New homes on rise: South lags behind national jump; multi-unit construction leads June
New construction of residential housing across the nation jumped in June, easily surpassing most estimates and supporting the stock market's largest one-day gain this year, but the South lagged behind the national trend.
The U.S. Department of Commerce said housing starts nationwide increased 14.6 percent in June, compared to the previous month, and 16.7 percent compared to June 2010.
Multi-unit buildings, mostly apartments, accounted for nearly the entire increase.
In the South, new starts increased by 10.6 percent from May to June, but the year-over-year change in housing starts was just 2.1 percent, and industry experts in the Charleston area were not surprised.
"The last time I checked, we were running about where we were last year, as far as permits," said Philip Ford, executive vice president of the Charleston Trident Homebuilders Association. "I think everybody thinks we are heading up, but it's a slow ride."
Will Jenkinson, broker in charge at Carolina One New Homes, agreed.
"From what we are seeing with builders we represent, and other builders, it's been steady and consistent," he said. "I think we're about where we were a year ago, but I see us picking up slightly through the end of the year."
The housing market is struggling to recover from the building excesses of the mid-2000s, the glut of existing homes for sale, the lack of demand related to unemployment and the poor economy, and tougher bank lending standards that have made loans harder to obtain.
At the peak of the building boom in 2005, 10,472 building permits were issued in Berkeley, Charleston and Dorchester counties, according to the Real Estate Information Service in Charleston, which provides statistics to real estate professionals. In 2010, just 2,550 permits were issued.
At the same time, according to the Charleston Trident Association of Realtors, the supply of homes for sale increased from just over 4,000 in 2005 to nearly 12,000 in mid-2007.
The inventory of homes for sale now hovers just under 9,000, and at the rate homes are being sold, it would take about a year to sell them all if no more came to market.
Ford said builders don't expect to get back to where they were during the boom years, but back to normal.
"Nobody is where they want to be," he said. "Now, we're at least getting close to the point where we were, before the market exploded."
What's good for builders may be good for the economy -- construction means jobs -- but new construction might not be good for homeowners who are trying to sell.
Jenkinson said home builders have been able to buy land at distressed prices, allowing them to sell new homes at prices competitive with existing homes.
"Now, we can deliver a brand-new house that competes with a neighborhood built seven or 8 years ago," he said.
"The people hurting the worst are Joe Homeowner," said Jenkinson. "You've got to either compete with price, with the foreclosures, or you've got to have it 100 percent pristine and compete with the new homes."
Brian Foster, of the Real Estate Information Service, said that from January through May, 1,160 permits for new single-family homes were issued in the tri-county area. That's fewer permits than during the same period last year, when federal tax incentives boosted construction and sales, but it's an increase of about 18 percent over the same months in 2009 when the real estate market was near its lowest point.
Nationally, if the pace of home construction seen in June were to continue, about 629,000 homes would be built this year, which would be an increase of about 42,000 over 2010, but only about half the number of housing starts that economists say must be built to sustain a healthy housing market.
Jennifer Lee, a senior economist at BMO Capital Markets, called the gains "just a blip in the overall flat-lining trend of home-building activity."
"We have to see a rebound in job creation to sustain a recovery in housing," she said.
The Associated Press contributed to this report.
