Numerous factors affect residential building

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The weather, consumer confidence in the economy and Federal Reserve Chairman Alan Greenspan's announcements of interest rate adjustments all affect the residential construction industry. |ret||ret||tab|

Representatives of the local home-building industry continue to be optimistic about the residential construction market.|ret||ret||tab|

In a Jan. 18 news release, the U.S. Commerce Department's Bureau of the Census reported that construction for new housing starts in December 2000 was, on the whole, better than November and better than the previous seven months. |ret||ret||tab|

Single-family, privately owned housing starts in December were 6 percent above the November rate. Although the seasonally adjusted annual rate of single-family building permits authorized in December was 3 percent below November's rate, the industry seems healthy. |ret||ret||tab|

While the report indicated that privately owned housing starts in December 2000 were 11 percent below those in December 1999, this may be a result of the climb of mortgage rates to a five-year high of 8.64 percent in May. However, the Federal Reserve's lowering of the prime rate has since lowered mortgage interest rates to more attractive levels.|ret||ret||tab|

As of Jan. 17, Ted Hamilton, senior vice president at Signature Bank, gave the current interest rates at 7.125 percent for a 30-year, fixed-rate mortgage and 6.625 for a 15-year, fixed-rate mortgage each down a full percentage point from about six months ago. That means saving about $75 to $80 per month on a $100,000 mortgage.|ret||ret||tab|

What does this mean for residential construction in the Springfield area?|ret||ret||tab|

"Generally speaking our guys are optimistic. Lower interest rates have created a lot of phone calls to our office, many on refinancing," said Jerry Graham of Guaranty Federal. "We've got a number of builders who have homes ready and on the market. We anticipate a pretty good spring, especially if the rates stay as low as they are or possibly drop a little more."|ret||ret||tab|

Kathy Davidson, vice president of Citizens National Bank, said, "Loan demand is really increasing among the people who want a custom home. Loan demand always increases this time of year among the builders who want spec homes to sell in the spring."|ret||ret||tab|

Will rates go down further? |ret||ret||tab|

"I don't know if we're at the bottom," said Hamilton, "but I think rates will stay down. My advice is, if you want a mortgage, don't sit around and wait for the rate to drop. If it's 7 1/4 or 6 3/4, take it and don't look back. That's a great rate."|ret||ret||tab|

The weather has had an effect on winter building.|ret||ret||tab|

"The hard winter has influenced the amount of speculative building going on. It really put projects behind three or four weeks. Builders usually don't want to start a spec house in the middle of winter because the optimal time to finish building is in March or April so they have inventory during the best selling season," said Brian Williams, senior vice president, The Bank.|ret||ret||tab|

"We're probably seeing a little more custom building than speculative, but the winter last year wasn't nearly as hard as this year's. A builder on spec isn't as motivated as is someone who wants to build their own house is to start building now. A businessperson wants to wait a month rather than risk the weather," Williams added.|ret||ret||tab|

"As far as spec homes, this is the slow time of the year. The weather has hurt construction because builders have had trouble getting to the job site. However, we are receiving a number of new requests, allowing builders to get ready for spring sales. It is down a little from last year, even though the rates are lower now. I don't know if it is because of the election or a slow down in the economy," Hamilton said.|ret||ret||tab|

He added that the requests for loans on custom homes has "picked up the last 30 days."|ret||ret||tab|

Overall, the general state of the residential construction business seems to be strong. |ret||ret||tab|

Davidson said she's been in construction lending for "many years and there have always been periods of low demand due to interest rates. Today is about the same as other times when rates have been way up and then they go down."|ret||ret||tab|

"It typically runs in cycles like any other industry. I think all the builders are trying to determine where we are in the cycle," said Williams.|ret||ret||tab|

All in all, the consensus among the bank representatives polled is that the residential construction market in the Springfield area is strong.|ret||ret||tab|

"We will continue attracting people to the area and that makes the demand for housing greater," Graham said.|ret||ret||tab|

"We'll always have a need for new homes," Davidson said.|ret||ret||tab|

"We've always had a very healthy residential market economy in this area and we will continue to have a healthy residential market as Springfield continues to grow," Williams said. |ret||ret||tab|

"The year 2001 will be a good year. The prime rate has dropped and mortgage rates are down. That will be a determining factor for people waiting to build a house," Hamilton said.|ret||ret||tab|

"All of our economy revolves around housing. If a person builds a new home they will need new furniture and appliances," Graham said.[[In-content Ad]]