Larry Recar sands down drywall Monday afternoon while working on the Lexington Crossing apartments in Cape Girardeau. The new multi-unit apartment buildings are a bright spot in the local construction industry.
New home construction permits are down almost 50 percent in Cape Girardeau for 2008 and they are off almost 40 percent in Jackson.
Construction in unincorporated parts of the county fared better, but preliminary figures indicate that fewer than 225 new homes were built countywide, including Jackson and Cape Girardeau, down from about 300 in 2007.
Commercial construction is down as well, with 12 new commercial buildings with a total value of $6.1 million in Cape Girardeau for 2008, compared to 16 worth $9.6 million in 2007. In Jackson, four new commercial buildings with a total value of $1.5 milion have been issued construction permits, down from 11 in 2007 and lower in value than the single largest project from 2007.
"It has not been a good year," said Mike Annis, owner of Annis Construction Co. and president of the Southeast Missouri Homebuilders Association. "I know my own company is down close to half of what it would have done the previous year."
Drywall crew with Alpha Management work at Lexington Crossing on Monday. Lexington Crossing is one of the only new apartment buildings to go up in the city in the previous year.
Another bright spot, builders and real estate brokers agree, is that with interest rates at the lowest point in decades and sellers eager to unload property, people ready to buy can make good deals.
Apartments go up
The new apartments, being advertised now with a late January target for occupancy, are being built by The Rebel Group, a partnership between Virgil Jones and Andy Wallace. The apartments are the last two buildings on a property that was originally developed beginning in 2004, Jones said.
What is bad for new home construction -- people reluctant to assume the debt necessary to buy -- is good for apartment builders, Jones said. "We are going to continue building apartments for the foreseeable future in Cape Girardeau," he said. "Right now we are looking for a site for our next project."
Jones said his apartments are designed to be highly energy efficient. Economic conditions that make people reluctant to buy don't usually diminish the amount they are willing to spend on a place to live, he said.
"People have to have a place to live," he said. "Shelter is a very basic human need. And if someone is going to scrimp on something, it is usually not where they live."
While other business sectors in the Cape Girardeau area are resisting the national trends -- auto sales are down here, but much less than national reports and retail sales are flat to down slightly -- the home market is mirroring the national scene. The latest report from the U.S. Census Bureau shows that the rate of home construction in November was 47 percent lower than in November 2007.
For Janet Sanders, building and planning superintendent for Jackson, the slowdown has meant less work. The real slowdown, she said, took hold in the second half of the year.
And from what builders are saying, she said, the slowdown will be over when national conditions improve. "There are people who say they have projects in mind but they are waiting for things to pick back up," she said.
The slump has Annis both scaling back his construction plans for 2009 and agreeing to creative deals to sell his homes. In business since 1980, Annis estimates he has built 700 to 800 homes during his 28 years. In some ways, he said, this is the worst climate for new homes he has seen. "The duration has been longer here," he said. "We have been in this recession for a year or longer here."
In a normal year, Annis said he plans 14 to 16 homes, most of them begun before a buyer is found, or what is known as a "spec" or speculative home, in the industry. For next year, he expects to build 10 to 12 homes.
And that staple of the auto dealer, the trade-in, is becoming part of his business, Annis said.
"Right now we've got three people who couldn't sell their house, and we are taking trades like a car dealer in order for them to get rid of their house," he said. "It works out, but since you sell a new house and have to redo another to sell it, you are doing double the work for the same money. It is not something you are excited to do but what you do now is get through by watching what you are doing and not making any big mistakes."
The housing market nationally got into trouble when the bubble fueled by easy credit and low-down payment loans on overpriced homes burst in 2007. That, in turn, undermined the banking industry as international credit markets froze due to foreclosures and uncollectable debt.
Governments worldwide have spent trillions of dollars to shore up banks, and markets and central banks have cut interest rates dramatically. Paul Kitchen, president of Prudential Bridgeport Realtors Inc. in Cape Girardeau, said a qualified buyer can find a 30-year loan at 5 percent or less, a level not seen in 40 years.
Locally, he said, bankers have money to lend, but they are a little more cautious than in past years. Prices are down and homes are on the market longer, all indicators that buyers are in charge during negotiations.
With foreclosures up again -- there have been 172 foreclosures in 2008 compared to 149 in 2007 in Cape Girardeau County -- there is an abundance of real estate on the market.
The most difficult homes to sell right now are those with prices above $350,000, he said. The market for homes priced higher than $500,000 -- which he acknowledges is limited -- is controlled by how the buyers view investment portfolios. With the stock market ending its worst year since 1931, the outlook for those sales is self-evident, he said.
There are a lot of homes on the market locally priced at $350,000 to $500,000, a price that as recently as 2006 would be a fairly easy sell, he said. "They are not getting much interest," he said.
But homes in the $85,000 to $150,000 price range are selling well, Kitchen said. "If I had 20 homes at $135,000, I would be getting a lot of calls."