Birmingham Area Homebuilders may be Poised for Comeback

The following article by Dawn Kent was in the Birmingham News on February 3, 2011.

Metro Birmingham homebuilders could be poised for a comeback in 2011, after a steep market downturn left most of the industry battered.

During a two-week period in January, more than 50 building permits were issued for speculative single-family homes in area neighborhoods, according to data collected by Southern Exposure, a Huntsville firm that tracks permit activity. That’s up from roughly 10 a week in recent months.

The sharp uptick might be the result of seasonal factors, said Bart Fletcher, executive officer of the Greater Birmingham Association of Home Builders.

If builders want to have houses ready for the typically busy spring buying season, now is the time they start working on them, he said.

But, Fletcher added, “I think builders are more optimistic about 2011. I think that we really believe we have seen the bottom. A lot of builders have not built anything new for quite some time. We’ve worked through the inventory.”

Still, hurdles remain for an overall recovery in home building, notably low consumer confidence and high unemployment, which make buyers wary.

Lending also continues to be tight, which means many builders can’t get financing for new projects.

That’s been true throughout the recession, Fletcher said, as a number of area homebuilders have exited the market. In early 2007, membership in the local homebuilders association peaked at 551; it is now down to about 245.

The group does not cover 100 percent of area home builders, he added, and some may not have officially closed their companies.

“Some may have dropped their membership, but their corporation remains intact,” Fletcher said. “They’re just not doing any work.”

To help put them back to work, the homebuilders association has been meeting with U.S. Rep. Spencer Bachus, chairman of the House Financial Services Committee, for help in communicating with regulators. The group is trying to determine where the brakes are being applied when it comes to lending in an effort to loosen the purse strings, Fletcher said.

“The type of lending environment that is necessary to keep small- to medium-size builders in business, that’s just not happening right now,” he said.

Despite such an environment, there are green shoots in the market.

In December, new single-family home sales rose 17.5 percent, the Commerce Department reported. It was a strong finish to a year that had the lowest total of new home sales on record, at 321,000, since the records started being kept in 1963, according to the National Association of Home Builders.

While discussing the sales rise, NAHB officials cited concern over declining inventory.

“.¤.¤. It means that the critical lack of acquisition, development and construction financing continues to pose a tremendous obstacle to medium- and small-sized builders across the country, thereby slowing the arrival of a true recovery and the jobs that could generate,” the group’s chief economist, David Crowe, said in a prepared statement.

According to local real estate analyst Tom Brander, the Birmingham area’s inventory of new homes for sale totaled 1,078 in December, a 14.6 percent decline from November.

By comparison, Brander’s statistics show the local new home inventory hovered around 3,300 in early 2007, before the market tanked.

Meanwhile, the vast majority of the 50-plus new home permits pulled in metro Birmingham from Jan. 7 to 21 are tied to Fort Worth, Texas-based home builder D.R. Horton.

As one of the nation’s largest homebuilders, publicly-traded D.R. Horton is in a better position to capitalize on a rebounding market, since it doesn’t have to rely on banks for financing individual projects, as smaller companies do.

Locally, D.R. Horton is building new homes in areas including Hoover, McCalla, Leeds, Moody and Pelham, according to the permit information collected by Southern Exposure.

Birmingham-based Signature Homes, which has continued to build and sell homes at a healthy clip throughout the recession, also accounted for a portion of the recent uptick in permits.

The company is working on four new communities, in addition to ongoing work in Hoover’s Ross Bridge and Chace Lake communities, said Chairman Dwight Sandlin and President Jonathan Belcher.

The new communities include Water’s Edge at Bent River, a Hoover neighborhood where homes start just below $200,000, and Miller Hill in Vestavia Hills, where lots are being developed and home prices are expected to range from the high $300,000s to the low $400,000s.

Signature Homes also is building in new communities in Calera and Chelsea.

Last year, the company’s home starts were up 40 percent over 2009, despite a drop off in the last half of the year that was caused by the expiration of last spring’s federal tax credits for homebuyers.

And so far this year, the company’s January sales are up 40 percent over the year-ago period.

“We’re looking for a really big year,” Sandlin said.

As for the area’s overall new home market, Sandlin points to declining inventory and says he expects builders to start filling in those gaps.

It’s moving toward a “new normal,” he added, nowhere near the super-heated housing market of 2005 and 2006, but toward the healthier levels of the early 2000s.

“There’s pretty good stuff going on,” he said. “It’s not great, but we’re headed in the right direction.”

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