By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — Home construction fell by 7 percent in July as homebuilders struggled to cope with a variety of headwinds.

The July decline put home construction at a seasonally adjusted annual rate of 1.53 million units, the Commerce Department reported Wednesday. It was the slowest pace since April but was 2.5 precent higher than a year ago.

Applications for building permits, which can forecast future activity, rose 2.6 percent in July from the June level to an annual rate of 1.64 million units. It was the first monthly increase in permit applications since March.

Construction starts for single-family homes fell 4.9 percent in July to an annual rate of 1.11 million and the construction of apartments of five units or more dropped 13.6 percent to a rate of 412,000 units.

Home construction was down in every part of the country except the South, where housing starts rose 2.1 percent. The biggest decline was in the Northeast, showing a drop of 49.3 percent, followed by declines of 11.3 percent in the West and 6.9 percent in the Midwest.

According to a survey of builder confidence, expectations fell sharply in August to the lowest level in a year as builders struggled with high costs, supply shortages and rising home prices. Expectations dropped five points to a reading of 75 in the National Association of Home Builders/Wells Fargo survey.

Although the peak of the housing frenzy may be past, economists believe strong demand will continue to drive the market.

“Housing demand and sparse inventory will give builders strong reasons to maintain solid levels of construction,” said Oren Klachkin, lead U.S. economist at Oxford Economics. “However, high materials prices, a limited supply of workers and limited land availability will constrain activity.”

Also on Wednesday, the Mortgage Bankers Association reported that mortgage applications fell 3.9 percent last week to their lowest level in a month, reflecting a drop in refinancing applications as mortgage interest rates rose.

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By MATT OTT
AP Business Writer

SILVER SPRING, Md. (AP) — The rate of home construction in the U.S. jumped 6.3 percent in June, another big swing in an already volatile year.

The rise in June put home construction at a seasonally adjusted annual rate of 1.64 million units, the Commerce Department reported Tuesday.

Home construction starts rose 12.6 percent in the West and 9.7 percent in the South, offsetting high single-digit declines in the Northeast and Midwest.

Applications for building permits, which are used to forecast future activity, declined 5.1 percent in June to a seasonally adjusted rate of 1.59 million units.

Applications for permits declined in all four regions. Those declines could validate some economists’ predictions that the surge in home building and sales over the past year may begin to slow, especially for single-family homes.

Supply-chain troubles caused by the coronavirus pandemic have hamstrung builders, who have been dealing with material shortages and inflated prices for lumber, though the latter has moderated somewhat, at least at the wholesale level.

Month-to-month, homebuilding activity has been on a wild ride so far this year, with several double-digit swings in either direction. But housing remains one of the stronger segments of the economy, with buyers far outnumbering sellers.

The 6.3 percent overall increase in home construction in June matched the 6.3 percent increase in single-family home construction which rose to a rate of 1.16 million units. A 6.8 percent rise in construction of apartments pushed that category to a rate of 474,000 units.

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RICHMOND, Va. (AP) — Home builders and home remodelers are still facing supply shortages and higher prices for construction materials in the wake of the coronavirus pandemic.

The Richmond Times-Dispatch reported Sunday that heightened building costs are the continuing result of surging demand for new houses and home remodeling projects.

Many Americans have been stuck working at home and decided to add a deck or a room for an office. Or they’ve sought out a new home.

The demand is impacting lumber mills as well as factories that make materials for plumbing and electrical wiring. Many were shut down during the early days of the pandemic, prompting gaps in the supply chain.

Freezing weather in Texas earlier this year was another factor. Many building supplies come from factories in that state.

Some builders have had to absorb the increased costs for projects because they contracted to do the work before the pandemic hit. Others have put escalation clauses in their contracts to pass on the extra costs to consumers.

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By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — U.S. home construction slipped a bit in May as a sharp drop in single-family construction was only partially offset by a rise in apartment building.

The Commerce Department reported Tuesday that construction was started at a seasonally adjusted annual rate of 1.27 million homes and apartments, a decline of 0.9 percent from April when construction starts had risen a strong 6.8 percent. Applications for building permits, a good sign of future activity, edged up 0.3 percent in May to an annual rate of 1.29 million.

Construction of single-family homes fell 6.4 percent in April while construction of apartments rose 10.9 percent.

