Housing slowdown taking its toll

Even in St. Charles County, the hotbed of home construction in the St. Louis metropolitan area for the past decade, the home-building industry is experiencing a definite slowdown.

What is less clear is just how severe this slowdown is in the county, and how long it will last. This is what the numbers say:

The number of building permits issued for the construction of single-family homes is down almost 12 percent for the first four months of this year, compared to the same period in 2006. County and local governments have issued 836 such permits through April of this year, while 948 permits were issued during the first four months of last year, according to figures compiled by the county's Building Department.

The county is still on pace to issue a little more than 2,500 building permits for single-family homes this year, about the same number issued for all of 2006. From 2001 to 2005 more than 3,000 such permits were issued annually, and in 2000 a total of 2,999 permits were issued, according to the county.

St. Charles-based Whittaker Homes is the county's largest home builder. Tim Busse, a vice president and director of architecture for Whittaker, said this is the deepest recession he's seen in the housing market for the past 12 years.

What has helped Whittaker is the company's New Town development in the northeastern portion of St. Charles City. This model of new urbanism, designed to be pedestrian friendly to residents, is relatively new to the region and in demand.

"This has cushioned us," Busse said. Generally, a house in New Town stays on the market between 90 and 120 days, he said.

While T.R. Hughes Inc. is not the largest builder, it is a company that many subcontractors and others watch to gage the health of the industry in the area. Also based in St. Charles, the company experienced its best month ever - as regards sales volume - in March. Hughes sold approximately $13 million worth of housing stock that month, said company President Steve Thomas.

Nevertheless, the builder laid off 10 employees in May. "We had a good month in April and a good month in May, but it wasn't like March," Thomas said. "In the home-building business you don't get paid until [a house] closes, which is an eight-month cycle. "

The majority of employees laid off worked in land development. "We've got a lot of raw land right now, but we're just not moving forward with it," he said.

Thomas said Hughes was one of the last builders in the area to make layoffs. The company probably should have cut jobs a year ago but wanted to wait as long as possible to see if demand increased, he said.

Home building in the metropolitan area "generally is down" this year compared to 2006, so it's not too surprising to see some layoffs in the industry, said Patrick Sullivan, executive officer of the Home Builders Association of St. Louis and Eastern Missouri.

There is no scientific formula, but there is a "loose correlation" between job gains or losses in the building industry and the number of building permits being issued, Sullivan said.

Housing is a cyclical industry, so a decline in construction is to be expected. But this area is not in store for a bust because the boom never materialized into a bubble, as was the case in some communities in California and Florida. "Our peaks and valleys are a little bit less because they never reached the extremes" in population and job growth those communities did, he said.

Sullivan shied away from the term "overbuilt" in describing the area's new-home market. "There's almost always a little bit of a mismatch between the number of units being built and the volume of demand at any given point in time," he said.

Still, builders' speculative homes are taking longer to sell, Sullivan noted. "Some might describe that as overbuilt, ... I just think we're going through a period of time where the demand is not quite as robust as it had been. "