Slow, steady comebacks

Housing rebound trickles down for Midlands companies

krupon@thestate.comMarch 25, 2013 

Kim Sutton is owner of Window World.

C. ALUKA BERRY — caberry@thestate.com Buy Photo

  • By the numbers 4%

    Increase in the number of registered real estate agents in South Carolina last year, compared with 2011. That’s down 16 percent from the peak of 52,072 in 2009.

    10 months

    Supply of current homes available for sale in the Midlands. The Midlands’ supply exceeded 16 months in April 2011. A normal market is around six months.

    16

    The number of consecutive months mortgage rates have been below 4 percent.

    SOURCES: S.C. Department of Labor, Licensing and Regulation, S.C. Realtors trade group and Freddie Mac

  • More information

    Market measure

  • More information

    A snapshot of some highs and lows of the Columbia-area real estate market in recent years:

    Home sales

    Jan. and Feb. 2003: 1,141

    Jan. and Feb. 2007: 1,403

    Jan. and Feb. 2011: 758

    Jan. and Feb. 2013: 1,098

    Building permits

    Jan. and Feb. 1996: 576

    Jan. and Feb. 2003: 766

    Jan. and Feb. 2006: 1,204

    Jan. and Feb. 2009: 263

    Jan. and Feb. 2013: 513

— As sales plummeted more than 40 percent the past two years, Window World’s owners went into survival mode: laying off their five-person staff, taking on all the work themselves and pinching every penny to make it through to better times.

“It was beans and weenies time,” said Kim Sutton, co-owner of the St. Andrews Road business with her partner Anne Dumont. “That’s what you have to do sometimes.”

As home sales tanked across the nation during the worst recession in a lifetime, related businesses – from landscapers to remodelers – saw their bottom lines tumble. In the Midlands, home sales and building permits for new homes dropped by nearly half, bottoming out in 2011 – one of the worst years on record for local real estate.

But a slow rebound that started last year – spurred by ultra-low interest rates, a drop in home prices and an improving economy – is picking up steam in 2013.

“The spring selling season started in January for us,” said Steven Mungo, chief executive officer of Irmo-based Mungo Homes, the largest builder in the Midlands. “For the first time in five years, I had two people bidding against each other for the same house.”

Bidding wars were commonplace during the heady selling days of 2006 and 2007 but unheard of in recent years when sales fell and buyers had the upper hand in negotiations.

“The people we are talking to are feeling pretty confident about their personal situation,” said David Keeling, mortgage director and senior vice president for Columbia’s First Citizens Bank, which saw purchase mortgages jump 50 percent last year from 2011 and already has seen another 25 percent increase to date this year over the same period in 2012. “That’s a very positive trend.”

Still, challenges remain. Unemployment – while down from its 11.9 percent high in November 2009 – remains elevated at 8.7 percent in South Carolina. The national rate is 7.7 percent.

And those in government jobs – such as military personnel at Fort Jackson – are bracing for potential furloughs or layoffs from sharp cutbacks in federal government spending from the sequester, and the possibility of another round of military base closures.

Lending standards also are still tighter than they were in 2007 at the height of the local market.

If standards were loosened even slightly, “sales would be unreal,” said Susan Longshore, marketing director for Essex Homes. “The interest (from buyers) has really peaked.”

Essex is building in 30 communities in Columbia and 20 in Charlotte – about a 40 percent increase from two years ago, Longshore said.

“The market is much stronger,” she said. If sales continue to increase at the pace they are now, the company is on track to reach 2006 and 2007 levels in the next year or two, she said.

But the market in general has a long way to go. Some experts argue that 2007 levels are unrealistic because they were inflated by looser lending standards.

Still, building permits have risen over the past few years, though they remain below levels of nearly 20 years ago.

A little more than 500 permits were taken out by builders in the first two months of the year. That’s up 95 percent from the same period in 2009 but still down 11 percent from 1996 levels.

But many home builders were forced out of the market in the lean years, which means the ones who are left have bigger market shares – leading to Mungo’s bidding wars and Essex’s strong sales growth.

Home sales are up 45 percent in the first two months of the year from the same period in 2011. But they have been set back at least a decade, down nearly 4 percent from 2003 levels, the most recent year for which statistics are available.

Interest rates at historic lows – below 4 percent since November 2011 – could continue the rebound. The Federal Reserve has pledged to keep rates low until the unemployment rate improves significantly.

Buyers, who can get mortgages with as little as 3 percent down, are recognizing that home prices might have bottomed out, First Citizens’ Keeling said. The median price of homes sold in February was $133,000 – down more than 2 percent from the same month a year earlier but up 4 percent from February 2009.

While it’s still a buyers’ market, inventory levels are starting to even out. There was a 10-month supply of inventory on the market in February – down from the peak of more than 16 months in April 2011 but still far from a balanced market of six months’ supply.

“Individuals’ net worth has typically come from their equity in their home and probably their 401(k)s, and we’ve seen them both get hammered since 2008,” Keeling said.

However, the stock market has made significant gains in recent weeks with the Dow Jones industrial average reaching a series of record highs earlier this month. And some are beginning to see modest appreciation in their home values, he said.

That has many looking to either buy a home or make some long-needed repairs or additions, he said.

That’s good news for small businesses like Window World, which have scrimped by the past few years.

“The rising tide floats all ships,” Mungo said.

Sutton and Dumont – who dub themselves the Window World girls and greet everyone with hugs – saw business start to rebound after the presidential election last November. Sales have grown about 30 percent since then, and they have hired back a saleswoman and an office staffer. Most customers are looking to put in new windows to improve energy efficiency and save money on their monthly electric and gas bills, the women said.

At last month’s Home & Garden show, Dumont noticed about a half-dozen window companies were represented – that number was close to two dozen in the early 2000s, she said.

“We managed to ride through a horrible 22 months where a lot of our competition went belly up,” Sutton said.

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