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.

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November 3, 2009

Martin Crutsinger

News-Leader

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.

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News-Leader Editorial: 'Home building news cause for joy'

Following Tuesday's page 1A news story on signs of life in the building industry, the Springfield News-Leader editorialized Wednesday on what great news that would be for the community and local economy. The editorial follows below, or can be read directly on the News-Leader site by clicking here.

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Our Voice

November 4, 2009

Experts say the growth rate can be foundation for future prosperity.

For now, it's just a ray of optimism for home builders.

But it's a bright ray.

Battered by sour economic news month after recent month, a headline Monday could be a harbinger of better days on the horizon.

"Increase in spending on home building spurs hope" were the words atop a 1A News-Leader story Tuesday.

It told how the U.S. Commerce Department is reporting that September showed the biggest increase in private residential building in six years.

Of course, no one's anywhere close to declaring an end to lean times. But the latest numbers have spurred a positive buzz that the housing market is rebounding.

It's sunny in the Ozarks this week, with temperatures approaching balminess. It's a good time for a reprieve from the bleak and the dire.

Take a minute or two to bask in these latest numbers and allow yourself a rosy glance forward.

Economic experts say a return to health for the housing industry will support economic recovery overall.

Cautions about overreacting abound, but one thing is clear: this growth -- a 3.9 percent rise in residential construction -- was not expected. Analysts had been predicting an overall decline in total construction spending, which includes public building projects.

Locally, experts say an upturn could soon create demand for more new homes, because the current inventory has shrunken. These might be smaller homes, perhaps built with evolving, green technology, but at least a demand is predicted.

Builders in Greene and four other nearby southwest Missouri counties also received other soothing news recently.

A market research company -- reporting an analysis of census information, building permits, lot supply vs. demand, the historical rate of demands for new homes and other data -- concluded the Southwest Missouri housing market "is moving in a healthy direction."

Among the key factors noted: a projected 7 percent population growth over the next five years; a "relatively healthy employment picture"; and an economic resilience not enjoyed in other parts of the nation.

Builders had essentially stopped constructing homes due to the downturn. Deciding which kind to build as the market surges back is undoubtedly the kind of problem they'd be glad to tackle.

Hopefully, September wasn't an anomaly.

There's nothing like the sounds of industry -- hammers, nail guns, concrete trucks -- to complement another beautiful, fall day in the Ozarks.

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This editorial is the view of the News-Leader Editorial Board.

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News-Leader: 'It's a good time to build'

On Monday, October 19, Springfield News-Leader reporter Cory de Vera had this report from the weekend HBA Home Remodeling Expo:

'It's a good time to build'

Remodeling expo attracts fewer,

but more serious patrons this year.

For Battlefield residents Judy and Jerry O'Dell, the Home Builders Association Home Remodeling Expo was the place to be over the weekend.

After living in their home 33 years, Judy O'Dell said she's ready for some upgrades.

"I'm looking at remodeling the bathroom, the kitchen, the living room," she said. "I'm wanting wood floors, granite tops. I'm wanting marble in my bathroom."

Matt Morrow, executive director of the HBA, estimated that this year's show at the Ozark Empire Fairgrounds drew about 4,500 people Friday through Sunday, fewer than the 5,000 to 7,000 that the show has drawn in years past.

But, vendors told him, those who did come seemed to have definite plans for projects. In other years, the show may attract higher numbers of people who come for entertainment.

"They did say the show helps create a few jobs that will help get them through to the next construction season," Morrow said.

If the Remodeling Market Index is an accurate measure, business has been picking up from when the index hit a low point in December 2008.

The RMI is an economic indicator created by the National Association of Home Builders based on a survey that goes out every quarter to 2,000 remodelers around the country. The survey asks questions about the current demand for remodeling for projects under $25,000 and for projects over $25,000.

A second portion of the survey calculates an index number quantifying future expectations of remodelers, based on responses to questions about topics like their calls for bids and their backlog of work.

In December 2008, the index number measuring future expectations hit a low of 18.6, but that climbed to 30 after the first quarter of 2009 and to 34.2 after the second quarter. The index numbers reflecting actual contracts showed the same trend.

Still, those numbers are a far cry from when the indexes were over 50 in 2003 and 2004.

Morrow said anecdotally, he has heard that business for remodelers had been picking up locally, but there isn't an easy way to get hard data for the area.

"A lot of municipalities and most counties in this part of the state don't issue permits (because) they don't have building codes," said Morrow. "So you can't just go down to the courthouse and say, 'How many remodels have we had?' You can for a particular permitting jurisdiction that they happen to track, but you can't do it for all of southwest Missouri."

One trend Morrow has seen is that as demand for new construction has decreased, builders have moved into major remodeling projects instead.

That was true for builder Sam Bradley.

"Almost all the calls that I get have been for remodeling this year, up until about three or four weeks ago," Bradley said.

"Then just this last month I've had five calls for new homes. That's why I think new construction is coming back."

