Montgomery County Home Building Still Strong

The U.S. Commerce Department reported Thursday that construction was started on 1.353 million new homes and apartments last year, down 24.8 percent from 2006. It was the second biggest annual decline on record, exceeded only by a 26 percent plunge in 1980, a period when the Federal Reserve was pushing interest rates to post-World War II records in an effort to combat an entrenched inflation problem.

Many economists believe that the current slump in housing will rival the dive in the late 1970s and early 1980s, when housing construction fell for four straight years before beginning to recover after the severe 1981-82 recession. For December, construction fell by a bigger-than-expected 14.2 percent.

In Conroe, where new home construction can be seen in numerous areas around the city, building permits for 2007 were down 29 percent from 2006. The total permits for 2006 was 854, while 607 permits were issued for 2007, according to data provided by the city's Community Development department.

The lower numbers are in fact part of the seasonal ebb and flow of home construction, according to a city official.

"Homebuilders will tell you there's a downward trend," Guy Andrews, director of community development said. "What impacts that is speculative. It's stronger than in other parts of the country. We've seen a drop in the number of permits since July, but it's cyclical. The housing market is so seasonal.
"I think it's coming back once people figure out we're not the rest of the country. Houston is still the number one economic market in the nation."
The construction ills in the rest of the country haven't spread to Montgomery, where real estate values are holding strong and construction continues without interruption.
"There's no housing glut in the area," said Norm Frank, president of the Montgomery Industrial Development Corporation. "We anticipate a good year ahead."
Hillary Dumas, vice president of LeFco, the developer of Buffalo Springs, agreed.
"Texas won't be impacted the way areas on the coasts will," she said, referring to the faltering housing market. "This area has very little of the sub-prime, lower end housing that is causing surplus inventory and a glut in other markets."
Indeed, Buffalo Springs has no inventory of finished homes available at the moment. Three houses were available a few months ago, but all sold within 60 days. Several firms are active in the community building houses, but all are custom homes for landowners, according to Dumas.
"There has been a lot of speculative building in other areas of the country which contributes to an oversupply," she said. "That is not an issue here."
The drop in construction in December was bigger than economists had been expecting and reflected weakness in all parts of the country. Housing construction fell by 30.8 percent in the Midwest and was down 25.8 percent in the Northeast and 19.6 percent in the West. The decline in the South was a smaller 3.3 percent.
Economists said the weakness showed that the housing correction was getting worse since the turmoil in financial markets hit in August.
"Builders have finally thrown in the towel," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "This is a precondition for recovery as it will eventually reduce the inventory overhang. But there is a long way to go."
For December, housing starts totaled 1.006 million units at an annual rate. In an ominous sign for the future, applications for building permits fell by 8.1 percent to an annual rate of 1.068 million units. That marked the seventh consecutive monthly decline and reflected the fact that builders have been slashing production plans in an effort to deal with a glut of unsold homes.
Many economists believe the housing sector will remain weak through this year before starting to stage a rebound in 2009.
Brad Meyer can be reached at bmeyer@hcnonline.com.