A couple of weeks ago I had the privilege of attending the National Association of Home Builders’ annual International Builders Show in Orlando. Like the industry it represents, the Builders Show is not nearly as big as it used to be. But it still ranks as one of the largest trade shows in the world and it is an annual reminder of what an enormous part of our economy residential construction is, both nationally and locally.
On average, building 100 single family homes in a community generates $16 million in local income and 284 fulltime local jobs. In the six counties the HBA of Greater Springfield tracks with the help of MarketGraphics Research Group, we are building about 25% the number of homes we were building when things were more “normal.” That means that this region – in a matter of only a few years – has lost more than 13,000 housing & construction jobs that used to be a normal part of our economy.
In fact, our local economy is more dependent on construction than most. The largest employers here are stable industries (health care and education) that have not experienced major job losses. If our unemployment rate remains around 9%, much of that is job loss in the construction industry. That’s actually very good news. Our local recession is far less complex than the national one. If we can get construction going again, our overall recovery will immediately begin taking hold.
More good news: the worst is behind us (at least here). Sadly, nobody is predicting a robust recovery any time soon. But after spending most of 2009 doing the hard work of clearing what was an overbuilt inventory, housing starts in our area turned upward in 2010 for the first time in years – a 16% increase in new housing starts over 2009. In fact, a number of market segments, price points and locations in the area now are experiencing serious shortages of in-demand new housing. Further, the unemployment rate in southwest Missouri is lower than most markets, and we the only segment of the state that is still growing in population.
And, while the modest rebound still leaves us at less than one-third the activity we would expect in a normal year, it puts us well ahead of most other local real estate markets. The hardest hit markets still will be digging through overbuilt inventory five years from now. Even among other Midwestern markets not hit as hard by the burst of the housing bubble, precious few saw their inventories return to normal and/or their housing starts increase in 2010. While it is far from easy, if one is going to build homes for a living, there are few other places one would rather do it than here!
And it is no blip on the radar. The HBA is forecasting a gradual, multi-year recovery of the local residential construction sector to continue in 2011. Housing starts in 2011 should exceed those built in 2010 by approximately another 15%.
For those who might be in the market for a new home in the next few years, it’s hard to imagine any better time to make that move than right now. Consider the advantages: low interest rates, available high-quality building professionals, competitive pricing, etc, etc.
To be sure, challenges remain ahead as we inch toward recovery. The tight credit environment and home appraisal complexities are among them. But overall, builders are more optimistic than they have been in quite some time that the worst is behind us. Our economic recovery – such that it is – appears to be underway.