Falling mortgage rates are expected to help boost home construction and sales in coming months and help offset such problems as a shortage of building lots and a lack of skilled construction workers.

The latest National Association of Home Builders/Wells Fargo survey showed builder confidence dipped to a still solid reading of 64 in June, down from 66 in May. Sentiment levels have held in a range of the low- to mid-60s for the past five months.

“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” said Robert Dietz, chief economist for the home builders.

The May report on construction starts showed declines in every region of the country except the South where building starts rose by 11.2 percent. Construction took the sharpest fall in the Northeast, declining 45.5 percent while starts were down 8 percent in the Midwest and 2.4 percent in the West.

Residential construction has been a drag on the economy over the past year but economists are forecasting that it will turn around in the coming months with home construction boosting growth in the second half of this year and into next year, spurred by falling mortgage rates.

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Home builders who specialize in accessory dwelling units might have cause for celebration this Wednesday.

The city council is scheduled to vote on a resolution that would extend a suspension on system development charges for ADUs for another three years to July 31, 2016. Adopted in 2010, the suspension was slated to expire in 2013.

ADUs are small apartments – often converted garages or mother-in-law cottages – that are built onto existing residential properties. While the price to build one can start at $80,000, the SDCs alone can often cost between $8,000 and $13,000.

Matthew Grumm, policy manager for Commissioner Dan Saltzman’s office and the Bureau of Development Services, said the existing suspension had proven to be successful in promoting ADU development. In a Sept. 25 article in the Daily Journal of Commerce, Hammer and Hand owner Sam Hagerman said the SDC suspension had increased the number of yearly permits for ADU construction from a couple handfuls to a couple hundred.

The goal of the resolution is to foster continued ADU development. Wednesday’s city hall meeting begins at 9:30 a.m. and is located at 1221 S.W. Fourth Ave. Information on the resolution can be found .

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As the economy staggers back to its feet, state economist Mark McMullen told members of the Oregon Legislature last week that good news is coming from the homebuilding industry.

“The housing recovery is here to help drive economic growth,” he said in his quarterly Oregon Economic and Revenue Forecast. “Even so, housing-related production is just now beginning to improve from its recessionary lows and has a long way to go before the level of production approaches anything considered a normal year for housing.”

Ryan Bloedel, owner of , confirmed the dark lining in McMullen’s silver cloud. “Here in Salem, we’re not seeing the same kind of recovery that they’re seeing in Portland and Bend. It’s not hugely significant at this point.”

Economic growth in Oregon has averaged just over 2 percent in recent months, said McMullen, a representative of the Oregon Office of Economic Analysis. Meanwhile, the nation as a whole has added approximately 150,000 jobs per month so far in 2012.

“The slowdown seen in recent months can largely be attributed to the global manufacturing cycle beginning to wane,” he said.

Employment in Oregon continues to increase at a slow, subdued pace in 2012.

“After a strong start to the year, with employment increasing nearly 3 percent on an annual basis in the first quarter, employment gains have slowed the past two quarters in Oregon,” McMullen said.

“Oregon’s economic expansion persists, but remains stuck in a low gear,” he added. “Growth continues to come in fits and starts – a strong quarter or two followed by a weak quarter or two – with the underlying trend remaining slow and steady.”

Wage growth has been similarly soft, according to McMullen.

“Average wages are growing at a 1.5 percent rate among production and non-supervisory employees, and just under 2 percent for all employees overall,” he said. “In good years, like the late 1990s or even mid-2000s, wage growth reached 4 percent per year.

“Given such weak growth, consumers – like the economy as a whole – remain vulnerable to shocks,” he added. “Encouragingly, inflation remains in check for now.”

Senate President Peter Courtney, D-Salem, told lawmakers he is optimistic.

“We continue to see growth in our economy and our forecasts continue to be in the black; the signs are positive,” he said.”The housing market continues to recover. The unemployment rate is coming down.”

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As a whole, the construction industry is still regaining its footing in the wake left by the recession. However, one segment appears to be more stable than others.

Residential business, according to the Associated General Contractors of America, has improved 21 percent thus far in 2012 – more than five times greater than commercial or retail. And it’s the only type of construction expected to experience significant gains in 2013.

Some local homebuilders who have managed to keep their doors open are finally seeing a light at the end of the tunnel.

