Home building permits increase from same time last year

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Sarah Demski can’t wait to move into her new house on Milwaukee’s northwest side. If all goes as planned, construction of the house should be complete in June.

Until then, her family is watching excitedly as the four-bedroom home takes shape on a lot in the River Highlands subdivision.

“We’re there every day,” Demski said. “It’s like Christmas every day.”

The Demski family is among what home builders are hoping is just the first batch of consumers with enough confidence in the economy and their personal finances to construct a new house.

While the numbers of people building new homes are nowhere near the enormous levels of the housing bubble of mid-2000s, home building permits in the first four months of 2010 have risen markedly from last year’s scrubby totals in the same period.

New home starts are up about 28 percent in metro Milwaukee, 47 percent in Dane County, 45 percent in the Fox Valley, 48 percent in the Racine-Kenosha area and 61.5 percent in the Green Bay and Door County area in January through April, according to MTD Marketing Services LLC, a Menasha firm that tracks building permits.

However, economists and others who follow new-housing trends say it isn’t necessarily the start of a new building boom.

There’s no question some of the increase was driven by consumers scrambling to take advantage of a tax credit of up to $8,000 for first-time homebuyers and $6,500 for move-up buyers, they said. To get the credits, buyers needed to have a signed purchase contract by April 30 and close before July 1.

In addition, they say, the 2010 home-building numbers are being compared with the same period in a dismal 2009.

“Product has been down so low for so long that we’re in that sort of something’s-got-to-give stage,” said Robert Denk, an economist for the National Association of Home Builders.

Denk added that on the association’s U.S. map, Wisconsin is lumped in with a group of Midwest manufacturing states likely to take longest to recover from the prolonged home-building slump.

Signs of life

Still, home builders and others in the industry say there are new signs of life, offering some encouragement for builders who made it through the recession. It also is seen by some as an early indicator of hope for the economy.

“Those people who have been sitting on the fence waiting to see what’s going to happen seem to feel -- and we in the industry are seeing it as well -- that we’ve pretty much hit bottom and we’re starting to see a little uptick in values on homes and prices,” said Tim O’Brien, owner of Tim O’Brien Homes Inc. in Waukesha and president of the Metropolitan Builders Association. “I think people are recognizing, ‘Hey, I want to get in before interest rates go up and the demand starts to increase again.’ “

In the first quarter ended March 31, building permits for single-family homes statewide rose to 1,534 from 972 in the same period in 2009, a 58 percent increase, according to the U.S. Census Bureau. Nationally, building permits for single-family homes rose 44 percent to 115,660 from 80,072 in the first quarter of last year.

Dominic Collar, who operates MTD Marketing Services, said housing starts could double this year over last if the pace doesn’t slow. But that’s not saying a lot, he cautioned.

“We have a long way to go before I would call this a recovery of any kind,” Collar said. “There are still way too many great builders, subcontractors and businesses that serve the residential building industry in Wisconsin that are struggling to stay afloat or just survive.”

Fox Valley home builder Jim Kubasta, of Classic Homes by Kuba in Oshkosh, said the tax credit deadline gave buyers “a sense of urgency” in the first four months of the year and accounts for some of the sales. The tax credits were widely seen as a driver of sales of existing homes in March.

Kubasta said he detects a sense among consumers that the worst economic woes are over and things are moving back toward normal. But he’s unsure whether new home sales will continue increasing now that the tax credits aren’t there as a catalyst.

“I think we’re creeping back more to consumer confidence, and people are out looking and doing stuff again,” said Kubasta, president of the Wisconsin Builders Association. “I’m hoping there’s not a drop-off. I’m hoping we just keep rolling.”

Working in favor of home sales are mortgage rates still around 5 percent for 30 years and relatively low prices. O’Brien said prices of lots for new homes are down 10 percent to 30 percent over the last year.

Many still jobless

Working against sales, of course, is high unemployment, which still stands at almost 10 percent nationally.

“We need people to return to work and regain consumer confidence before we will see any recovery with housing starts,” Collar said.

It might seem that with huge inventories of used homes on the market -- including some recently constructed ones that have ended up in foreclosure -- potential buyers wouldn’t have to build new to get what they want. But industry professionals say there are always people who will want to build a new house.

It can be to take advantage of new energy efficiencies that can save money over the long term. It could be because many houses built during the most-recent boom are bigger than people now want. It could be the desire to have a certain type of house in a particular location.

“You get a chance to create something that is yours, unique to you, rather than try to find something that fits you,” O’Brien said.

Copyright (c) 2010, Milwaukee Journal Sentinel/Distributed by McClatchy-Tribune Information Services.

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