While Mississippi hasn’t been immune to the nationwide slowdown in new home construction, and sales of both new and existing homes, the state isn’t seeing the drastic declines being experienced in some of the rest of the country where the housing markets were on fire before the decent downturn.
“We certainly are not going to see the impact some of the areas that have a lot more housing starts than we do,” said Marty Milstead, executive vice president, Homebuilders Association of Mississippi. “Statewide, we might have 11,000 or 12,000 housing starts per year. Atlanta might have 50,000 housing starts. Nevada/Las Vegas, Florida and some of those other high-growth areas will see more impact than we will.”
Mississippi is also somewhat insulated because there is not as much luxury home building in the state as seen in areas of the country where the decline in homes prices and sales has been the most dramatic. Milstead said overbuilding in the upper-end market has been blamed for the declines in the fastest-growth areas, which has lead to increased foreclosures, especially in the subprime mortgage market for borrowers with borderline credit ratings.
For the most part, home building continues on a level pace in most of the state.
“Hattiesburg is doing fine,” Milstead said. “They are still doing well. Jackson is okay, and in the northeast part of the state, they are doing very good. They are really doing well in the Columbus area with the new jobs being created up there with the new steel plant and other developments there. Tupelo with Toyota coming on is thriving. Southaven is feeling a little bit of a slowdown.
“Anybody that follows the industry knows you can’t keep growing at phenomenal paces every year. That just doesn’t happen. It is like automobile sales or anything. There is growth and then slowdowns. We still have very attractive interest rates, there is still job growth going on in Mississippi. I think we are going to be okay. The Coast rebuilding just isn’t happening as fast as I thought it would, but it is going to be fine.”
On the national level, Milstead said the big concern right now is that a lot of large national builders have excess inventory.
“They need to get rid of some houses,” Milstead said.
Because there is so much news in the financial press about how the slowdown in homebuilding and home sales in having negative impacts on the U.S. and the world economy, it is important that people don’t buy into a “doom and gloom” message regarding home building and sales in Mississippi.
“Things are going good,” said Bob McKay, executive vice president, Home Builders Association of Jackson. “Boy, does that need to be said. I don’t know what some of these publications are doing. They are pulling these national stories off the wire service and make doom and gloom fit Jackson. That is just not what is happening here. The last time I checked with the MLS, I was told we are 3% higher in new and existing home sales that we were last year. Home starts are great.”
Home building continues on a steady pace in the Jackson metro area. McKay said a lot of the home building continues to be located in South Hinds County. But there has also been growth in the past year in the City of Jackson. He said that has gone from virtually nothing a few years back to 122 home starts year-to-date in 2006 and 210 starts year-to-date in 2007.
McKay said there is one way, unfortunately, that the Jackson area compares to the nation, and that is it is overbuilt in the upper-end market. Expensive homes were selling well in 2005, and the building continued while demand slacked off.
“We do have more in that price range than I would like to see us carry,” McKay said.
McKay said there is, of course, concern about a slowdown. Builders are building as many houses as they were, and aren’t selling as many new houses as previously.
“But we are a long way from being in a situation like California, Florida, Michigan, Nevada and Arizona,” he said. “What happened in a lot of those places is the market caught fire. Prices went up 400% to 500% in a short period of time. Ours went up, but at a low rate, and are fairly priced. Now those prices are holding steady.”
The problem in the bigger markets has been that people were playing the housing market like they played the stock market, McKay said. When prices weren’t going up extremely fast, people got out. That left a glut of housing on the market.
“A lot of those places got hurt,” McKay said. “But we don’t have those kind of players in Jackson.”
Houses in the Jackson area are staying on the market a little longer than before. For the first three quarters of the year, houses stayed on market average of 70 to 80 days. McKay said that is increasing to approximately 100 days now.
But overall building permit activity is holding fairly steady. January through September 30, 2006, 2,649 permits were issued in Hinds, Madison and Rankin counties as compared to 2,585 year-to-date in 2007.
“We have noticed a trend for house sizes to be down in size about 60 square feet,” McKay said. “Possibly houses are being built a little smaller because that is what is selling. Small houses are selling faster than larger homes.”
There may be a tendency by prospective buyers to put off purchases in the hopes that home prices will go even lower this time of year. McKay said people could get burned by waiting for wonderful prices or giveaways that won’t happen. Since builders slow down in the winter months because they don’t want to carry the houses until spring, there could be fewer new homes on the market in the spring.
“I’m afraid next spring we won’t have the inventory,” McKay said. “I certainly hope that isn’t the case, but it could very well happen.”
Glen Alexander, co-owner of Success Homes, Tupelo, said his company has seen steady demand for its homes. Success Homes is an on-your-lot builder.
“We have not seen any decrease,” said Alexander. “In fact, we have seen a little increase in our business. The Toyota plant is coming in here, and the price of property has gone way up. But even if you pay a little more for property, you can still build a house for the same you could before.”
Alexander said while the people who are going to be working for Toyota aren’t in the area yet, the major development in the pike is giving people a better mindset to buy.
Alexander, who has been building homes for 28 years, thinks concerns about the decline in the housing market have been overblown.
“Everyone sitting out there is saying everything is going to the dogs, but it really isn’t,” Alexander said. “I think the way to weather any storm is turn the bow into the waves, get out there and get to work. This has been a pretty good market, and always will be because we have such progressive community leaders. It isn’t just in Tupelo, but the surrounding 10 to 15 counties around Tupelo.
“Homebuilding is one of the largest industries we have. I have been in some phase of the business since 1963. It is always an interesting challenge. There are spots where it can be horrible, and then it turns around and is great. Just because it is bad overall in the U.S. doesn’t mean it is bad here. People have jobs and are able to afford homes. We are seeing a better quality client now than we have seen since we have been in business.”
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.
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