“We’ve seen a 100 percent increase in sales and closings (in 2012),” said Randy Sebastian, president of Renaissance Homes, which has established itself as the top homebuilder in Portland since filing for bankruptcy protection in 2008. “It’s definitely a lot better.”

Nationally, private residential spending bottomed out at $222 billion in July 2011. By September 2012, spending was $286 billion – a 29 percent increase in 14 months.

Nonresidential spending rose significantly over a 16-month period – from January 2011 to May 2012 – but has since slipped. And expectations are for public-sector construction to decrease even more in 2013, while commercial and retail remain relatively flat. But residential (including multifamily) is expected to continue to increase, according to the AGC.

The re-emergence of residential construction can be attributed to growth in demand as well as general income and wealth, AGC chief economist Ken Simonson said.

Jim Chapman, president of Legend Homes, said he has seen a 50 percent increase in production this year.

“There was a large drop in the available inventory out there,” he said. “The lack of inventory has created some urgency that created more sales happening.”

Chapman added that building homes still is not profitable. But after experiencing years of slow business, he is happy to finally see an increase in demand.

For Joe Hermanson, a local residential contractor, work remained steady during the economic downturn. As a 35-year industry veteran, he relied on a loyal set of customers. However, he has noticed that work these days has a greater scope.

“The projects I’m looking at are bigger – whole house remodels and such,” he said. “It’s been a couple of years since I’ve done a really big job.”

Not all local residential builders are seeing improvement. Bill Stotts, owner of Stotts Construction, a home addition company, believes work is still hard to come by. As a result, he has had to take on other projects, such as barns.

And Miranda Homes, a Damascus-based company known for its sustainable practices, has abandoned residential construction for now to develop retaining walls.

“It was the path of least resistance,” company president Rob Boydstun said. ”It was more profitable and (had a) much greater need because it didn’t rely on new construction.”

Boydstun admitted that Miranda would have pursued retaining wall development regardless of the recession, though he is unsure whether he would have abandoned homebuilding completely.

Sebastian focused on opportunities in certain areas of the metro area to stay afloat during the downturn. Economic growth has helped, he said.

“It certainly is more what we’re doing than what the economy is doing, in my opinion,” he said. “Seventy-five percent is our products, our locations, what we’re doing. The other 25 percent is the economy getting better.

“We’re not putting ourselves out on a branch or anything. But things have really improved.”

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The homebuilding industry may be on the rebound, at least in Central Oregon.

Only four building permits were issued for Awbrey Butte, one of Bend‘s ritziest neighborhoods, between January 2010 and July 2011. Twenty permits have been issued since.

Of 99 luxury homes sold in Awbrey Butte in 2010, 41 were because of bank foreclosures. Some 90 homes have been sold in the neighborhood this year; only half a dozen or so have been because of foreclosures.

Approximately 50 luxury homes have been sold at Broken Top, an exclusive country club neighborhood west of Bend, in 2012 – nearly twice as many as last year. Half of the 41 home sales there in 2010 originated from foreclosures. There were only four foreclosures this year.

Joseph Kendall, a real estate broker who runs , said he’s not doing a happy dance just yet. There are signs of life, he said, but that doesn’t mean the recession itself is dead and buried.

“Inventory is still very low here,” he said. “There’s a lot of building here right now, but it’s mostly low-end stuff between $250,000 and $450,000.”

Foreclosures are also a big problem, he said, adding that many high-end houses are locked up in court battles.

“Short sales are still a pain,” he said.

Deb Tebbs, who also sells luxury homes in the Bend area, said she wouldn’t know about that.

“I don’t do short sales or foreclosures,” she said.

What Tebbs does know, she said, is that business is good and getting better. She knows of 29 homes that recently sold for more than a million dollars. Her company, , sold a lot of them.

“We really dominate the high-end market,” she said.

Building permits are up for the simple reason that there aren’t enough luxury homes for all the people who want to buy them, Tebbs said.

“What’s going on is that we’ve funneled through all the available and foreclosed properties,” she said. “For a long time, it was cheaper to buy than to build. People weren’t building here. The industry just stopped. Now we’re hitting that vortex where we don’t have enough homes to meet the demand.”

The shortage of homes has definitely created a buyer’s market, she said. She recently sold an Awbrey Butte home reduced from $2.3 million to $1.6 million.

