Surveying the Market: HBA conducts first in-depth housing market analysis

The analysis includes data from roughly 450 responses each to two surveys – one general 19-question poll about market conditions and perceptions, and a separate 17-question survey focused on green building.

Information in the analysis also comes from four focus groups – two comprising young professionals and two comprising baby boomers – which delved into the same issues.

Among the findings: People are still fairly optimistic about the investment value of their homes, despite the recent downturn in the housing market, but interest rates could act as an impediment to homebuyers, especially if they currently own a home.

The surveys were the first of their kind for the HBA, according to Executive Officer Matt Morrow. Springfield-based Opinion Research Specialists conducted the survey.

“In the past, we may have been in the field doing a poll for some other purpose, and we’d ask a few questions that would give us a hint as to what is going on,” Morrow said. “In this case, we’re obviously in a much more uncertain housing market, so we wanted to dig very deep into the housing market and find out where people are.”

HBA contracted with consulting firm Morrow & Associates – owned by Morrow’s wife, Rachael – to meet with focus groups at HBA offices.

Price optimism

The analysis yielded a healthy dose of optimism about housing in southwest Missouri – 76 percent of respondents said a home purchased today would be worth more in five years, despite the recent decreases in housing prices nationwide.

“This is significant – there’s a lot of negative information and news about the housing market, but when we asked if people saw a home as a good investment, even five years from now, overwhelmingly they did,” Morrow said. “That’s big, especially in a housing market that’s taken a real hit.”

The hit is evident in the number of housing starts in Springfield, which is down 47 percent to 209 permits in 2007 compared to 2006.

Another bright spot for HBA is that 25 percent of respondents anticipate buying another home in the next five years – well more than HBA expected.

Additionally, 25 percent of people surveyed anticipate buying another home in the next five years.

According to the analysis, 40 percent of respondents said homes in the Springfield market were priced “about right,” while only 36 percent said prices were too high.

Nixa appraiser Pam Long said that from what she’s seen, the average home in the market will still sell quickly – if it’s priced to reflect the rest of the market.

“A good house will sell within 90 days if it’s priced correctly. If they sit on the market like they are right now, they’re priced too high,” Long said. “A lot of Realtors are getting so astute that they won’t take the higher priced homes if they’re not reasonable. They want listings that are reasonable and don’t have a lot of blue sky built in.”

Doug Andrews, president of the Greater Springfield Board of Realtors, agreed; he said with the number of homes on the market due to sluggish sales and foreclosures, prices are competitive.

“Any time there’s that much competition, there’s someone always wanting to be the prettiest girl at the dance, so that in itself tends to bring some of those properties down,” Andrews said. “I don’t hear clients say that houses are priced too high.”

Morrow said that when the HBA broke down the results of the home price question by demographics, they noted that people moving to the Springfield area from other parts of the country were much more likely to see prices as reasonable.

“Really, everyone is comparing prices to what homes used to be,” he said. “For people who’ve always been here, it’s what homes used to be here. For people who moved here from, say, California, it’s comparing it to what they used to be in California.”

The price difference between new and existing homes also was noted; About 70 percent of those surveyed said a new home costs more than an existing home. Long noted that, while that is true, the gap has narrowed considerably in recent months due to market issues.

“Competition is too extreme with all the new properties – there’s so many new homes on the market that are really priced to sell that people will buy a new home before a used one,” she said, adding that an increasing number of affordable foreclosure properties are also applying downward pressure on prices. “We’ve had too big of a supply (of new homes), and that’s what’s correcting our market prices around here.”

Discouraging results

Another question that brought less-encouraging responses dealt with interest rates.

More than half of respondents said that interest rates are low historically. While that response may seem positive, Morrow said deeper analysis tells a slightly different story.

“We’ve had historically low interest rates for quite a while now, and most people have either bought a home or refinanced in the last few years, so they have a really good rate right now,” Morrow said. “Just because today’s rate is lower than it was in 1990, it doesn’t really matter – it’s an obstacle to moving if it’s higher than what they have right now.”

The low rates are not a problem for first-time homebuyers or for people paying cash – a significant number considering the number of people moving to the area from more expensive housing markets. 

But Morrow added that low rates could be more of a long-term problem than other current weights on the housing market, such as the credit crunch or the subprime loan fallout, especially since rates can’t really go any lower.

“(Credit and subprime lending) are issues, don’t get me wrong, but they’ll be fixed in the short term. We won’t be dealing with those things five years from now,” he said. “The issue of people in a 30-year fixed mortgage at 5.5 percent will continue to be an issue.”

Aaron Jernigan, president of mortgage lending for BancorpSouth, said that while interest rates have climbed slightly from their lowest point in recent years, the increase isn’t enough to discourage buyers.

“If they had gone up 5 percent, that’s a whole different story,” he said. “With all the different products today, it would have to make a substantial increase to make a difference, and I can’t see in the foreseeable future rates moving that high.”

Design issues

One opinion expressed among the association’s focus groups was that there’s a lack of creativity in new home design – a phenomenon referred to as the “Springfield ranch home” or the “window, door, garage” design.

Brett Godfrey, owner of home construction firm Built By Brett, said breaking from the stereotypical new home is a constant battle, especially with Springfield’s limited lot sizes.

“The market expects two- or three-car garages, and to do that, you have ‘X’ amount of footage on the front of the house that has to be a garage,” Godfrey said, noting that designing an L-shaped house can work around the issue. “Most of the spec houses I do have walk-out basements, and to do an L-shape on a home like that can lead to depth and slope problems.”

Sam Bradley of Sam Bradley Homes said he also faces the issue of “TV homes” – homes that look one way from the front and another in the back.

“I try to design a home that’s attractive all the way around, and that’s an issue that was hinted at in the survey,” Bradley said. “I call them TV houses in that there’s a lot of homes built that are attractive from the front, like a TV, but if you look at the back, it’s pretty ugly.”