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  • 16 Sep 2014

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Homebuilding on bumpy road to bright future

Economists see good things ahead as industry avoids pitfalls


When David Crowe took the stage at last week's Home Builders Association of Metropolitan Portland annual housing forecast meeting, he brought news of a slowly building economy, a gradual pickup in consumer confidence and the bright building light that is multifamily housing.

But Crowe, chief economist for the National Association of Home Builders, also told an audience of builders, developers and others that tight restrictions on home mortgages, rising construction costs and a host of other headwinds aren’t exactly going to make it a walk in the park for builders in the coming years. Crowe then did his best to lighten the mood and leave the packed house at the Oregon Convention Center with something a little more optimistic.

“I hope I convinced you that there is a promising future,” he said.

Whether Crowe did that or not isn’t quite clear. What he and the two other speakers on the lineup, state Treasurer Ted Wheeler and Todd Britsch, president of the Washington research company New Home Trends, did do is to paint a picture of an Oregon housing market that has gotten itself going again but that still has some rocky roads before it.

“The homebuilding industry is essential to the economy of this state,” Wheeler said. “Until your industry is fully recovered, Oregon’s economy won’t be fully recovered.”

So far this year, builders have built about 2,000 homes in subdivisions in the four Portland-area counties, about half what they were building during the peak of the boom. That doesn’t include infill building, which Britsch said makes up a big portion of all 3,700 single family permits in Multnomah, Clackamas, Washington and Clark County, Wash., in 2013 so far.

He noted that Clark County is the metro county that has showed the strongest numbers because it’s had the most job growth this year. Of the 6,000 jobs added in the region in 2013, Britsch said almost 4,000 of them have been in Clark County. Additionally, the county has seen 30 percent of the region’s new home sales this year, up from 20 percent last year.

He also said the number of available building lots in the metro area is nowhere near where it needs to be to accommodate projected population growth in the next five years. The city of Hillsboro itself contains no five-acre or larger parcels for subdivisions, Britsch said.

Multifamily boom

His forecast bright spot was multifamily housing. According to Britsch, builders in the region have applied for 10,000 multifamily units in the past two years. At present they are all for apartments, but Britsch said by the time many of those units come on to the market in the next three to seven years, they could be converted to condominiums, especially if interest rates stay relatively low.

“If (that happens), the condo market will recover,” he said.

On a national level, Crowe noted that the economy has begun to chug forward again and should grow at a rate of nearly 3 percent next year and almost 4 percent in 2015. Housing has been growing and contributing to the economy as well, but because it took such a hit during the recession, it’s not carrying as much as weight it once did.

“The important thing,” Crowe said, “is that it’s finally doing what it’s normally done again in terms of helping out.”

Similarly, job growth has been steady, though Crowe said many of the jobs are coming in the relatively low-paying service sector, not in manufacturing and durable goods. He also said despite some strong numbers recently, the country as a whole still needs to create five million more jobs “before we get back to where we need to be.”

Students strapped for cash

Wheeler injected a topic that’s never really been a big player at the housing forecast: student debt. Nationwide, students owe more than $1 trillion, and in Oregon the average student has at least $26,000 worth of student depth.

“I cannot think of a single industry that is more significantly impacted by student debt than the housing and homebuilding industry,” Wheeler said.

The heavy debt load is changing purchasing behaviors and forcing students to forgo big-ticket items and homes. As a result, homebuilders are seeing their stream of potential new customers narrowing, and more students who end up with low-paying jobs head not into homeownership, but into the rental market.

Wheeler used the platform to talk about his plan to help reduce student debt in Oregon. Called the Oregon Opportunity Initiative, the plan would create an endowment using a portion of the state’s general obligation bonds to help reduce student debt, increase access to financial aid and increase vocational and technical training at community colleges. Voters will consider the initiative as a measure on the November 2014 ballot. Wheeler asked the homebuilding crowd for their support.

“Student debt impacts all of us,” he said. “It impacts your industry disproportionately.”