Southwest Missouri housing market: Building, not booming

While the southwest Missouri housing market is still a far cry from the building boom of 2006, those who work in and are affected by the industry are just happy that 2010 is looking better than last year.
 
A jump of more than 50 percent in housing permit numbers in Greene, Barry, Christian, Stone, Taney and Webster counties shows an upswing from 2009 for the first quarter of this year.

During that time, 351 building permits for single-family residences were issued in those six counties, compared to 149 for first-quarter 2009, according to an April housing analysis by MarketGraphics Research Group Inc.

“I don’t know what the new norm is going to be. In this economy, if you’re doing better than last year, you’re doing good,” said Steve Childers, Ozark city administrator.

From his perspective, Ozark’s permit data is promising. The city issued nearly 200 permits in both 2006 and 2007, but that number dropped to 16 in all of 2009 – the same number that was issued through the first quarter of this year.

Expectation forecasts
The early months of 2010 have been good to Jim Fortner, co-owner of Branson-based Mastercraft Custom Homes Inc.

Fortner said he’s already begun building four homes in the $600,000 to $750,000 price range this year, and more high-end homeowners who make up his Stone and Taney counties client base are considering building.

He expects to start two homes worth at least a half-million dollars each this year, for a six-home annual total compared to the 10 he’s averaged during his best years.

“Last spring, we thought we’d have several new jobs, but the clients backed off,” Fortner said. “For people that have cash, they’re starting to realize that now is probably the best time to build. It’s time to quit listening to all the negatives and get on with it.”

Joe Zanola, owner of St. Louis-based Zanola Co. and licensee of MarketGraphics Research Group in southwest Missouri, said there are signs of improvement in the regional housing market.

Zanola and his research team, which have tracked the six-county housing market in southwest Missouri since 2003, expect 1,274 new home starts in 2010, compared to 1,033 starts in 2009. Zanola’s projections for this year are up from last fall, when he forecasted 1,185 housing starts.

Still, MarketGraphics research indicates that Fortner’s situation may be an exception to current market norms, at least in the counties he serves.

Projections call for fewer 2010 home starts – 128 in Stone County, compared to 139 last year, and only a six-house year-to-year gain to 111 in Taney County.

Zanola points to supply and demand as the reason behind the relatively flat outlook for the two counties.

“Those areas still have a lot of inventory to work through,” Zanola said, noting that the two counties’ economies rely more heavily on tourism compared to Greene and Christian counties.

“Our forecast is based on supply and demand, what’s going on with the population and employment stability,” he said.

Challenges remain
Overall, Zanola said, the region has more employment stability than other parts of the state, but the market’s not out of the woods yet.

According to the Missouri Department of Economic Development, the March unemployment rate for the Springfield Metropolitan Statistical Area is 9.4 percent, compared to 10.2 for the entire state.

That’s significantly higher than unemployment rates in 2006, when the Springfield MSA’s annual average was 3.9 percent.

High unemployment will drive foreclosures, which will lead to reduced home values, said Realtor David Martin, broker/associate with Murney Associates.

“Foreclosures are selling at least 25 (percent) to 30 percent lower than market price,” he said.

A national home price index by the Center for Retirement Research at Boston College shows home prices were at an index of 120 in 2009, compared to 100 in 2000 and a peak of 180 in 2006.

And while residential home sales have gone up in the Springfield Multilist service area – primarily Greene, Christian and Webster counties – the average home price is going down, Martin said. According to MLS statistics, 577 homes were sold in the area through March 2010, at an average price of $122,217. During the same time period last year, 413 homes were sold, with an average price of $125,932.

The lower-price trend is something Martin expects to continue, at least for the moment.
“Like car buyers going from big gas guzzlers to sleeker, more economical models, home buyers are looking for less square footage and an open great room design,” he said.

Too much inventory
Zanola said one challenge for the region is an oversupply of homes, particularly larger, more expensive homes meant to entice baby boomers.

MarketGraphics research used historic patterns and population growth projections to calculate a sustainable rate of new homes, pegged between 2,900 and 3,900 annually, Zanola said.

“In the early years of the decade, we were there and jumped above it,” he said. “We created an additional 1,200 to 1,500 homes for three to four years, which is why we still have that backlog,” he said, adding that he expects the market to be back on pace for the sustainable rate by 2014, with 2,576 housing starts.

The current new housing need, he said, is for first-time buyers and downsizing retirees. The economy, he said, has more consumers looking for right-sized homes.

The Home Builders Association of Greater Springfield is addressing the changing marketplace through its 2010 Ozarks Regional Housing & Construction Conference on May 11.

MarketGraphics founder Edsel Charles will be a keynote speaker, and seminars will include topics such as obtaining funding for infrastructure.

“We’re really all in this together,” said HBA Executive Officer Matt Morrow. “The cities and counties are starving for more development right now. We now need to figure out how to make it happen.”[[In-content Ad]]