Keeping Pace

While the housing market landscape is a bit turbulent with elevated interest rates contributing to higher mortgage costs, the homebuilding industry remains active with no shortage of projects, local officials say.

Tyler Bussell, vice president of Bussell Building Inc., says his company expects it will build around 120 single-family homes in southwest Missouri by the end of the year. It’s a mark he said is consistent with the company’s average in recent years. That’s not to say the higher interest rates aren’t posing problems.

“The biggest challenge is just affordability. Homes are just more difficult to afford right now,” he says. “You get a lot of people who think they’re going to sit on the sidelines and wait for home prices or interest rates to come down.”

The average rate for a 30-year fixed mortgage climbed above 7.2% in August, the highest level since 2001, according to Freddie Mac. A year ago, it was just over 5.5%. Mortgage rates largely have been ticking up since March 2022, when the Federal Reserve began raising interest rates. After hiking rates 11 times since then, the Fed skipped an increase at its September meeting. Still, it hasn’t ruled out another rate hike before year’s end.

Higher mortgage rates didn’t keep the median sales price for homes from rising in the greater Springfield area, according to the Greater Springfield Board of Realtors. Its most recent market report in August showed a year-over-year 4.3% increase to $260,000 for the average price. Homes remained on the market an average of 23 days in the August report, up from 13 days one year prior.

“We’ve taken a huge segment of the buying people from the entry level, as they now can’t afford a home, due to cost increases and interest rate increases,” says Mike Cronkhite, owner and President of Cronkhite Homes LLC. “It’s been very impactful for our local market and also nationally. You hear a lot about housing affordability and rent affordability.”

Still, Cronkhite says his company, which he calls a homebuilder for entry-level houses, is on pace to build at least 150 single-family homes this year. That would put his company up from 130 homes built in 2022 and equal to 2021’s total, according to Springfield Business Journal list research.

“I do have an optimistic, positive outlook for the next couple of years,” Cronkhite says. “It just really boils down to housing inventory. We’re still in a depressed housing inventory state.”

Citing Realtor.com data, the Federal Reserve Bank of St. Louis notes 934 active house listings in Springfield for August. While up from 858 listings reported in July, it’s a dip from 1,343 listings pre-pandemic in February 2020.

For Bussell’s company, he says homes are still selling, noting prices for its built homes typically range $275,000-$600,000.

“It’s still a very busy time and still a very lopsided seller’s market, just not to the extent that it was,” he says, adding people who may have been looking at homes in the $400,000 range are likely looking for less expensive homes now. “You basically saw everybody’s affordability get knocked down just a notch. We still have a lot of buyers in our range, just not as many as we had a year ago.”

Housing prices also are a concern for employers when it comes to recruiting and retaining employees, according to Springfield Business Journal’s 2023 Economic Growth Survey respondents. One in five respondents say the prices have a very large impact, while an additional 37% believe the impact is somewhat large. Only 12% responded that the prices have no impact.

Consistent market
Cronkhite says his company is very active in the Republic area and building homes in three of the town’s subdivisions, in addition to work in Nixa, Ozark and Bolivar. Republic also is a busy spot for Bussell Building, which is working in the Auburn Hills subdivision near the high school.

Andrew Nelson, assistant city administrator with the city of Republic, says residential landscape activity for both single-family and multifamily markets remains strong.

“We’re still seeing a pretty consistent [residential] market,” he says. “We had so much stuff, even before the change in the economic situation with interest rates. Those guys that had that money outlaid for those developments are continuing on and building those houses to try and seek a return on their investment.”

Permits for single-family units in Republic are on pace to match last year’s total of 220, Nelson says.

“The builders who are building lots of houses aren’t pulling as many permits at once,” he says. “They’re probably taking a little bit more cautious approach to how many are ongoing. Based on the total, we’re going to see as much this year as we did last year. I really think we’ll see probably the same consistent numbers next year. It’s just going to depend on how crazy the economy gets with interest rates. That could really affect the pace.”

Several hundred multifamily units also are under construction or soon will be in Republic, Nelson says, and that includes the residential portion of the mixed-use Iron Grain District project. The $65 million residential and commercial development is being constructed on 30 acres adjacent to the Garton Business Park, which houses the Amazon fulfillment center. The residential portion of the project is designed with more than 200 one-, two- and three-bedroom units and a pool, dog park, clubhouse and walking trails.

“The city has got some water line to install, and they’re going to start building their first phase,” Nelson says of Iron Grain District general contractor BP Builders LLC. “In a couple more months, I’d expect dirt to be moving.”

Adam Pyle, managing member and CEO of BP Builders, says it’s a busy time for multifamily jobs at the Rogersville company. It just finished The Timbers Apartments, a $15 million project in Lebanon, and is currently at work on Bluff View in Branson and a couple projects in Springfield, including Nordic Landing, a $7 million, 41-unit apartment complex just west of the Grant Avenue Parkway on Catalpa Street.

“It seems like it’s a little more than what we’ve done the last couple of years,” Pyle says of current multifamily projects. “But we’ve usually had at least two going the last couple of years.”

The work of homebuilders adding more housing is necessary to keep Springfield competitive in the next five years, SBJ Economic Growth Survey respondents say. According to this year’s survey, 77% of respondents chose affordable single-family residential housing as their top choice of what Springfield needed to stay competitive, up from 66% in the 2022 survey.

Affordable multifamily housing was chosen by 44% of respondents this year, while 23% picked Class A multifamily housing as their top selection.

Rate movement
With dozens of homes under construction every year, Bussell says he’s not fearful of the rising interest rates pricing potential customers out of the market.

“I wouldn’t say we have any less prospects,” he says. “We’re just getting a lot of requests at a different price point.”

It’s a similar refrain from Travis Miller, owner of Travis Miller Homes LLC. His company’s new home prices currently range $800,000-$2 million.

“People keep moving forward with and exploring projects,” he says. “Cost is still an issue, but it’s not as big of an issue. Interest rates are a factor but not much. Everybody I talk to says they’re eventually going to come down. You keep hearing that.”

In its August housing forecast, Fannie Mae predicted the average 30-year fixed mortgage rate will end the year at 6.7% and reach 6% by end of 2024.

“The general consensus in the industry is that we’re going to be seeing lower rates sometime in the next 12 months,” Bussell says.