Real estate market in state has advantages over others

By Richard Mize

Published: September 29, 2007

It's like some of the ductwork came loose.

The housing market in the Oklahoma City area runs from one extreme to the other, with some new additions still hot and some turned cold.

"Hero or zero. Chicken or feathers. Feast or famine. Whatever you want to call it. Although there are some subdivisions in Oklahoma City that are having a really tough time, there are others that are having record years,” said Edmond builder Caleb McCaleb, president of the Central Oklahoma Home Builders Association.

Activity perked up a little in August, with Oklahoma City, Edmond, Midwest City, Moore and Norman collectively issuing permits for 487 new homes, a 10.7-percent increase from July.

"It comes to being in a great neighborhood, building an extraordinary home and offering it for sale at an exceptional value. That is the triple threat that will work in almost any market,” McCaleb said.

However, the yearlong slide persists. Those cities issued 3,395 permits through August, 17 percent fewer than the first eight months of 2006, a year-to-date figure comparable to fall 2002. Leaders of the Oklahoma State Home Builders Association huddled privately Friday with executives and principals of leading lenders and mortgage brokers to gauge the scope of the slowdown. Metro-area builders are trying to shake off the effects of the slower market with the central association's biggest public event three weeks away — the rain-delayed Parade of Homes.

With subprime lending all but gone and loans for upscale homes harder to come by, credit tightening at both ends of the market has builders hoping for an especially successful parade.

"We may build locally, but our buyers borrow nationally,” McCaleb said, noting that interest rate hikes for nonconforming jumbo home loans — those in excess of $417,000 — have priced some buyers out of the upscale market.

"We are fortunate in Oklahoma that the great majority of our homes fall into conforming ... guidelines and those types of loans are seeing interest rate lowerings in recent weeks,” he said.

Recent interest rate reductions this month came as the stock market stumbled, sending investors fleeing to buy bonds. Increased demand for 10-year notes pushed relative yields down. Mortgage rates trend with changes in bond yields. Rates last month averaged 6.27 percent, down from 6.64 in August 2006, according to the Oklahoma City Metro Association of Realtors.

Realtors handled the sale of 1,918 houses in August, down just 5 percent from August a year ago.

That left 9,495 houses for sale, which amounted to a 4.8-month supply based on average sales of 1,960 per month over the past year, equal to the metro area's housing inventory at the end of last year, but still higher than the 4.5-month supply on hand at the end of April, the low point for this year.

"As inventory levels return to appropriate levels, builders are now making preparations to maintain those levels, given the 6- to 9-month lead time needed to create that inventory,” said Oklahoma City builder Jeff Click, vice president and secretary-treasurer of the Central Oklahoma Home Builders Association.

Click said the increase in construction activity from July to August was another sign that Oklahoma City building is out of step with the national situation — happily, this time.

"Oklahoma City is proving to remain a stand-out market compared to other areas of the country, and home buyers are recognizing the investment value that home ownership provides here, despite what's happening in other markets,” Click said. "Investors are recognizing it, too, which is leading to additional investment activity that used to be attention given to other markets.”

Some builders, attracted to the construction boom, have gone on to greener pastures, McCaleb said.

"I think a lot of part-time builders jumped into the market and truly believed the ‘Field of Dreams' story of ‘if we build it then they will come.' It becomes a market in which the best home builders survive and flourish. And in the long run, that is best for the consumer, too.” Even longtime builders are being careful, though, McCaleb said.

"This comes from our local bankers telling us that until speculative house inventory increases that, they will be loaning on a more conservative basis,” he said.

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