YOUR BUSINESS AUTHORITY
Springfield, MO
YOUR BUSINESS AUTHORITY
Springfield, MO
Many experts are predicting a slump in the housing market in 2023, but locally, most builders began the year expressing guarded optimism about the outlook for the next 12 months.
The National Association of Home Builders/Wells Fargo Housing Market Index report published Dec. 19, 2022, showed homebuilder confidence at its lowest level since August 2012. That index, based on a survey of some 900 homebuilders, stands at 31 out of 100, down from 84 a year ago – a 63% decline.
Another survey, the HomeSphere/BTIG State of the Industry Report, released Dec. 15, 2022, revealed 51% of homebuilders expected new contracts to decrease in 2023, with 33% of builders saying they expect new contracts to be up this year – even though 71% of builders reported a decline in sales in November.
The national forecasts are affected by an increase in material costs and reduced supply availability, as well as a sharp increase in mortgage interest rates and an anticipated recession. Freddie Mac reported average 30-year mortgage rates ranged 3.22%-7.08% in 2022.
Mike Robbins of Robbins Custom Homes Inc. does not foresee a full-blown downturn, and expects the rest of the country to experience the effects of a projected recession more than in the Springfield region.
“Historically, we don’t have the extreme highs and extreme lows the rest of the country has,” he said via email.
“The biggest problem is, of course, costs and inflation,” he said. “But I see next year as busy as last. People are just figuring they have to pay it. So many have land and are committed to build on it or they find themselves overpaying for existing homes.”
Robbins Custom Homes saw a year-over-year increase from 2021 to 2022, with the company building 15 homes in 2022 versus 10 in 2021, with a total value of $9 million in 2022 and $5.8 million in 2021.
Austin Miller of WiseBuilt Custom Homes also had a mostly sunny forecast for the year.
“The outlook for construction in the housing market is still looking strong as we start 2023,” he said in an email. “Rising interest rates have slowed some portions of our industry, but it’s still a very busy time.”
Miller said local builders are lucky to live in an area that continues to record population growth.
“That means we need more rooftops,” he said, “so some of the slowdowns that happen in bigger markets don’t hit us as hard.”
The most recent figures from the U.S. Census Bureau, from mid-2021, put Springfield’s population at 169,724, and the 2020 census was 6.1% higher than a decade before.
High-end building continues
Jason Bekebrede of Monticello Custom Homes & Remodeling said the home building market just keeps getting more interesting.
Monticello builds high-end homes, with most of its new homes valued at $1 million or more and most remodels in the $300,000 range or above. In 2022, the company built three homes totaling $6 million in value.
“In our niche of the market, the interest rates don’t necessarily keep someone from being able to build a home or do a remodel, but it definitely still affects what they can do,” he said.
Customers might pull back on some features they would ordinarily choose in order to make the numbers work, Bekebrede said.
Bekebrede said he notices a slowing in the number of leads he is getting.
“This time last year up until midsummer, we’d get one or two a week; now, it’s one every couple of weeks,” he said.
Built-to-suit rising
Bussell Building Inc. is a built-to-suit company, meaning it provides a variety of floor plans within its own subdivisions. It is the area’s largest builder of single-family homes, selling 129 homes valued at $48 million in 2022, up from 119 at $35 million the year before. Vice President Tyler Bussell is seeing an increase in business.
“Things have picked up, but they were pretty slow when the rates were rising pretty rapidly,” he said. “We have definitely had an uptick in activity, with more starts and more orders coming in.”
Bussell said many customers are waiting to see where interest rates will settle.
“It’s a whipsaw effect,” he said. “No one really knows what’s going on, and they’re hesitant to lock rates.”
Bussell said buying a home means dating an interest rate.
“You can always get a lower interest rate,” he said. “If you buy today at 6%, if they continue to increase and hit 8%, you’re in a good spot. If they come down to say 5% or 4%, you can refinance.”
Drew Beaty is sales manager of Cronkhite Homes LLC, the second-largest homebuilder in the area, recording 130 homes selling for $40 million in 2022 and 150 homes selling for $32 million the year before. Beaty said he isn’t seeing a big change in people’s desire to buy a home, but climbing interest rates adjusted the buying power for a lot of people in the Midwest.
“There’s still the same amount of people that want to buy a home, but the home that they’re looking for has dramatically changed and become a little more expensive than they planned,” he said.
Cronkhite offers production homes designed to be cost-effective for most homebuyers, Beaty said. The company’s new Summit collection features two-story homes that use multiple cost efficiencies to help customers make homeownership a reality, he said.
“We want to recapture the interest and the opportunity for so many people, who in the last two or three years have really not been able to have a chance to buy a home,” he said. “They’ve been outbid or pushed out of their price range because of rising costs, but there’s still an extreme amount of interest.”
The data bear that out. Springfield Business Journal list research revealed the average new home price for the 15 largest area subdivisions with available lots increased 11% year over year to $474,333 in 2022 from $427,533.
Remodeling an option
Aaron Wyssmann, owner of Ozarks Remodeling & Design, said he saw a slowdown in leads in the fourth quarter of 2022, and customers are more price conscious.
“Our backlog is continuing to grow despite this, and we are planning for a solid year of growth,” he said.
Wyssmann said psychologically, interest rate hikes “just kind of mess with people.” When rates double from 3%, it’s undesirable, he said, yet noted historically, 6% is a good interest rate.
But there is a bright side for Wyssmann’s company.
“Remodeling typically picks up when interest rates are being driven up,” he said.
Nationally, the trend is expected to go in a different direction than Wyssmann’s prediction. The November 2022 Leading Indicator of Remodeling Activity, a quarterly study conducted by Harvard University, predicted homeowner remodeling and repair spending would shrink from 16.1% at year’s end in 2022 to 6.5% by the third quarter of 2023.
With another contradictory finding, an October 2022 study of 4,000 homeowners by decorating platform Houzz Inc. found only 1% of homeowners reported having canceled a home improvement project in 2022, and 23% plan to start a home improvement project in 2023.
It is likely that the only certainty in the outlook for 2023, locally or nationally, is unpredictability
“Everybody’s been holding off for different reasons and sitting on their hands. I don’t know that people really know they’re doing it, but they have been,” Bussell said. “Nobody knows what’s going to happen, but we do know that historically the housing market has always gone up.”
Moseley’s Discount Office Products was purchased; Side Chick opened in Branson; and the Springfield franchise store of NoBaked Cookie Dough changed ownership.
