Housing Crisis Over for Many Homebuilders

Teke Wiggin

Rick Judson, owner of Evergreen Development Group, recalls the bottom of the housing crisis when home construction had plunged by more than 80 percent in some states, and many builders had either lost their jobs or were barely hanging onto them.

Well, good news, he says: For many builders, those days are over.

"The life support has been taken off now, and you're allowed to live again," Judson says.

In the past 60 days his company has sold two or three plots a month; previously it needed an entire quarter to sell that many, he says.

Judson, who is first vice chairman of the National Home Builders Association, is one of many builders across the country who is noticing increased business as more Americans finally dip a toe into the real estate market. While North Carolina builders have fared better than in many states, his industry, in general, is now on the upswing, he says.

Indeed, the housing market has just recently shown signs that suggest that many of his once-glum colleagues have reason to be hopeful. Coming after a survey that shows builder confidence surged this month, this week brought news that housing starts rose 2.6 percent month-over-month in April to a seasonally-adjusted annual rate of 717,000, continuing a relatively consistent rise over the past year.

And while builder permits, which predict future housing starts, declined 7 percent to a seasonally-adjusted annual rate of 715,000, they still rose 23.7 percent above the April 2011 estimate.

"New construction is a vote of confidence by builders that demand is strengthening," says Jed Kolko, chief economist of listing service Trulia. "Asking prices have stabilized since last September, and construction starts followed, leaping up in November and keeping those gains."

The National Association of Home Builders' Housing Market Index would appear to reflect that confidence, having surged month-over-month from 25 to 29 points in May.

"That's been a real shot in the arm," Judson says of the four-point rise, "And it becomes self-perpetuating when the consumer ... feels it's a good time to buy. They'll go out and buy, and that is now happening again."

NAHB economist David Crowe said the rate of housing production is still half of what his organization would expect in a fully healthy market but that in April "it was very solid for this point of the recovery."

The jump in confidence and rise in housing starts suggest that the housing market could be traveling on an encouraging trajectory, but Kolko notes that housing starts still remain far below pre-housing-bust levels, and cautions against a Pollyannaish outlook.

Judson agrees that his industry is still struggling against tight credit conditions and what he says is a distorted appraisal process that unfairly compares borrower-owned homes to foreclosed homes.

But he adds that a "trickle-up effect" has started, with increased buyer demand beginning to spark more building activity.

"Builders to whom I sell lots," he says, "would not be buying lots if they didn't have customers interested in those lots."

See also:
Mortgage Points: When It's Smart to Pay More
Buying a Home Won't Get Much Cheaper
6 Cities Where Rents Are Skyrocketing


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