April 2013 - By Brian Ross, 2013 MBA President
The last few years of economic upheaval and unease, especially in relation to our local housing industry, had us all on our heels. The instability of the entire economic climate created uncertainty and inaction on the account of most consumers. If you even glanced at the front page of the newspaper or a news website, you read varied opinions about how the market was reacting and when we could expect relief in the form of consumer spending and, especially, new home sales. Throughout the recession, no one seemed to have a clear answer as to when we would stop floundering and start the recovery. Recently an answer has begun to form, and news about our industry, as of late, has been positive. It seems that we have begun our recovery, which is great news. What we need to focus on now is ensuring the recovery continues by dealing with the remaining problems and new issues that have resulted.
First, some good news. As an association of homebuilders and building industry-related members, new home sales are at the crux of our livelihoods, making or breaking our businesses and our bottom lines. Nationally and regionally, home sales have been on the rise as buyers have been reentering the market, trying to take advantage of low housing prices and low mortgage rates. Things are definitely looking up for our industry. Nationally, as reported on spindices.com, the S&P Case Shiller National Home Price Index was up 7.33 percent year-over-year (YOY), as of December 2012. Locally, the Seattle area performed much better, rising 8.66 percent YOY, as of January 2013. There are several national indices, reported YOY, ending December 2012, that support the notion of a rebounding real estate market, including:
- New Home Sales increasing by 12.3 percent
- Inventory reducing by 8.3 percent
- Housing Starts increasing by 27.7 percent
As if these S&P Case Shiller Indices weren’t convincing enough, members who attended last month’s General Membership Dinner were treated to a very detailed presentation by two nationally known real estate consultants. CEO John Burns and Senior Vice President Ken Perlman, both from John Burns Real Estate Consulting out of Irvine, Calif., keynoted the quarterly dinner event, speaking to the current real estate climate, both nationally and regionally. They came reported both good news and concerns, giving us much more than just the rose-colored-glasses version that everyone would have loved to hear.
Burns and Perlman made clear with their thorough research and compelling statistics what builders in the area already knew – that, with employment growth being back up at 2.9 percent, housing demand increasing, and a diminishing supply, consumers will be hungry for housing. Not only do we not have the inventory available for the demand, we do not have enough housing in the pipeline to keep up. This is just one of the issues that was created by the recession.
This issue will not subside quickly due to a new issue we are facing: buildable lot shortage. Throughout the time of our economic downturn, very few developers were applying for new lots, and that recession-induced phenomenon is now negatively affecting builders’ ability to find lots to build new homes on. Without a good, steady supply of buildable lots, new homes will be sparse, which will limit new homes sales.
How do the signs of positive home sales and home building combined with the shortage of buildable lots affect our members and our industry? The real question is how doesn’t it? The lack of homes on the market and lack of homes coming-to-market in the near future will put a strain on the housing industry and economy’s recovery, but it also puts us in the driver’s seat with our foot on the pedal.
Although we still have issues resulting from the recession that remain, including the buildable lots shortage and lack of new homes coming to market, the important, overarching take-away is that we can not only see the road to recovery, we are on it now and there isn’t much traffic. Tempering our progression with the accumulative knowledge and wisdom that can be found in the halls of our Association and within the ranks of our membership is the key to success.