New home construction stalls, stock shrinking

The recession has hit the market for newly constructed homes in Columbia harder than the market for existing homes. A builder, after all, doesn’t have the option of taking a home off the market if nothing’s selling.

“At some point, business decisions come into play, and they start discounting homes just to get rid of them,” Randy Bryson of Associated Property Analysts said.

Only 26 new homes were sold in the first quarter of 2009, less than half the number in the first quarter of 2008, according to the Columbia Board of Realtors’ Multiple Listing Service. Only 85 new homes were listed for sale in March, compared to 155 in March 2008.

“We’re using up way more new construction than what’s being built,” R. Anthony Development Group President Rob Wolverton said. “There’s nothing that corrects a market like selling more than you’re producing.”

Wolverton is happy to see the new housing inventory decreasing, but he said Columbia may actually be going below a healthy inventory level.

“Inventory-wise, as far as homes that are built and ready to be sold, we are below the inventory level that we need to be right now,” Wolverton said. “I feel like our market at its natural level will support total home sales of about 1,600-1,800 per year, and new construction homes will sell about 300 to 400 per year.”

While the supply of new homes has decreased, the number of undeveloped lots remains high, Wolverton said. High-priced residential developments have failed to sell many lots. For instance, the city has issued only two residential building permits for lots in the Copperstone development since issuing permits for the development’s clubhouse and pavilion in the summer of 2007.

Wolverton said it could easily be two to three years before Columbia sees any significant development projects, residential or commercial.
Wilkerson said BCNB has made fewer loans for new construction and developments recently.

“We’re not really going after new construction because the regulators consider it risky,” she said. “But no one’s really asking for it right now anyway.”

Wolverton said that it is unlikely Columbia will build its new construction inventory to a healthy level this year. Still, he said that, by the end of the year, the market will be ready for some new construction starts-not too many, but enough to provide some inventory for the spring 2010 market.

“The lending community is cautious enough now to where they’re going to lend money for speculative homes to be built in only very select circumstances,” he said. “The people who have qualified for those circumstances are not exactly chomping at the bit to go out and build a whole bunch of speculative homes.”