Local home building at lowest in 18 years

Home building in the Midlands hit an 18-year low in 2009 as a faltering economy slowed sales for the third straight year.

The 2,675 permits issued last year were down 22 percent from 2008 and off 57 percent from 2006's peak.

But 2009 ended better as building spiked in its last three months - helped by a federal tax credit for first-time buyers that eliminated some excess inventory. December building permits rose 124 percent over the year earlier.

That's giving builders some hope a turnaround is starting in 2010.

"The Columbia market has pretty much bottomed out, and we anticipate a slow improvement," said Earl McLeod, chief executive of the Home Builders Association of Greater Columbia, which compiles the statistics.

The figures include permits issued in Richland, Lexington and Kershaw counties, the city of Columbia and the town of Lexington.

Home sales fell 10 percent in the Columbia area in 2009, according to the S.C. Realtors trade group. Much like building permits, home sales had their strongest showing in the last few months of the year, even though the median sale price slid 2.4 percent to $140,000 for the year.

The last time building permits dipped below 2,600 a year, Bill Clinton was about to enter the White House.

Home building grew steadily throughout the 1990s, topping the 4,000-a-year mark in 2000. By the height of the building boom in 2005 and 2006, more than 6,000 homes were being built each year.

Much of the building was taking place in the suburbs of Northeast Richland and Lexington counties.

Some buyers were getting loans with little or no money down and no proof of income. Some of those communities are now struggling with foreclosure problems and homeowners who owe more than their homes are worth.

"We did overbuild to some extent," said Steven Mungo, president of Irmo-based homebuilder The Mungo Cos.

But the pendulum has swung the other way, and the number of homes being built now is "unsustainably low," Mungo said. "We're starting to see a little bit of a turnaround."

Mungo, the Midlands' largest home builder, ended the year with a 16.5 percent spike in 2009 sales last year and roughly the same number of building permits.

The Midlands has about a seven-month supply of new homes, down from a 10-month supply in July, Mungo said. A six- to eight-month supply is considered good, industry experts have said.

"We're approaching an equilibrium point," said Hal Von Nessen, a Columbia-based national real estate consultant. "We're sort of bouncing along on the bottom."

The Midlands area probably will settle around the 3,500-a-year mark for new homes being built in 2011 or 2012, Von Nessen said. "There are signs that perhaps the worst is behind us," he said.

A turnaround would be good news for many in the industry who have lost their jobs.

South Carolina has the fourth-highest unemployment rate in the nation, including 12,000 fewer construction workers than a year ago in December, according to the S.C. Employment Security Commission.

Many of the builders who took out permits toward the end of 2009 now are trying to beat the deadline for first-time buyers to take advantage of a federal tax credit. The homes must be under contract by the end of April and close by the end of June. Those homes would have to be under construction now to be finished on time, Mungo said.

Sales could dip again this summer as the tax credit ends and interest rates potentially rise, he added.

"We are going to steal some buyers from the second and third quarters with this tax credit," he said. "But the general health of the economy seems to be a little bit better."