In St. Louis, the city’s largest home builder has a contract to build almost 200 homes in a master planned community. In Imperial County, Calif., part of California’s Mexican border region, zoning has cleared the path for a project consisting of more than 7,000 homes in over 70 neighborhoods. In Miami’s upscale Brickell neighborhood two new multifamily projects are slated to begin, one with almost 200 units, and the other with nearly 400. Outside Sacramento, Calif., developers in Sanger, Calif., are taking over derelict lots, propelled by a city incentive that reduces fees for doing so, provided that building materials are bought from local suppliers. Permits are at a five-year high in Washington County, Utah. In Houston, Realtors are reporting the lowest inventory in four years, with sales up almost 17 percent.
This is fact, not folly. Scattered pockets of the country are registering a pulse, and not just tech-heavy places such as San Jose, Calif., and Austin, Texas, cities that some would argue never felt the pain the way others did. So what’s behind these signs of life? Analysts, including Patrick Newport, U.S. economist at IHS Global Insight, cite first-time buyers as a driving force. Young people, it seems, are champing at the bit to move out of their parents’ place and strike out on their own.
The numbers are not products of wistful crystal ball gazing, either. They’re index-based, with several indices reporting improvement. The Conference Board’s Consumer Confidence Index is up. So is Gallup’s Economic Confidence Index. According to the Census Bureau, new housing permits, which began a climb this past fall, are at their highest level in more than three years. The American Institute of Architects Architecture Billings Index (ABI) is up for the fifth straight month. After all the head-fakes and false starts, even builders are feeling cautiously optimistic. The NAHB/Wells Fargo Housing Market Index (HMI) reports that builder confidence is at its highest level in five years.
If you’re still in doubt, follow the money. The banks seem to be loosening up, especially in first- and second- ring suburbs. “We’re seeing a bit more appetite for construction lending occurring in both problem and active projects,” says Bird Anderson, executive vice president at Wells Fargo who oversees its home builder lending. “There’s a bit more acquisition and development lending occurring, or being contemplated.” The news, he says, is that horizontal development lending is going on in phases two or three of existing projects where the front ends have been built out.
Like everyone else, Anderson is cautious, but adds, “There’s enough positive news in enough places so that it feels like there’s something to it, though depth and breadth remain to be seen.” His best advice? Do better market research than you ever have before, and be prudent. “Look for opportunities for retail lot takedown, where the upfront investments may not be substantial, and where the market can be tested with new plans and models.”