WASHINGTON — At least the market for new homes isn’t getting worse anymore, and that’s the first step to getting better.
In fact, the overall economy is actually getting a small boost as more buyers walk into model houses ready to sign contracts and builders hire workers to pour foundations and pave roads.
Construction of single-family homes rose in July for the fifth straight month, edging up almost 2 percent to the highest level since last October, the government said this week. Building permits climbed nearly 6 percent.
Bill Lovvorn, general manager of the Macon office of America’s Home Place, said he’s been seeing “a slow and steady increase” in people looking to build a new home since the beginning of the year.
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“We are a little unique in that we don’t build spec homes and we don’t build subdivisions,” Lovvorn said. “So people with land have recognized that interest rates are extremely good and material costs have stayed consistent and not increased like you would see year to year.”
But now probably the biggest struggle is construction loan money, he said.
“Lending regulations are changing so quickly ... even lenders are unsure what to do and how to commit three months out (until a house is built and the loan can close),” Lovvorn said.
Amy Day, marketing and development manager with Moon Family Properties in Bibb County, agreed that getting loans for new construction is sometimes a problem.
“It’s not that there isn’t a demand,” Day said.
Moon Family Properties has several developments in various stages. Even though it doesn’t expect to complete all the infrastructure until January for Cresent Cove, its newest subdivision off Hartley Bridge Road at Interstate 75, it has presold its first house and expects to have three houses available in April, she said.
“Last week, when an economist said we were coming out of the recession,” more people started calling, she said. “The next 12 months, people on the fence will be rushing in before the rates start going back up.”
Nationwide, each new home built creates about three jobs on average and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.
With new construction up 37 percent from its low point this winter, the industry is expected to help the overall economy this quarter for the first time in three and a half years.
“Housing is no longer a drag,” said Mark Vitner, a senior economist with Wells Fargo. “That’s a good thing.”
Of course, the housing industry is coming back from the worst recession since the Great Depression, and construction is still more than 70 percent off its 2006 peak.
So the impact from hiring and spending on materials such as wood and concrete is modest.
There are still several threats to the recovery of the U.S. housing market.
The unemployment rate, now 9.4 percent, could surpass 10 percent, leaving more homeowners unable to pay their mortgages. Interest rates are still near historic lows but could rise, making homes less affordable. Foreclosures are still at record highs.
And July was the last month that most builders could start new homes and have first-time buyers qualify for a new tax credit. Buyers can save 10 percent on the price of a home, up to $8,000 in taxes, if they complete the purchase by the end of November.
Builders and real estate agents are pressing in Congress for that credit to be extended. If it isn’t, sales could easily slump again.
To contact writer Linda S. Morris, call 744-4223.