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Low interest rates and heightened consumer confidence has created an abundance of work for metro home builders and real estate agents heading into 2013.
“That’s about 654 more permits,” says Kurt Dinnes, past president of the Central Oklahoma Home Builders Association and managing member of Sun Custom Homes. “If the average home is $200,000, that equates to approximately $130 million being pumped into the Oklahoma City economy. When you consider that over 150 people touch each new home built, that has created and maintained a large number of jobs in our local economy.”
In addition, the entire metro area shows a 27% increase in building permits through October 2012, compared to the same time period in 2011.
If averaged, 2012 will have produced the highest number of building permits in five years with 5,227.
However, the rise in building permits during 2012 might be deceiving.
“The increase is over last year, which was not the best year we’ve ever had,” Dinnes says. “However, we are catching back up. We’re starting to approach the 2007 numbers.”
What’s driving the building boom? “Some of it is that the (economic and political) uncertainties have come and gone. The election really slowed things for a while,” Dinnes says. “We also have historically low interest rates. It’s been challenging the last four years in Oklahoma, but not as challenging as some of the other areas in the nation.”
Dinnes also points to a high level of consumer confidence as part of the home-building recovery.
“I think a lot of people were holding on and waiting to see what would happen with the economy. I think home buyers are feeling more comfortable now,” he says. “If interest rates remain low, we should see home building and developing continue to be good.”
In some parts of the metro, available residential lots are in short supply. As a result, developers are looking to acquire and develop land wherever they can to meet consumer demand.
Many home buyers aren’t looking at available housing inventory; rather, Dinnes says, they are looking to build a large, upscale, customized house.
“These buyers also are trying to take advantage of the lower interest rates,” he says. “There’s a larger number of buyers who are selling their current homes and wanting to build their dream home.”
Higher-end builders have seen significant growth in houses that range from $250,000 to $500,000, he says.
“There’s been a turnaround for homes priced from $175,000 to $250,000,” he says. “Anytime you go through a tough economic time, recovery starts at the bottom and works itself up.”
Dinnes says he’s cautiously optimistic that the economic recovery will continue.
“We don’t want to overbuild too quickly,” he says.
That might be sound judgment considering the federal government’s budget debate, the fiscal cliff concerns and increasing health care costs.
“I don’t know if it will put a stop to the growth, but it could be a factor in the amount of growth we have,” Dinnes says. “It could very well affect our industry. I’m looking at optimistic, but conservative, growth in 2013. I don’t offer any specific projections because the minute you do that, you’re going to be wrong.”