Just a few months can make a big difference, and a series of ups and downs seems to be par for the course when it comes to tracking new home construction in the Ozarks.
In January, Springfield Business Journal reported that the Springfield metropolitan statistical area failed to make the monthly National Association of Home Builders/First American Improving Markets Index.
That changed in March as the Springfield MSA made its debut on the index, which measures employment growth, house price appreciation and housing permit data for single-family homes.
By April, the Springfield MSA dropped off the index, but according to Matt Morrow, CEO of the Home Builders Association, that’s not necessarily a cause for great concern.
“Take all of it with a grain of salt. We love to cheer when it’s good news, and we like to hide when it’s bad news,” Morrow said from Washington, D.C., where he was attending NAHB’s 2012 Legislative Conference.
“What happens is, if you’ve got monthly improvement in all three of those, you appear on the list of improving markets. Then, if one of those metrics doesn’t improve, you’re off the list by definition for another six months at least,” Morrow added.
NAHB Senior Economist Robert Denk said it was a drop in house-price appreciation that pushed the Springfield MSA off the index.
He noted that rather than using average monthly sales prices or median prices, price appreciation for the index comes from Freddie Mac and is determined by comparing loan data when the same house is sold twice.
“The good part that you can take away from this is that permits and employment have improved steadily. It’s only the prices that have been a little wobbly in Springfield and have sort of been the soft spot, and that’s true around the nation,” Denk said.
He noted, too, that because the area price index climbed fairly moderately in the years leading up to the recession, the decline has been relatively moderate, too, leaving Springfield in better shape than several other places, even if the MSA did fall off the list.
“From 2000 to about 2007, Springfield house prices … appreciated about 30 percent,” Denk said, pointing to anecdotal data. “Then after 2007, they sort of drifted back down. … There are plenty of places where appreciation was much, much higher. … Prices literally doubled and tripled in some markets, then, of course, they had to collapse.”
Morrow acknowledged, however, that there is still ground to be gained in local new-home construction.
“We have hit the bottom, and what has been happening the last three or four months, maybe more, is that we’ve been kind of bouncing along that bottom,” he said.
Housing-start data supports that claim. Through June 6, there were 50 building permits for new residential construction on file with the city of Springfield, up just five from 45 during the first six months of 2011. For all of 2011, there were 87 residential new construction permits filed with the city.
Morrow is confident, however, that as existing home sales – and sale prices – increase, new construction will follow suit.
“It always does. You run out of old houses, the old houses start costing more, and people wake up to the fact that a new home is a pretty good value, too,” he said.
During the Springfield HBA’s third Regional Housing Conference, held last month, housing industry consultant Edsel Charles predicted that the area would see a slight bump in demand in the next four to eight months, Morrow said.
“But that very slight increase in demand means we’re going to start needing some new homes that aren’t being built right now,” Morrow said. “That’s a lot better news than we’ve had in about five years.”
Charles, president of Market Graphics Research Group, also predicted a shortage of new homes in several price points within a year, Morrow said.
“That doesn’t mean that we’ll need to go out and build 500 $300,000 homes all of a sudden, but it means we’ll need more than we have, and there’s going to need to be some built,” Morrow said.
Business already is picking up this year for home builder Rick Ramsey of Ramsey Building Co., which has 15 homes at varying stages of construction, including two that are part of the HBA Parade of Homes this year. In 2011, Ramsey completed nine homes, putting his company at No. 3 on SBJ’s January list of the largest single-family home builders.
“We are so busy right now,” said Ramsey, noting that both of his parade homes already have been sold, though one was originally a speculative home that was sold during the construction process.
Ramsey, whose homes start at roughly $350,000, said he’s getting more interest in new homes from potential customers, including those who want to take advantage of interest rates that have dipped to historic lows in recent weeks.
The rate for a 30-year fixed mortgage was 3.75 percent on June 6, according to
Bankrate.com.
“I think people are feeling like they’re getting on the end of the good times with the interest rates,” he said.
Ramsey said his biggest challenge is getting fair preconstruction appraisals on homes, because there are often no comparable sales to justify the homes’ costs.
Morrow anticipates that rather than a broad-scale recovery for home building, pockets of activity will emerge, which means that communities will have to compete for new housing in what’s expected to be at least a modest recovery in new-home construction.
“They’re going to have to … do the kinds of things Rogersville and Marshfield have been doing, incentivizing builders to come there by cutting their impact fees,” Morrow said. “Or what Republic has done by simplifying its fee structure for commercial development, or what about nine cities and counties have done, working with us to make sure they amend the new building codes in a way that will be reasonable,” he said.[[In-content Ad]]
