Bust to boomlet: Housing market’s turnaround stuns industry
The housing turnaround seems to have caught almost everyone in the business by surprise.
The New York Times
SACRAMENTO, Calif. —
After six years of waiting on the sidelines, newly eager homebuyers across the country are discovering there are not enough houses for sale to accommodate the recent surge in demand.
“In my 27 years I’ve never seen inventories this low,” said Kurt Colgan, a broker with Lyon Real Estate in the Sacramento metropolitan area, where the share of homes on the market has plummeted by one of the largest amounts in the nation. “I’ve also never seen a market turn so quickly.”
The housing turnaround seems to have caught almost everyone in the business by surprise. As desirable as the long-awaited improvement may be, the unusually low level of homes for sale is creating widespread problems for buyers and sellers alike, leading to bidding wars and bubblelike price jumps in places that not long ago were suffering from major declines. In the Sacramento area, where the housing bust took a heavy toll, the median list price has surged 35 percent in the past year, according to Zillow.
Nationwide, prices rose 7.3 percent during 2012, according to the Standard & Poor’s Case-Shiller index, ranging from a slight decline in New York to a spike of 23 percent in Phoenix. Tracking more closely with the national trend were cities such as Dallas, up 6.5 percent; Tampa, Fla., which rose 7.2 percent; and Denver, up 8.5 percent. In many areas, builders are scrambling to ramp up production but face delays because of the difficulty of finding construction workers and in obtaining permits. At the same time, homeowners often remain reluctant to sell, either because they want to wait and see how much further prices will climb or because they are afraid of being displaced in the sudden buying frenzy.
“You see a home go for sale and within a couple days, there are three, four, six offers,” said Carrie Miskawi, a mother of three who has been looking for a new home for the past six months with Colgan’s help. She and her husband decided not to put their current home on the market because they fear it will be snatched up before they have a chance to bid on a new one.
“It’s kind of a Catch-22,” Colgan said. As long as large numbers of people are hesitant to put their homes on the market because so few other homes are available, he said, there won’t be many homes available.
Nationwide, the raw number of homes for sale is at its lowest since 1999, according to the National Association of Realtors. In the Sacramento metro area, home listings were down 60 percent in January from a year earlier, compared with 23 percent for the country overall, according to Zillow.
Inventories have been whittled down largely because new construction ground to a standstill for several years. Investors large and small also scooped up most of the backlog of foreclosures and short sales; about 40 percent of all homes bought in Sacramento County in the past year were purchased by owners who live at a different address, according to county records and title data provided by Fidelity National Title Insurance.
Steady job growth has put more people back to work, and families that put off moving because they couldn’t afford it are finally ready to do so. “Distressed” sales are down and conventional sales are up.
Extraordinarily low mortgage rates don’t hurt, either. “The recovery is real,” said John Burns, chief executive of John Burns Real Estate Consulting.
For builders who survived the collapse, the tight market is a signal to get back to work.
Monthly permits for single-family homes in the Sacramento area more than doubled from January 2012 to January 2013, though are still only one-quarter of the level they reached during the bubble. Nationally, the construction industry added 48,000 jobs in February, the biggest increase since 2007.
The housing upturn looks set to continue, adding a crucial element of support to the improving economy. The government reported Tuesday that housing permits, while far below their peak, surged in February to their highest level since June 2008, an increase of nearly 34 percent from a year earlier. But it will be many months before new homes going through the approval process will be ready for residents.
The New Home Co. has ramped up building as fast as it can, said Kevin Carson, president of the company’s Northern California division. Founded in 2009 by the veterans of a major homebuilder that filed for bankruptcy during the crisis, the company plans to build 120 homes in Northern California this year, in contrast to 50 homes last year.
Construction is expected to take longer than usual, though, and expenses are rising, Carson said. That is primarily because after six years of almost no local building, skilled labor is scarce.
Many workers in the immigrant-heavy industry have left the area, returning to Mexico and other points south. Others pursued work in Texas’ energy boom. Those who stayed in the area often switched to medical-data entry, UPS delivery services or anything else that they could find. Or they filed for disability and dropped out the labor force altogether.
For builders hesitant to dive into the market too deeply, delays may be welcome, since they help buy time for prices to rise further.
“If we could build 500 houses right now, could we sell them?” asked Harry Elliott III, president of Elliott Homes, which built 250 homes last year and plans 350 this year, compared with a high of 1,400 in 2006. “Possibly, but I don’t want to sell all my lots that I’ve held onto forever and have to give them away at these prices.”