Jahi Chikwendiu/The Washington Post - Construction in the Madison Crescent neighborhood of Gainesville, Va. is an example of the resurging housing market. Houses built in Madison Crescent stood empty for several years, but all are now sold and new ones are beginning to be built.
“The market’s reached a price point where it’s economically feasible to build again,” Granville-Smith said. “We’ve gotten a tremendous amount of interest.”
Housing historically accounted for an average of 4.8 percent of the country’s economic output but has been contributing only about half that amount since the recession. The gap between the industry’s normal output and its current activity is $413 billion, translating into a 2.6 percent boost to GDP.
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Particularly important is the role of new-home construction, a significant creator of jobs. Home construction jumped 28 percent last year, helping to drive a rebound in hiring in a sector that was decimated during the recession. An analysis by the National Association of Home Builders, a trade group, calculated that each new home generates as many as three jobs.
Local home builder Miller & Smith employed about 150 people during the boom, then slashed its staff to 80 in the midst of the bust. Now the company is back up to about 100 employees and hopes to hire four more this month.
“It’s been a difficult six years,” said Dale Hall, vice president of operations. “It’s been enjoyable to watch the turnaround.”
That doesn’t mean there haven’t been reality checks. The Mortgage Bankers Association reported that applications for mortgages dipped in December. Sales of existing homes also declined last month, though prices continued to increase. And an index of pending home sales fell 4.3 percent in December when economists had expected it to remain flat.
“We believe the disappointment represents just a brief lull in what are volatile data rather than a fundamental change of direction, but, of course, that remains to be seen,” said Jim O’Sullivan, chief U.S. economist at the consultant firm High Frequency Economics.
Part of the problem may be that many households, because of tighter credit requirements, are unable to take advantage of low interest rates. The Fed will probably discuss the state of the housing sector during its regular policy-setting meeting this week, though it is not expected to begin pulling back on its support of the mortgage market yet.
Some analysts say the weak December results are actually a symptom of limited supply rather than slackening demand — the inventory of homes on the market dropped 8.5 percent last month to the lowest level since May 2005.
In addition, the pipeline for new homes has been constricted. In Prince William, for example, government data show that more than 5,000 applications to build new homes were filed in 2004. Last year, that number was about 1,200.
Hall said his company has focused on finishing projects started during the boom. It is scouting for sites to build new developments, but the permitting and approval process can take two years or longer.
Buyers may not be so patient. Traditionally, the real estate season does not start until March. But Hall said Miller & Smith has already booked 40 home sales this month, making it the company’s best January since 2005.
“I think the kickoff has already started,” he said.
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