Construction Boom in 2010? Maybe Not
Sunday's Billings Gazette article had a comforting headline for the real estate and construction industries:
After long recession, home building in Billings is on the rise again
There's only one problem: It's not exactly true. That headline gives the impression of a solid, sustained increase in building that will last throughout the year. Here's the reality of single family building permits so far this year:
Year to date, the totals are definitely better than the bleak beginning of 2009. Unfortunately, a large portion of the increase is simply due to the $8,000 first time homebuyer tax credit. Builders like Wells in Riverfront Pointe and Oakland in Twin Oaks worked furiously this spring to meet demand for first time homebuyers. The construction frenzy reached its peak in March, as builders tried to stay ahead of the April 30 deadline for contracts to be in place. Some were pre-sold; Some were spec homes.
As evidenced by the last two weeks, that breakneck pace could not be sustained. The majority of building was in entry-level homes supported by an expiring $8,000 government giveaway. I do not believe these construction levels will be sustained throughout the year. Home inventory levels are very high and rising. We have probably not yet seen the bottom for home building in Billings.
Thanks for the numbers, where do you get the weekly permit data? I was skeptical when I read that article too, didn't seem likely that the trend could be sustained.
Let me say that in the one conversation I've had with a Gazette reporter they seemed like good people. That aside, the analytical quality of Gazette housing articles always leaves something to be desired. I'm all for rah-rah Billings but the housing articles seem to be nothing but "unvarnished optimism" with little fact-digging involved.
And just to reinforce my point, the Gazette delivers today without a single quote from someone who doesn't have skin in the game. The only remotely negative comment is a one-sentence statement about "some economists" that serves as a lead-in to everyone else talking about how they are not worried about the end of the tax credit.
http://billingsgazette.com/news/local/article_a91303b4-534d-11df-9a3f-001cc4c03286.html
I grabbed the numbers directly from the PDF files published each week here.
Yeah, the Gazette writers I've met are good people. With the time available to write articles, it's hard to expect much in-depth economic analysis. Another problem is that the "experts" you'd want to interview for an article are all in the RE industry. Which makes sense, except that they have a vested interest in making the market look good even if it isn't.
There are some quietly bearish Realtors in Billings, but they probably don't want to talk publicly.
Thanks for the article link. Some pretty amazing quotes there!