The news was sobering at the National Association of Home Builders’ annual International Builders Show in Las Vegas earlier this year. Nationwide, fewer homes – 571,000 – were built in 2009 than in any year since World War II.
The good news, however, was that 2009 likely was the bottom of what has become a painful downward economic spiral.
In 2010, NAHB is projecting a 28 percent increase in new home construction, to 732,000 starts. Then, in 2011, 1.056 million starts are forecast; followed by nearly 1.6 million in 2012, 1.8 million in 2013, and 1.96 million in 2014. That 2014 forecast is not far off the all-time record set in 2005. Better times are ahead in home construction. And that is good news, for those who are in the home building industry as well as those who are simply interested in the area’s economic vibrancy.
On average, the construction of 100 single-family homes in a community generates $16 million in local income and 284 full-time local jobs.
In Greene, Christian, Taney, Stone and Barry counties, more than 5,000 new homes were built in 2005. In 2009, that number had fallen closer to 1,000 new homes per year. That difference of 4,000 homes means the regional economy is suffering overall income losses of hundreds of millions of dollars annually. As a result, more than 11,000 local jobs are now unavailable.
The local economy is more dependent on construction than most. The largest employers here are stable industries – including health care and education – that have not experienced major job losses. If our unemployment rate is between 8 percent and 9 percent, much of that is construction industry job loss. That’s good news. Our local recession is less complex than the national one. If we can get construction going again, an overall recovery will immediately begin taking hold.
More good news: For nearly a year, new construction sales have outpaced new construction starts by nearly 2-1. As buyers gradually returned, builders have stayed conservative. By the second quarter of 2010, the Home Builders Association of Greater Springfield and MarketGraphics Research Group are forecasting shortages of available new housing at several price points throughout the Ozarks. When housing is in short supply, new construction – and the jobs and economic gains that come with it – can’t be far behind.
A gradual, multiyear recovery of the local residential construction sector should begin this year. Housing starts in 2010 should exceed those built in 2009 by at least 15 percent. Here are some facts to support that forecast:
• Interest rates remain near historic lows. You can still get a 30-year mortgage for 5.5 percent or less, but most economists anticipate that higher interest rates are not far off.
• The best builders and subcontractors are available – no waiting months or years to work with a particular building professional. That could change, though – top home builders tell me they are receiving more queries from eager home buyers in the first six weeks of 2010 than at any time in 2009.
• The price of many construction materials has dropped. As a result, new homes often are more affordable than in recent years.
• Lucrative tax credits. The federal government will help first-time homebuyers with an $8,000 tax credit. Those who aren’t first-timers can qualify for $6,500 when they buy their next homes. Both credits expire soon (see www.federalhousingtaxcredit.com) Other temporary tax incentives exist for popular green building features that could save more money in the long run on utility bills.
To be sure, challenges remain ahead, including the tight credit environment and home appraisal complexities. But overall, builders are more optimistic than they have been in quite some time that the worst is behind us. Recovery finally appears to be on the way.Matt Morrow is executive officer of the Home Builders Association of Greater Springfield. He can be reached at email@example.com.