News-Leader: ‘Increase in spending on home building spurs hopes’
On Tuesday, November 3, the Springfield News-Leader ran a front-page headline and story signalling the beginning signs of recovery in the home building industry. The 1A news article follows, or, to read the story directly from the News-Leader site, click here.
November 3, 2009
Washington — Construction spending in September posted a better-than-expected performance, powered by the largest jump in housing construction in more than six years.
The advance spurred hope that the battered housing sector is starting to turn around and will provide support for the overall economy as it struggles to emerge from the worst recession since the 1930s.
The Commerce Department said Monday that total construction spending was up 0.8 percent in September, much better than the 0.3 percent drop that analysts had forecast.
The August performance was revised down to show a 0.1 percent drop rather the 0.8 percent gain first reported.
The overall increase reflected a 3.9 percent rise in spending on residential construction, the biggest jump in housing activity since July 2003. Economists believe that this sector is starting to rebound and should help support an economic recovery.
Locally, builders say housing starts have picked up. But the bigger news is the shrinking inventory of new homes.
Matt Morrow, chief executive officer of the Home Builders Association of Greater Springfield, said there could be a shortage of new homes in the area by first quarter 2010, “and that means we’ll have to be building some homes pretty quick.”
Builder Rusty MacLachlan, president of the Springfield HBA, said the recovery has been slow, “but it is getting better.”
MacLachlan said local builders “responded appropriately” to the housing downturn — “they stopped building.”
Combined with a below-normal but “good sales pace all things considered,” the inventory of new homes in the area could reach a point soon where new inventory is needed.
MacLachlan, who sits on the board of directors for the national association of homebuilders, is optimistic the industry is on the mend. But there’s still reason to be cautious. As construction fell off across the country, building material suppliers cut production, as well.
“If demand returns too quickly, then we’re in a position of material shortages,” which could drive up prices, he said. “It’s a fine line we’re walking on the recovery here. We want it to happen, but if it happens too quickly we’ll hurt ourselves.”
He also expects construction, when it picks back up, to be more conservative.
“I think people are getting a little more realistic about what they need in a house,” MacLachlan said. “I think there was a trend for a little while where everybody wanted a little more.”
Buyers still want nice amenities, but they’re backing off of “too big,” he said.
Green building, too, may be more common — when it’s affordable and cost-effective.
“If there’s a payoff to going green, I think people want to do it,” he said.
Another worry on the national front is that a big part of the activity in recent months may have reflected a rush by builders to start projects that could qualify for a tax credit of up to $8,000 offered by the government to first time home buyers.
That tax credit is due to expire on Nov. 30 although a group of senators last week agreed to extend the tax credit for potential buyers who have sales agreements signed by the end of April. Those buyers would have until the end of June to close on their new homes.
The housing industry has lobbied for the extension, arguing that without this support the tentative rebound that is now occurring in housing could be derailed.
MacLachlan said he thinks the extension, as well as another plan being considered that would offer somewhat smaller tax credits to existing homeowners looking for an upgrade, will help.
“I think that will push some people along to go ahead and buy that next house,” he said.