“If it’s priced right, it’s going to sell,” she said.

Tebbs said she knows about building homes as well as selling them. Her husband, Jack Tebbs, is the owner and president of , which recently built a home in Awbrey Butte worth more than $3 million.

The number of building permits issued for single-family homes has more than quadrupled in Bend’s upscale neighborhoods since 2010.

What’s happening in Bend could reflect a national trend.

The Wall Street Journal reported that builders across the country started work on 26 percent more single-family homes in May 2012 than in May 2011, when the housing market was still seriously depressed. In addition, the paper reported, the number of unsold new homes is close to what it was around 2005 – before the housing bubble burst.

The paper surveyed 47 economists, and 44 of them said they believe the market won’t fall any further.

Josh Lehner of the Oregon Office of Economic Analysis wrote in his blog last week that he shares such optimism.

“Starts in Oregon are up considerably from their recessionary lows, particularly multifamily,” he wrote. “The improvement in single-family homes has taken a two-steps-forward-and-one-step-back approach.

“That being said, the current quarter is shaping up to be the strongest for single-family starts since the end of the recession and expectations are for these gains to continue moving forward,” he added.

Jon Chandler, CEO of the , backs those sentiments.

“We’re seeing guarded grounds for optimism statewide,” he said.

It is particularly gratifying to see signs of recovery in Bend, he added.

“Central Oregon was really clobbered,” he said. “Any improvement there is going to be extremely welcome.”

As the entire state struggles beyond the recession, getting money from banks for new homes seems to be the biggest hurdle, he said. A lot of people are rushing to their bankers.

“We could see a bottleneck there,” he said.

Nonetheless, he added, he is upbeat.

“We are seeing things pick up,” he said. “People are getting tired of living in their parents’ basement.”

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Continuing a topsy-turvy path of ups and downs, national residential sales in September edged up once again.

Following a decrease in June, an increase in July and a decrease in August, sales of single-family homes increased 5.7 percent to a seasonally adjusted annual rate of 389,000 units, according to the most recent report from the U.S. Department of Housing and Urban Development. The number of sales, however, has been increasing steadily throughout the year, and September’s number is the highest point so far. It is also 27.1 percent higher than a year ago.

According to the report, the median sales price of new houses sold last month dropped 5.6 percent to $242,400; the average sales price dropped just 1 percent to $292,400. There is a 4.5-month supply of new homes for sale at the current sales rate.

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Many homebuilders use the words “cautiously optimistic” to describe their hopes as their industry emerges from the recession.

However, Gordon Root, president of the Home Builders Association of Metropolitan Portland, said his optimism is becoming less cautious. He’s positively excited.

“Oh, absolutely,” Root said. “Permits are up. Sales are up. It’s been astounding. We saw the housing market turn on a dime in April.”

Paul Barnum, executive director of the , said the numbers in a new report support Root’s excitement. According to the 2012 Forest Report, prepared by the institute, the number of housing permits issued in Oregon is up at least 24 percent over August 2011.

Barnum may not be quite as giddy as Root.

“We’re cautiously optimistic that things are getting better,” he said. “We are trending in the right direction. Everyone just wants to make sure there’s not a hiccup on the way to recovery.”

Karla Holland, communications director for , said the commercial construction industry remains in the teeth of the recession.

“Commercial construction is still very slow,” she said. “There’s been nothing notable in terms of improvement.”

Root said one of the biggest problems is that banks are still skittish about lending money to buyers and builders, he said.

“If financing were more available, there would be a lot more homes built,” he added.

Oregon’s homebuilding industry still faces a long road to recovery, Barnum warned.

“It’s been painful for people, and folks are weary about hiring people back, but if the housing sector continues to improve, we’ll see improvement,” he said.

“For every silver lining, however, there is a dark cloud,” he added. “The one thing that could hold us back is the lack of timber supply. Federal lands have declined since the Northwest Forest Plan. Many forests are actually unhealthy and could use harvesting. We could be in a situation where the recovery could just slip by Oregon if we don’t have a stable timber supply.”

Even without additional harvests, however, Root said his excitement level remains high.

“It’s going to be a sustained recovery,” he predicted. “It’s been a rough four years in the building industry, so this is a welcome recovery.”

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