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Home building, sales expected to remain steady in 2005

In recent years, home building and sales have been one of the strongest segments of the nation’s economy. Now that the economy is strengthening, and interest rates are going up as a result, can home buildingsales possibly continue on the record breaking pace seen in the past four years?

Scott Brunner, CEO of the Mississippi Association of Realtors, expects the home market will continue to be very healthy in Mississippi, especially in the state’s “hot spots.”

“What I hear from our members and see as I travel the state is that, to a great degree, Mississippi is somewhat insulated from what we see as national ups and downs,” Brunner said. “Our cycles are not as extreme as they tend to be in some places. Therefore, Mississippi has not been as affected by the economic doldrums seen in the U.S. in the past four or five years.”

Brunner expects continued heavy activity in areas of the state seeing rapid growth: DeSoto County is the fastest-growing market in the state. Madison and Rankin counties in the center of the state continue to see a lot of home building and sales activities. The Hattiesburg market has benefited a great deal from a strong retiree recruitment effort. And the Coast growth spurt continues with a lot of new homes coming out of the ground.

Expanding ownership opportunities

“Mississippi continues to be poised for growth,” Brunner said. “As long as that continues, the home market will be healthy. The Mississippi homeowner rate is one of the highest in the nation. But we need to look at increasing it particularly for African-Americans and other minority groups. That is something our association is focusing on by helping Realtors understand there are a lot of products and services out there such as financial counseling that can help buyers who would otherwise be marginal.”

According to the National Association of Realtors (NAR), after four consecutive years of record-breaking home sales, home sales should ease but remain close to record levels in 2005. In 2004, there was an estimated 8.9% jump to 6.64 million existing home sales. NAR predicts sales this year will decrease approximately 2.5% to a total of 6.48 million, which would still be the second highest on record. New home sales in 2004 were estimated at a record 1.19 million, up 9.5% from 2003, with 1.11 million sales expected in 2005.

Selling fast

Bob McKay, executive vice president of the Home Builders Association of Jackson, said the metro area saw approximately a 7% growth in home construction from 2003 to 2004.

“We’ll be real close if not over 3,000 starts for 2004,” McKay said. “I think the market will probably hold about where it is. If we see any decline, we are expecting it to be in the $350,000 and over range. The $150,000 market is being sold during construction, and the $200,000 to $250,000 range is selling almost as fast. The only thing we are being real cautious about is $350,000 and up. We’re telling people to be extremely careful.”

Ricky Wilkinson, president of Gulf Construction Inc., Gulfport and immediate past president of the Home Builders Association of Mississippi, doesn’t think interest rates have increased enough to make a dent in the Coast housing market.

“With my company, we’re still moving houses,” Wilkinson said. “You are seeing a lot of the custom homes selling well. I just don’t see much slowdown now. Right now we are still full bore. The problems we are running into are increases in materials and labor costs. And now the weather may start to be a factor because we are getting into the rainy part of the year.”

Wilkinson said for the past year, builders have been fortunate that dry weather has made construction easier than normal. But this year an El Nino is predicted, which is a weather pattern that creates warmer Gulf waters that produce more rain. So, instead of just the normal wet period in the early spring, it could also be a wet summer.

“I’m in the middle of developing one subdivision in Gulfport and getting ready to start another on Highway 53,” Wilkinson said. “We have some concern about the weather.”

Building material costs a concern

The high cost of building materials also continues to be an issue. Any type of steel product is very high, and wood materials are also commanding higher prices than the historic norm.

“Now subcontractors want to increase because their material costs are going up,” Wilkinson said. “I don’t think the interest rate is going to slow us. But if anything is going to slow housing down, it is going to be the price of some of these materials.”

In Tupelo, home building permits were off to an unusually good start in January with 10 permits issued. Marilyn Vail, permit coordinator with Tupelo Planning, said normally January is so rainy that they don’t see a lot of housing starts.

Tupelo saw 102 permits issued for single family homes in 2004 with a total value of approximately $13.5 million. That compares to 98 single family homes valued at $13.3 for 2003. Approximately 100 homes were also constructed in 2001 and 2002.

“We’re pleased that we are holding steady,” Vail said.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

About Becky Gillette

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