Home-building market builds strength throughout 2002

A record month for new home sales late last year has local home builders optimistic about the housing construction market ahead. National sales of new single-family homes in November 2002 reached a seasonally adjusted annual rate of 1.07 million units, up 5.7 percent from the previous month and 14 percent above November 2001, according to the U.S. Census Bureau and Department of Housing and Urban Development.

News got better with the new year when national mortgage lender Freddie Mac announced 30-year fixed-rate mortgages averaged 5.85 percent the week ending Jan. 3, according to its Primary Mortgage Market Survey. It is the survey's lowest rate since an average of 5.83 percent in 1965, and it is down from the prior week's 5.93 percent.

Declining interest rates throughout 2002 fueled the home building market especially in the Midwest, making it one of the bright spots of an otherwise sluggish economy.

"I don't see any indication that it's going to be any different in 2003," said local builder Shawn Fink of Shawn Marshall Fink Custom Homes. "For the foreseeable future, I think things are going to remain pretty strong. We're seeing an influx of people in this area of the country, and we still have a lot of undeveloped land here."

The Midwest region, where home sales increased 41.2 percent over October, led the November surge.

Statistics show the trends are hitting home. Greene County Recorder Linda Montgomery said it was a record year for real estate filings in her office.

There were 75,606 real estate recordings in 2002, a total comprised of warranty deeds, deeds of trust, powers of attorney, releases and assignments at the county Recorder of Deeds Office.

"That's the most we've ever done in Greene County," Montgomery said.

It exceeded 1998's record by about 6,000 recordings. The 23,088 deeds of trust, which are tied to new property mortgages, also represent an all-time high, she said.

Builders filed 1,051 single-family residential permits at Greene County's Building Regulation Department, nearly 200 more permits than in 2001.

Housing starts within Springfield city limits saw only a slight gain, emphasizing development in Springfield's bedroom communities. There were 406 homes started in 2002 compared to 404 homes in 2001, according to the city's Building and Development Services.

"It's been an excellent year for homeowners and home buyers in the greater Springfield area," said Matt Morrow, executive officer of the Home Builders Association of Springfield. "That means it's been a good year for home builders, too."

Morrow attributes the positive housing market performance to three things: historically low mortgage rates, a high interest in residing in the Springfield area and a strong local economy.

"If you take any one of those out, it would make for a weaker market," he said. "Those three things kind of work together."

Economists with the National Association of Home Builders expect interest rates to rise approximately 1 percentage point throughout the year, according to Sam Bradley, a local home builder and NAHB Missouri state representative.

"The national prediction is that (the market) will soften some because people that were going to get into the housing market have already got into it," Bradley said.

Not so locally, according to Morrow and local builders.

Morrow said that when interest rates do go back up, the Springfield market should not see a major change, assuming the other two factors remain the same.

"A change in the interest rates is most likely to affect the types of homes that are being built not so much whether or not they are being built, but which market it appeals to," he said.

Higher rates often grow the upper scale housing market because that often means the stock market is performing well, Morrow said.

Conversely, low interest rates produce small- to mid-size home purchases, as 2002's rates have proved.

"There have been a number of people who previously didn't think they could afford to own their own home who can because of the lower rates," Morrow said. "That's where a lot of growth has taken place. It is reflected in the numbers."

For example, the 20,694 deeds of trust filed in 2001 were valued at $3.7 billion, but the 20,658 filed through November 2002 totaled $2.2 billion, according to Fidelity Title Agency, which tracks the value of deeds of trust filed in Greene County.

"More homes are being built, but they're not quite as expensive as the homes that were built (in 2001)," Morrow said.

However, if rates move that expected 1 percent; the local market could see a year similar to 2001.

"The reality is," said Fink, "7 percent is still pretty cheap money."