Wolverton: Local housing market demonstrates resilience

Boone County’s housing market has maintained price stability despite a series of  “negative influences” both locally and nationally during the past two years, according to the president of R. Anthony Development Group, Rob Wolverton.

 

 

Wolverton presented his analysis of the local market during the Fifth Annual Economic Outlook Conference on Tuesday at the University of Missouri College of Business, an event coordinated by the Columbia Chamber of Commerce.

 

 

 

 

 

 

 

Wolverton said in an interview before the conference that he expects interest rates to slowly rise during the next year and for the residential housing market to thrive during the next six months. He also pointed to several potential problems, including an oversupply of building lots and condominium projects, and said, “We desperately need a return of overall consumer confidence.”

Wolverton’s presentation summarized the conditions that fueled Columbia’s housing boom, including low interest rates, extremely favorable financing terms for builders and buyers and a one-time boost of new homebuyers-State Farm employees who moved here when the company consolidated. 

Building permits peaked at 1,126 in 2004 and stayed just above 1,000 in 2005, while house construction starts were above 560 in each of those years and reached 526 in 2006.  So far this year, building permits and housing starts are barely above 200.

The drop in home sales is less drastic, and since few new homes are under construction, the oversupply is steadily getting absorbed.

“The local housing market grew at an unsustainable pace in 2004 and 2005,” Wolverton said. “We are much closer to a normal level of sales today.”   

Statistics provided by the Columbia Board of Realtors show that average and median prices for existing and new houses are rising at a slow but steady pace. 

Wolverton said the price stability during a turbulent market demonstrates the local housing market’s resiliency. Columbia’s designation as a declining market lasted only one quarter last year.

Wolverton estimated that less than 10 percent of the local homebuyers took out sub-prime mortgages or “jumbo” mortgages, which insulated this market from the national housing crisis. Columbia’s stable job market and it’s status as a primary home market also kept the area from extreme fluctuations experienced in other areas of the country. Values remained strong even after the collapse of the financial markets in September and the shock of  $4 per gallon gasoline, he said.

The commercial property market is in even better shape. The vacancy rate last year was less than 10 percent for office, retail and industrial buildings in Boone County, according to a survey by Plaza Commercial Realty. Wolverton said there has been very little speculative building in the commercial market this year, so vacant space is being gradually absorbed.

There also is a significant amount of commercial building projects under way, including Menards home improvement center along U.S. 63 north of town, Moser’s grocery store on Range Line Street, the two Hi-Vee grocery stores, the Landmark Hospital on Old U.S. 63 and Dick’s Sporting Goods on Stadium Boulevard just south of the mall.

But there are potential problems on the horizon, in addition to low consumer confidence, Wolverton said.  

Boone County still has an oversupply of lots developed for single-family houses and an oversupply of condominiums.

“We have had several new condo projects enter the market over the last two years and we need to give them time to be absorbed in the next couple of years,” Wolverton said.

The two rounds of layoffs at Boone Hospital Center were worrisome, he said, because the worst thing that could happen to the local economy is a significant loss of jobs.

But Wolverton is so confident that the real estate market will bounce back next year that he’s concerned about overconfidence.

Typically in the first quarter after a presidential election, the real estate market is strong because of pent up demand.

“We have to be very careful to not misinterpret what goes on in our market over the next six months,” Wolverton said. “We can’t say, ‘Oh, the market is back; we have to build a bunch more homes.”‘