The Kansas City home construction market is on a solid, though slow, growth path that should improve further in the next few years, members of the Home Builders Association of Greater Kansas City were told Wednesday.
David Crowe, chief economist for the National Association of Home Builders, gave that assessment to an audience of about 200 at the group’s 2016 economic forecast breakfast.
“The Kansas City metropolitan market has done fairly well. It’s about on par with the rest of the country,” he said, “rejoining some growth that has been lagging for a number of years. We’re looking forward to some decent growth. Not runaway growth, but decent growth.”
Crowe charted many measures of residential construction and factors affecting it. One in particular — single-family home construction starts — marked national and area progress and possibilities.
Nationally, single-family building has doubled from recession lows, Crowe said, but is still only 55 percent of its level of the early 2000s. Crowe calls that turn of the century period normal, a market that was healthy but below the pre-recession peak.
And he foresees that number continuing to rise to 87 percent of normal by the fourth quarter of 2017.
“We’ve doubled from the bottom and are only halfway back,” Crowe said.
In the Kansas City area, he said, the number of new starts had been rebounding but was flat last year at only 38 percent of the area’s early 2000s normal pace. But he sees that growing to 48 percent of normal this year and 65 percent in 2017.
Some other points Crowe made:
▪ Many of the hurdles to housing recovery and growth have mitigated, from household debt and foreclosures coming down to employment rolls growing. Even long-stagnant household incomes are starting to rise.
▪ Mortgage rates will edge up from an average of 3.9 percent last year to 4.5 percent this year and 5.3 percent in 2017. But rates still will be historically low and, more important, more people should be able to get approval for mortgages as some lending restrictions ease.
▪ On the downside of the recovery: More builders are saying they have trouble getting the skilled labor they need and are concerned about shortages of affordable lots to build on.
▪ The market also could get a boost when millennials start buying more homes. But that generation’s appetite for ownership might remain lower than historic norms, given that employment overall is shifting toward more people having multiple jobs during their careers.
▪ Concerns about China appear to be overblown, given its relatively small direct impact on U.S. business.
Crowe was followed by local economist Chris Kuehl, managing director of Armada Corporate Intelligence. Kuehl also said it is difficult to gauge the effects China’s economy will have in the United States, given China’s size and the difficulty everyone, including China’s government, has in measuring its growth and output.
Kuehl said the Kansas City economy is a good reflection of the entire country, in that it’s diverse and changing and there is a mix of businesses rising and falling.
“When people ask ‘How’s the economy?’ I always say it depends,” Kuehl said. “It depends on what industry you’re in, and what part of the country.”
So the lower oil prices that used to be bad for Saudi Arabia now are bad for North Dakota, he said, but good for the U.S. auto industry, including the Kansas City area’s Ford and General Motors assembly plants.
People who bought Priuses when gasoline approached $4 “are back buying F-350s now,” he said, referring to a larger version of Ford’s popular pickup truck line.
“It’s going to be an interesting time for homebuilding too — not a boom or a recession,” he said.
Almost any builder can profit in a boom, he said, and it’s tough for even the best builder to make money in a recession.
“Now it matters how good we are,” he said. “Every decision is extra important. We’re going to succeed or fail based on those decisions.”