COLUMBIA — Columbia's housing market is "nowhere near meltdown stage," but its health will depend on consumer confidence and creating new jobs.
That was the message delivered on Tuesday by Robert Wolverton, president of R. Anthony Development Group, at the fifth annual Economic Outlook Conference sponsored by the Columbia Chamber of Commerce.
The housing market in Columbia peaked in 2004 and 2005, Wolverton told business leaders who gathered in Cornell Auditorium on the MU campus. The current year marks the end of a correction period that began in July 2006, he said, citing figures from Columbia Board of Realtors. "The current and past year are more at a normal level," he said.
Jobs and consumer confidence remain two problem areas, he said.
"We need to attract new jobs, especially in research, high tech and data centers, so that people have the money to buy the houses," Robert Wagner, president and chief executive officer of Columbia Insurance Group and vice president of Columbia Regional Economic Development Inc., said in an interview after Wolverton's presentation. "We need to look beyond the retail sector."
Among the factors that influenced peak years on the housing front was easy mortgage money, as banks gave loans to people who had no way of paying it back, Wolverton said.
"We also introduced what I call discretionary buyers, who bought homes because of low interest rates, sold after five to 10 years and reinvested in new homes," he said. There was also a movement of buyers from larger to smaller homes as some family sizes changed, Wolverton said.
The housing market is now experiencing declines because none of these trends can sustain long-term development, he said, adding that the local market is "going to sustain the current measure of stability."
The housing market in Columbia is more of a primary home market where buyers are focused on more than low interest rates, he said. Buyers look more at pricing and proximity to schools, work and children's activities, Wolverton said.
Columbia also has a stable core market where people buy homes whatever the interest rates are, he said. "At least 80 percent of our market is core market."
The core market in Columbia comprises retirees, newly married couples and young couples with a second child. There is also a high percentage of couples in which one spouse is working and the other goes to school, Wolverton said. When this partner comes out of school and gets a new job, their income doubles and they look into buying a house.
The demand-supply graph, too, shows Columbia's housing market favorably. "Today there is a six-month supply of detached single-family homes," Wolverton said. "Our supply is dropping and will continue till 2009."
With the large number of students in the town, Columbia has a healthy residential rental market, too, Wolverton said. Properties in attractive locations that are well-maintained have a vacancy rate of three to six percent, he said.
Wolverton cited a commercial use report generated by local developer Paul Land. As of the end of 2007, according to Land's report, the commercial vacancy rate was 10.98 percent. "Vacant commercial space is getting gradually absorbed with new groceries and schools moving in," Wolverton said.
Despite the confidence in the market, some problem areas remain. Consumer confidence, for instance, is at an ebb. "Over-supply of developed single family residential building lots and residential condominium projects are also among the troubles," Wolverton said.
The year ahead looks better compared to the current year, he said. Foreclosures doubled since the beginning of 2007, Wolverton said. Of the 584 foreclosures in Boone and six surrounding counties, 315 were in Boone County. Of those, 40 to 45 percent of the foreclosures went back to the bank. This is just one percent of all owned households in Boone county, Wolverton said.
Wolverton's confidence seemed to rest on Columbia's core market. "Our core market will sustain us," he said.
His confidence is based on the stable job market in Columbia, which is centered around insurance, health care and government sectors. Though these sectors are not recession-proof, they move slowly and therefore are less affected by the nationwide crisis, Wolverton said.
The three sectors that Columbia's economy depends on — education, health care and insurance — are stable, Wagner said. Still, Columbia needs more higher-paying jobs and better use of MU resources such as biotechnology and nanotechnology, he said.