Area home market holding steady if slow pace

Lisa Goodwin was looking for a house where she wouldn't have to tear up the carpets and repaint the walls before moving in.

The newly constructed home in Jackson she recently moved into offered advantages older homes didn't, she said, including a warranty from the builder.

"I looked at a variety of homes, one almost 100 years old, and though it had been updated, I thought, 'Oh my gosh, in older homes there are so many things that will potentially go wrong.'"

Although new home construction in Cape Girardeau County is still down significantly from levels before the recession, building continues at a slow but steady pace.

From January through July, building permits were issued for 27 new single-family homes in Cape Girardeau valued at a total of $4.2 million. Last year, 32 new homes were built in Cape Girardeau.

Lisa Goodwin shows Saturday the new home in which she has lived for about a month in the Jackson Ridge subdivision. (Fred Lynch)

In Jackson, building permits were issued for 23 new single-family homes valued at $7.1 million from January through July. Fifty homes were built in Jackson in all of 2010.

Economists watch housing closely as an indicator of economic recovery.

"Since World War II, new home construction and remodeling is about 5 percent of U.S. gross domestic product, but total housing expenditures, including construction rents, furnishings and other housing-related services, account for about 20 percent of total GDP," said Mike Devaney, professor of finance at Southeast Missouri State University. "During this recession, instead of housing constructions contributing 5 percent to GDP, it dropped to a record low. In 2009, residential fixed investment accounted for just 2.5 percent of GDP, and in the third quarter of 2010, residential fixed investment was only 2.4 percent of GDP."

Homebuilding stimulates the economy through purchases of supplies and by creating jobs. Each new home built is responsible for an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

June was the third straight month that nationwide construction spending has increased, according to the U.S. Commerce Department. In June, construction spending rose 0.2 percent to a seasonally adjusted annual rate of $772.3 billion. But construction spending is still just above an 11-year low hit in March of this year.

In Cape Girardeau County, the homebuilding business appears to be faring better than the national average.

Bent Creek announced last week it is starting on phase four of its golf course community.

"We have space for luxury duplexes and single-family homes. Builders are being contacted and construction will begin soon," Rob Litzelfelner of Bent Creek Development said in a news release.

Several new homes are also under construction in the Jackson Ridge subdivision in Jackson, where Goodwin recently purchased her home from builder Brandon Williams.

"Given the daily barrage of negative economic news, I think our results are strong," said Bill Cole, president of the Cape Girardeau County MLS and owner of Realty Executives.

So far in 2011, home sales are keeping an even pace with last year, Cole said.

In the first seven and a half months of the year, 556 homes have been sold in the Cape Girardeau County area, compared to 561 in 2010. The median sale price has increased from $116,000 last year to $120,000 this year, Cole said. The average sale price is up from $138,200 to $145,200.

The local MLS only recently started tracking new construction sales as a separate category, so data wasn't available.

When it comes to economic recovery, Devaney believes the U.S. economy should not rely as heavily on new housing construction as it has in the past.

"Austan Goolsbee, Obama's former economic adviser, argues the U.S. should not aspire to return to the national business model of the past decade in which debt-fueled consumer spending and a housing bubble drove the economy," Devaney said.

Goolsbee and Devaney suggest instead an economy fueled by business investment, export growth and innovation.

"Now is the time to refocus the economy away from its dependence on nontradeable bricks and mortar to one better able to compete in global markets," Devaney said.

mmiller@semissourian.com

388-3646

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Jackson, MO

Cape Girardeau, MO