Springfield residents Gary and Tish Orrick came to the show because they are planning to build a new home, starting in the next 30 days.

"It's a good time to build," Gary Orrick said. "With the economy being bad, all of the subs and all of the people who furnish materials for you have lowered their prices."

Judy O'Dell, who was planning major remodeling, said she was spotting good deals, too.

Remodeling appeals to her more than buying a new home because she likes where she lives, she said. In the long run, she believes remodeling will cost less.

"And when you remodel you can do it one room at a time," she said. "You can save your money, do one room, rather than dishing out all the money at once. ... Nowadays with the economy, you have to save for each project."

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Pearson Park Highlights Need to Block 'Cap and Trade' Legislation

HBA builder Richland Homes recently broke ground on the area's first 100% ENERGY STAR subdivision. Richland Homes president Brian Willaby has begun work on the first three homes in Pearson Park subdivision, which will require ENERGY STAR certification for all new homes as a part of the subdivision covenants.

Just when home building is showing signs of life (and as the free market is embracing energy efficiency and green building), the U.S. Senate prepares to take up the most restrictive environmental legislation in U.S. history. The controversial "Cap and Trade" bill passed this summer by the House of Representatives by all estimates would drive up the cost of utilities exponentially. The bill also includes costly and unnecessary code requirements for new construction nationwide. The ill-conceived legislation would place potential home buyers in a no-win situation: they can't afford to stay where they are, but they also can't afford to buy a newer, more efficient home.

With the nation's economy still reeling from economic recession with the housing industry virtually on life support, home builders, realtors and other housing advocates are urging Senators to reject the House bill.

In conjunction with the launch of Pearson Park, local news outlets drew the connection between the good intentions of government and the resulting negative impact on today's energy efficient home building options. KY3, KOLR, KSFX, KSPR and the Springfield News-Leader all covered the story. Part of that coverage is available to view and read below.

KY3: Builders worry cap and trade will stifle green growth

KOLR: HBA Builder Richland Homes Launches Area's First ENERGY STAR Subdivision

Springfield News-Leader:

Local Green Subdivision is First of Kind

Developer: Cap-and-trade would hamper project

Didi Tang

News-Leader

The first Energy Star subdivision of Greene County is under construction to demonstrate the feasibility of energy-efficient homes .

But such private, market-driven efforts will be in jeopardy if U.S. senators approve cap-and-trade rules to control carbon emission, said the developer of the 155-lot Pearson Park northeast of Springfield.

"To me, it's cap-and-tax," said Tom Barr, who has stipulated in the subdivision covenant that all homes at Pearson Park must be built to the federal Energy Star standards.

On Friday, Barr and his colleagues in the local building community showcased three energy- efficient homes being built at the 64-acre Pearson Park development.

They seized the opportunity to criticize the proposed cap-and-trade system, contending the new rules would not only hamstring consumers' financial ability to purchase energy-efficient homes but also make construction of such homes more expensive, putting them further out of the reach of American homeowners.

"The new regulations will paralyze the market," said Matt Morrow, executive director of the Home Builders Association of Greater Springfield.

In his opening remarks, Morrow noted the residential home market -- after 22 months of continuing decline -- is finally showing signs of recovery and warned against any regulations that would put the industry back in a lull.

The cap-and-trade system, approved by the U.S. House of Representatives in June, is heading to the Senate this fall.

At the heart of the debate is the eventual cost to businesses and consumers.

On Friday, Morrow said the system has been estimated to raise an average family's utility expenses by more than $1,700 a year.

The cap-and-trade system also would place onerous regulations on construction of energy- efficient homes, making them less affordable, Morrow said.

Barr said market studies have shown homebuyers are willing to purchase energy- efficient homes if they can see tangible monetary savings.

He said green homes are more expensive to build and consumers are less likely to pay extra for some of the environmental benefits that come with a green home.

A green home not only is energy- efficient but also must meet certain standards in other environmental issues such as recycling and material sustainability, Barr said.

Brian Willaby of Richland Homes is the builder of the first three homes at Pearson Park, and Willaby has been working with local contractors and supplies to rein in costs .

An energy- efficient home doesn't necessarily cost more to build because the extra dollars spent on insulation, for example, can be offset by savings in the heating and air-conditioning system, Barr said.

One of the homes, estimated to use only 52 percent of the energy a standard house consumes and the most energy- efficient of the three, costs slightly more to build, Barr said.

Probably half a percent, said Willaby.

"It's a minute percentage," the builder said.

Final cost figures will be tallied when the homes are built, Barr said.

On a price-per-square-foot basis, the homes at Pearson Park will be comparable to non-Energy Star houses, Barr said.

One house, for example, has an asking price of $189,900 with about 1,800 square feet.

An Energy Star home must meet strict guidelines for energy efficiency set by the U.S. Environmental Protection Agency, according to the official Web site of the federal program.

These homes are at least 15 percent more energy- efficient than homes built to the 2004 International Residential Code, and include additional energy-saving features that typically make them 20 to 30 percent more efficient than standard homes.

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