Hope springs eternal among members of the residential real estate and building community, even after months of difficulty selling both new and existing homes and builders who have often had to branch out to stay afloat.
While industry optimism should perhaps be met with a dose of skepticism, local housing market numbers seem to support a rosier outlook.
Building permits have been filed for 47 homes in the city of Springfield through the first five months of 2009 - exactly the same number as a year ago, meaning builders may feel they have gone far enough in softening the housing supply.
"I'm not saying this economic slowdown was needed, but there did need to be some kind of slowdown in new building, to give time for the existing homes to get off the market," said Matt Bailey, owner of The Bailey Co. and president-elect of the Home Builders Association of Greater Springfield.
He pointed to several indicators that the market is in the beginning stages of a rebound. According to the Greater Springfield Board of Realtors, homes in Greene County spent an average 74 days on the market, a timeframe which Bailey characterized as healthy. He also said excess home inventory is beginning to thin.
"Realtors have said that about 4,400 homes should be on the market at any one time, and I know that we're in that vicinity now," he said. "Some of the builders that were building 50 homes a year have slowed way down, and I think that has helped. If we were still building 700 homes a year, we would be much worse off."
Timing is everything
Whether a potential homebuyer is considering a new home or an existing one, price and interest rate trends may mean there's no time like the present
Home prices are down significantly - the average home sale price in the Springfield metro area in the first quarter was $116,300, down nearly 4 percent from the same time in 2008 and down 5.6 percent from the recent peak of $123,200 in the third quarter, according to data from the National Association of Realtors.
Interest rates, meanwhile, seem to have bottomed out. A 30-year fixed rate mortgage in Springfield averages 5.52 percent as of June 8, according to Bankrate.com. Tim Schaad, Springfield branch manager for Gorman & Gorman Home Loans, said rates are up half a percentage point since the end of May because of concerns about inflation.
"Mortgage bonds hate inflationary pressure, and that drives mortgage rates up," Schaad said. "With the dollar being weak, that has also created some of what we've been seeing as far as mortgage rates increasing. But they're still historically low."
According to the Mortgage Bankers Association, the historic low for interest rates was 4.99 percent in June 2003; many banks offered rates in the mid-4 percent range earlier this year.
Mark Gorman, Schaad's boss as CEO of the St. Louis-based Gorman & Gorman, said efforts by the federal government - including aggressive purchase of mortgage-based securities, which creates liquidity in the lending market, and the recently approved $8,000 tax credit for first-time homebuyers - should combine to create what he called "a good, soft landing" for the market downturn.
"The government does not want to see increasing interest rates in a recessionary market, so they'll do what they can to add liquidity," Gorman said, adding that rates should slowly but steadily climb the rest of the year.
A new plan of attack
While the combination of low rates and lower house prices should help thin excess home inventory, home builders are learning to adapt and find new niches.
The National Association of Home Builders notes that green building is particularly strong even in an otherwise weak market. More than 3,100 builders, remodelers, designers and other home-building professionals have earned Certified Green Professional designations, according to a May 20 NAHB news release.
NAHB's green standard is on display during this year's Parade of Homes, which includes two homes built using those guidelines. (See page 25.)
Builder Jason Bekebrede is focusing more on the needs of a continually aging population with homes touting aging-in-place features. One such home, in Kimberling City's Wildflower subdivision, is on display during this year's HBA Parade of Homes. (See page 18.)
Bekebrede said features such as single-level designs and doorways wide enough to accommodate a wheelchair are gaining popularity as more baby boomers look for ways to avoid the costs of nursing homes and assisted living.
"With the market being the way it is, there hasn't been as much interest in building in general, but when I have spoken to people about those types of changes, they definitely like the idea," Bekebrede said, noting that many buyers want to purchase a home that will last the rest of their lives.
Bailey said successful home builders have continued to find ways to reinvent themselves to counteract lack of demand for traditional new homes.
"As far as weathering the storm, everyone has done something different," Bailey said, noting an increasing number of home builders branching into the remodel and repair market. "People still want to do bathrooms and kitchens and update a few things. That has helped a lot of builders out in the slow times."
This installment of Springfield Business Journal’s Architects & Engineers Project Report showcases 26 endeavors by area design and engineering professionals.
