Wichita-area home builders report business looking up

12/20/2012 7:17 AM

12/20/2012 7:26 AM

Generally, December is not the best time of the year to sell a home, especially a new home.

The kids are in school. Cold temperatures, ice and snow keep potential homebuyers from looking. And homebuyers’ priorities shift to the holidays.

So from housing developer Jack Ritchie’s perspective, an active December is an aberration.

“We’re really having a good month,” said Ritchie, a partner in Ritchie Development. “It’s turning out to be probably one of my better months this year.”

Of course, there’s been nothing normal about the housing market since the bubble on prices burst in 2008, which in addition to triggering recession nearly brought housing sales to a halt and prompted lenders to clamp down on credit.

But Ritchie and other homebuilders are seeing signs that their industry is turning the corner, that people have begun to buy new homes again – not because they need to, but because they want to.

Craig Sharp of Craig Sharp Homes, a third-generation homebuilder, said he began seeing an upswing in demand starting in May. Between May and July he said he sold 21 homes. He said the last time his company had a three-month period of sales that strong was in 2007.

Cherie Nies Cowgill, vice president at Nies Homes, said activity at her 48-year-old company hasn’t changed much in December “because we have been busy through the year.”

Ritchie said it isn’t just December activity at his company that has him thinking that the new-home building business may be poised for a good year. It’s the kind of buyers purchasing homes in Ritchie’s mainly east Wichita subdivisions.

For about the past four years, Ritchie said the majority of buyers he’s seen are people relocating to Wichita who want to purchase a home.

“We’re starting to see the people again that want to buy a house,” he said. That is, the buyer who already owns a home and lives in Wichita but wants to move up to a bigger house or a newer house.

When home sales began their slide down four years ago, “that guy just disappeared,” he said. “I think that’s one of the major differences.”

Cowgill and Sharp agreed that the type of homebuyer they are meeting has changed to someone looking to move up. “They’re ready to buy,” Sharp said. “They’re tired of not doing anything.”

Homebuilders’ optimism is reflected in the uptick in construction of new homes.

According to the latest data from the Wichita Area Builders Association and Wichita State University’s Center for Economic Development and Business Research, the number of single-family construction permits in Wichita as of Oct. 1 was at its highest monthly level for the second time this year and considerably higher than October 2011. There were 48 permits in October, the same number as in May, compared with 32 in October 2011.

Stan Longhofer, real estate professor and director of the Center for Real Estate at WSU, said “these last numbers here show the beginnings of an upward trend. The activity seems to be really picking up.”

Anecdotally, Longhofer said he’s hearing from new home agents and suppliers to homebuilders that they are seeing more activity.

“That is definitely what we feel as well,” said Richelle Knotts, supervising broker of J.P. Weigand New Homes. “There are a lot of things in the works.”

Longhofer cautions, however, that a month or two of data does not a trend make.

“Generally you look for six months (of data) before you start to say what is really going on here,” he said. “If you look at the last 12 months, it’s up a little bit but it’s not great.”

Longhofer said there are still unresolved issues out there that could affect home-building in the next few months, including the fiscal cliff, the effects of the new health care law on employers and potential new regulations for banks and lenders by the new Consumer Financial Protection Bureau. “You’re not going to say it’s pure sunshine yet  at least it seems to be heading in the right direction.”

Better than forecast?

Some builders such as Ritchie are cautiously optimistic about their activity and sales next year.

“My crystal ball says we expect probably a better year next year,” he said. “I don’t see us getting back to what I would consider a normal year, yet. (But) we’ll make pretty good gains.”

Sharp said he’s optimistic about 2013, and Cowgill said, “We are expecting a good year next year.”

Longhofer’s center in October released its 2013 Kansas Housing Markets Forecast. That forecast called for a 4.2 percent increase in sales and a 2 percent rise in housing permits in Wichita.

“I will not be surprised at all if new home construction in 2013 doesn’t end up better than what we originally forecast,” Longhofer said.

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