Housing starts show modest improvement

Slow and steady wins the race, according to professionals in residential construction. The industry is slowly battling back after the recession and is optimistic looking into 2017.

There were 2,234 homes built in 2005 – midboom, which remains in stark contrast to housing starts in Greene County for the past couple years.

In 2015, 359 single-family dwelling construction permits were issued – the last year an apples to apples comparison is available.

Starting in 2016, the county revised its metric to exclude accessory buildings with living quarters. Under the new system, in 2016 there are 394 single-family residential building permits issued – a 10 percent overall increase.

According to Springfield Business Journal research of city data, single-family housing starts in the city declined 14 percent during that same time frame.

However, overall permit numbers were up roughly 10 percent last year from 2015. Springfield Building Services Director Chris Straw explained the discrepancy saying the numbers include anything linked to a residential permit – from a remodel to a swimming pool.

The city tracked 458 residential permits issued Jan. 1 through September 2016, that’s up from 414 during the same time frame in 2015.

Perception is key
Home Builders Association of Greater Springfield CEO Charlyce Ruth said the HBA Home Show taking place Jan. 27-29 is a good measure of the health of the industry.

“We’re probably about 5 percent ahead of sales from where we were last year,” Ruth said. “That really seems consistent with what is happening with the economy – slow, steady growth, which in my opinion, is more sustainable.”

According to Terry McKee, owner of MGM Properties, which builds homes in the $150,000-$1.5 million range, that 5 percent seems to be the magic number.

“We saw an increase from 2015 to 2016 percentagewise, probably a modest 5-6 percent more homes being built. We’ve seen that same modest increase over the course of 2016,” he said of the gains that amount to an $816,000 increase in the value of homes built from 2015 to 2016.

“I’d rather see a slow and steady increase. We don’t need a boom again. We’ve experienced that and it was a recipe for disaster.”

It appears the industry is improving outside of Springfield proper as well.

Through September, Republic increased by 15 residential building permits and Nixa by four, while Ozark reported an increase of 41 homes through August.

High(end) Rise
McKee said his company builds far more $150,000 homes, but he’s seen a dramatic uptick in high-end homes in 2016.

McKee said while he builds all over Springfield and the surrounding areas, he sees the most growth occurring in Nixa.

“We build a lot more of the homes that are $150,000 to $250,000 as far as volume goes, but that’s what the bulk of the market can afford,” McKee said.

“This last year, we built maybe eight homes that were in the $700,000 to $1 million price range. That was a pretty good increase from 2015. We saw probably a 50 percent increase in that $700,000 to $1 million spec home.”

But, with the slow revival, new issues arise.

The economic downturn meant banks weren’t financing subdivisions, so infrastructure wasn’t being put in – roads, water retention, water, sewer, etc. Now, with the uptick in the economy, there is a shortage of lots.

Ruth believes the shortage is indicative of a potential good year – demand is up.
 
“Now, we’re having to develop lots. We’re not using bank owned lots anymore, so there’s going to be a more realistic price increase for lots. It will be interesting to see how the consumer views that – and the appraisers and the banks,” McKee said.

He sees this as a pennant demand – a stock term – that came out of the housing crisis. According to Investopedia.com, a pennant is a continuation pattern created when there is a large movement in a stock, followed by a consolidation period with converging trendlines, followed by a breakout movement in the same direction as the initial large movement – which creates a flag shape when charted on a stock graph.

A very low volume equilibrium is eventually established, and then comes a catalyst to trigger the buying or selling.

Data from the National Association of Home Builders Leading Markets Index suggests the Springfield market was flat in 2016 at 0.90.

McKee and Ruth agree governmental changes always cause a few shockwaves in the industry.

“We do have a new administration coming in and anytime there is a change, there are some jitters,” Ruth said.

She said the industry is waiting to see how the shift will play out.

“We’ve got a few hurdles, there’s going to be some variables with the new President-elect (Donald) Trump to see what he does with banking regulations,” McKee said. “Overall, I expect 2017 to be as good or better than 2016, even with those hurdles.”

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