Heavy rains slow home construction

By Richard Mize

Published: June 23, 2007

Soggy job sites have slowed construction, but not enough yet for demand to eat up much of the general oversupply of houses on the market in the Oklahoma City area.

May ended with a 5.3-month supply of homes on the market, according to The Oklahoman's calculations, using data from the Oklahoma City Metro Association of Realtors.

The inventory was determined by dividing the number of homes listed for sale at the end of May, 8,838 — 830 more than at the end of May 2006 — by the average number of home sales per month for the past year, 1,646. The average is used to adjust for seasonal variations.

The end-of-May supply compares with an inventory of 4.5 months at the end of April, 5.2 months in March and 5.8 months in February, as calculated by The Oklahoman.

If May's sales pace could be maintained, it would take 4.4 months to sell the homes on the market. Realtors sold 1,994 homes in May. The inventory estimate does not include new homes sold directly by builders and not involving a Realtor.

Builders in Oklahoma City, Edmond, Midwest City, Moore and Norman obtained 22 percent fewer single-family permits through May — 2,080 — compared with the first five months of last year, according to the Central Oklahoma Home Builders Association.

The least drop was in Moore, with 10 percent, or 252 permits issued through May. The steepest was in Norman, with 55 percent, or 158 permits issued in the period.

Sales by Realtors remained almost flat last month compared with May 2006, even with interest rates slightly lower than they were a year ago. Sellers are tweaking their asking prices and builders are offering incentives to attract buyers.

Oklahoma City has sidestepped the depreciation that is redefining some big-city housing markets — so far. But if sellers have to drop their asking prices, by how much? And for how long?

"Sellers need to know what is actually happening in their markets and make the price adjustment if needed to trigger sales. This will be a relatively small adjustment, based on these most recent figures,” said Victoria Caldwell, president of the Oklahoma City Metro Association of Realtors.

People with houses to sell need to price them right from the start, she said.

"The most important thing to do as a seller is to look objectively at the data their Realtor brings to them and approach the pricing recommendations with an open mind,” Caldwell said. "We have just come out of unprecedented increase in values for the past five years.

"Now the market is much more normalized. To expect the increase of the last five years to continue this year would be unrealistic. A more normal and stable market like this is actually better for the economy. It allows a more predictable plan for both buyers and sellers.”

Builders are handling the slowdown in different ways.

"The last thing we ever want to do to sell homes is reduce the sales price,” said Jan Astani of Home Creations.

Instead, she said, the Moore-based builder is offering to pay the first three mortgage payments for certain buyers.

They must buy with conforming 30-year Federal Housing Administration- or Veterans Administration-backed loans, or a conventional, conforming 90-percent loan, and must borrow from Home Creations' preferred lender, JMR Mortgage, a joint venture between Home Creations and First Mortgage Co. That amounts to $3,500 to $4,000 with most homes, Astani said.

And, she said, the company hopes its "midnight madness” events will get people's attention. Home Creations will have its model home at 1100 NW 190 Place in the Canyon Creek addition, west of Western and south of NW 192, open from 11 a.m. to midnight today.

"It's a tough, competitive market,” Astani said. "We're up against builders who are dropping prices $10,000 to $15,000, giving pools away, whatever.”

Most builders wish they could give away the "pools” that are slowing their work: standing water and mud.

The slowdown is hurting subcontractors, stem wall specialists, concrete pourers, framers and others who start houses and work on exteriors, said Shelia Haworth, who works with her husband, south Oklahoma City builder-developer Marvin Haworth.

"We had a steel package, to pour a stem wall, sit on the ground for six weeks,” she said of the rebar and other materials that must go down before a foundation is poured.

Subcontractors are asking builders for more details of their plans than usual, "what we have projected to come out of the ground, just to budget their money,” Haworth said.

The rains have slowed work on some homes being built for the annual Southwest Showcase July 21-29, the home parade by builders in south Oklahoma and Moore, she said.