Housing boom cools off, but rebound predicted for ’07

Although nationwide indicators point to a softening of the burgeoning U.S. housing market, some area real estate agents and developers see the slowdown in Columbia as a temporary trend.

“The overall housing market is very strong, as strong as it has been in the last two years, but there is an over-in-ventory of new construction, which will affect the market through winter but will probably burn off by spring,” said Realtor John John.

The average time for Columbia home sales on the overall market has risen from 70 to 80 days. For new construction, that figure has gone from about 100 to 120 days, he said.

“We have about 120 to 150 extra new homes built this year, and they sit,” he said.

The number of building permits for detached single-family houses in 2006 dropped to 403 valued at $70,291,934 from January through August, compared to 653 permits valued at $100,482,623 for the same months in 2005, according to the city’s Department of Public Works.

Despite this reduction, Columbia still has about 437 new homes for sale, a seven-and-a-half-month supply valued at $88 million.

Department of Public Works figures related to these permits show the average price of construction rose from $153,822 in 2005 to $174,421 in 2006.

“The first half of 2006 has produced the most unusual market that I have experienced since I started selling real estate in 1995,” Columbia Realtor Rob Wolverton told area builders.

Although he calls market fundamentals very sound, Wolverton points to what he describes as a high level of anxiety regarding the overall health of the home sales market.

It may be a case of returning to a normal market following extraordinary sales between 2002 and 2005, like the correction in the stock market after the ’90s boom, he said.

During that time, 30-year mortgage rates dropped to historic lows. Since then, mortgage rates have climbed along with land development and construction costs, which reduce the buying power of the average consumer by 25 to 30 percent, he said.

Wolverton said he remains bullish on the long-term real estate market in Boone County. He is a partner in Madison Park on Chapel Hill Road, where land is being cleared for 29 homes. But, he warns, the short term will bring some pain for those who have become overextended.

His advice to builders is to reduce the price on any house not under contract while buyers are still out there. Builders holding on until winter should prepare for what he calls “a significant haircut.”

Annie Pope of the Columbia Home Builders Association said the market is slow, making it “a buyers’ market.”

“In my personal opinion, this has a lot do with the change in the [Federal Reserve Board]. In the past, as the Feds have raised interest rates, [Chief Allen] Greenspan had such a calming and stabilizing effect. As interest rates have gone up, we have [Ben S.] Bernanke in that position, who is a little bit of a loose cannon. The result is people are scared at a time when they wouldn’t need to be,” she said. “So people are staying put.”

One result of the interest-rate increase has been a lot of remodeling jobs, she said.

Columbia homebuilder Andy McVey said long-term real estate markets always have their ups and downs. He said he recently purchased a 69-acre tract off Millcreek Road next to Millcreek Manor for an additional 90-lot subdivision to be developed over the next three years.

“You’re always going to have ups and downs in the market, and there’s been a lot of negativity put out there lately,” McVey said. “But last fall I had 35 homes, and I’m down to, like, 10. I think that’s a pretty good track record.”

“Right now it’s tougher. We’re not moving houses quite as quick. August has never been that great, but I expect us to pick up a little bit more in the fall. The first of next year I plan on selling a lot of houses. Maybe we need a little bit of a slowdown and let the inventory run down. Come January, I think there’s going to some buyers out there.”

Realtor Glen Strothmann, who is a partner with McVey on some development properties, says the real estate market tends to correct itself. “Inventory sells down, and then you have an extremely healthy market,” Strothmann said.

The National Association of Homebuilders reported that U.S. homebuilders’ optimism sank to its lowest level for an August in 15 years as potential buyers pulled back and the number of visitors to model homes also declined.

Strothmann said media coverage of the association’s data has been sensationalized.

“Where there are jobs and a healthy economy, there’s a healthy housing market,” he said. •