Although the recession ended 3 1/2 years ago, new-home construction in Indiana County remains weak even as signs of an improving market are emerging.
Richard Clawson, executive director of the Indiana-Armstrong Builders Association, puts it matter-of-factly:
“New home construction is very flat for our members.”
Yet on a national basis, the numbers seem to suggest a market that is beginning to regain its footing. For instance, the National Association of Home Builders reported that sales of newly built homes rose 15.6 percent in January, the most since July 2008.
[This is a sample of the feature stories appearing in the SPRING HOME SHOW special section of The Indiana Gazette, Tuesday, March 12.]
“The surge in demand for new homes this January is an excellent sign that the housing recovery is gaining steam and helping put more people back to work,” said Rick Judson, chairman of the National Association of Home Builders, in a statement.
“While we can’t expect to see double-digit sales growth every month, consumers are definitely coming off the fence as prices start to rise, and builders in some cases are having a tough time keeping up. Challenges related to credit availability, poor appraisals, dwindling lot supplies, spot shortages of skilled labor and rising materials costs are all weighing on the recovery process.”
Also, tight supplies of new homes could also dampen a recovery, according to the association, which noted that the supply of new homes for sale fell to its lowest level in nearly eight years.
“The razor-thin supply of new homes for sale is very concerning at a time when we are only about halfway back to what could be considered a ‘normal’ level of activity. Builders need to be able to refresh their inventories to keep the momentum going,” said David Crowe, the association’s chief economist, in a statement.
But in Indiana, the hope is to simply to get the momentum going, any at all. But it may be a while before it does, Clawson said.
“Until some jobs are created in the economy around here, things are going to stay the same,” he said.
He noted that a lack of work has taken a toll on local builders.
Consider, he said, that 15 years ago, the local association counted about 600 members. Now, he said, it’s down to 153. Statewide, he said, there used to be 14,000 members. The roster now stands at just under 6,000.
Clawson said the market has forced some builders into retirement. Others put away the tool box and sought other work. Still others have settled for performing household handyman services, he said.
Clawson also said that while new home construction is down, the business in home repairs and renovation is brisk.
And so is mortgage refinancing, according to Joanne Duggan, senior vice president and mortgage loan products manager at S&T Bank.
Duggan said the bank has seen a surge in refinancing as borrowers move to take advantage of the current interest rates. She said it’s interesting to note that many homeowners who refinanced at S&T are returning their dollars to the local economy — they had initially taken out mortgages with big national banks such as Bank of America, Chase and Wells Fargo.
Duggan also said the bank has seen an uptick in new construction mortgage origination over the last 30 days, especially in Butler and Allegheny counties. But, she said, Indiana County is still very slow.
Overall, she said that with low interest rates and the rising cost of construction materials, it’s simply cheaper to buy than to build at the moment.
Mark McNaughton, of Harrisburg-based McNaughton Homes, said that for people in the market for a newly constructed home, now is the time to buy as construction costs are rising.
Factors such as high oil prices, demand created by the Hurricane Sandy and impaired production capacity are forcing manufacturers to increase prices for materials such as lumber and roofing.
Despite that, McNaughton said he, too, has seen an improvement in the new-construction market, particularly in Pittsburgh and in the state’s northern tier, where much of the shale-gas drilling activity is taking place.
He said that low interest rates, combined with a pent-up demand and a slowly improving economy, are driving demand for new houses.