plan for a total of 593 lots at build-out. The company also has developed Bent Tree, where there are now 146 lots sold and 85 available, with plans for 316 at build-out.

“Any building that is going on is happening on existing lots,” said Stu Stenger, developer with Ron Stenger Co. “We are not actively developing any new lots.”

The Springfield area also saw a number of lots being foreclosed on during the past several years, Stenger said, as well as developers leaving the industry and selling off lots. This has contributed to the number of lots available.

Once the number of lots regulates, developers will look to new ground and new areas for home building. Stenger points to the area between Highland Springs and Rogersville as having good potential.

“We see big opportunities out east,” he said.

With lots available in subdivisions across the spectrum, including Millwood, Saddlebrooke and Highland Springs, as well as more recent developments Kelby Creek and Prairie View Heights, it’s a good time for builders and homeowners to buy lots as supply has driven down prices, Clifton said.

The average lot price for the 10 largest subdivisions with available lots is $54,630, compared to an average lot price of $58,320 reported for the same subdivisions in 2010, according to SBJ research.

HBA’s Morrow predicts that in about three years, the Ozarks will have a shortage of lots at prices people want to pay, he said.

A May report from MarketGraphics Research Group for the HBA shows 269 residential building permits through April in Greene, Christian, Barry, Stone, Taney and Webster counties. That’s down 43 percent for the same period in 2010, but up slightly from 230 in 2009.

Still, Morrow said the area home-building market has probably seen its lowest point.

“The bottom has been hit,” Morrow said. “Now, it’s just a matter of how quickly we bounce off of it.”

Local builders report an increased demand for new homes, largely custom builds that are more expensive and built at the request of a prospective homeowner. They’re also getting more calls for speculative homes, which are built on speculation that once they’re built, someone will buy them.

Activity in the spec home market is focused at the entry level, Stenger said. New, spec homes that cost $90,000 to $130,000 are “still moving very well,” but higher priced spec homes – from $300,000 to $600,000 – are not being built, in part because it is difficult to secure bank financing without a prospective buyer in line.

While residential building is showing signs of improvement, Stenger said it still hasn’t made a full recovery.

He points to 2007 as the year the “faucet just turned off” in terms of home building.

MarketGraphics data shows that in 2005, the counties saw a high of 5,235 permits for the year, followed by 4,904 permits in 2006. The number fell to 2,853 in 2007, dropped below 2,000 in 2008 and has stayed below 2,000 permits annually ever since, hitting a low of 1,033 in 2009, but recovering to 1,197 in 2010.

“We’re past the bottom, and we are slowly seeing recovery,” Stenger said.[[In-content Ad]]