Submitted by Anonymous on Tue, 04/10/2007 - 00:13.
Kansas City Missouri Housing Slowdown Has Broad Ripple Effect
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McCray, the president of McCray Lumber & Millwork Co. of Overland Park, has had to lay off 50 employees since new-home construction began to drop last year.
“We started feeling the slowdown as far back as last summer,” McCray said. “When it really slowed down or stopped was since the beginning of the year. Our sales are off 40 percent.”
With roughly one of every 10 jobs somehow connected to the housing industry, experts warn that the current market slowdown could affect people you ordinarily would not consider. At the end of 2006, there were an estimated 114,000 people employed in housing-related jobs in metropolitan Kansas City, according to Moody’s Economy.com.
Just as the national housing boom helped drive recent growth, the slowdown now serves as a drag on the U.S. economy.
Last week, the outplacement firm Challenger Gray & Christmas reported that announced job cuts in real estate, construction and mortgage lending nationwide surged from 4,764 in the first quarter of 2006 to 21,245 in the recently completed quarter.
That’s almost as many job cuts in one quarter as there were in all 2006. For all of 2006, there were 22,814. The cuts in housing-related industries stood in contrast to the overall job cut numbers, which in March fell to an eight-month low.
“While many have predicted that the housing market has hit bottom, the situation seems only to worsen as home builders continue to report slumping orders,” said John A. Challenger, the chief executive of Challenger Gray & Christmas. “Now we are seeing the impact hit traditional as well as subprime mortgage lenders as demand for loans declines and the number of foreclosures skyrockets.”
Ripple effects
Although the Kansas City market did not boom as much as some other markets — and isn’t expected to collapse like some — the slowdown is being felt locally.
“Every one of my builder customers has laid somebody off,” said Mark Hosking, senior vice president of Morrill & Janes Bank, a construction lender. “They’re also telling me their suppliers are laying people off.
“The layoffs go all the way through the industry. All the way down to Deffenbaugh, because people need fewer portable toilets.”
The housing slump is reverberating from building sites to corporate office suites.
Kansas City-based NovaStar Financial recently announced it was shedding about 350 employees, including 50 people at its headquarters on Ward Parkway. The once high-flying company, which specializes in making loans to customers with shaky credit histories, has lost roughly $1 billion in market value amid the meltdown in the national subprime lending industry.
H&R Block Inc. also has seen its stock suffer as it tries to shed its subprime lending unit, Option One Mortgage Corp. of Irvine, Calif. Block itself in the last three quarters has written down an estimated $250 million tied to bad home loans.
Despite these individual examples of trouble, however, the broader regional economic statistics so far have not been alarming.
The Federal Reserve Bank of Kansas City estimates there are 51,800 construction jobs in the area, virtually unchanged from January 2006. About half involve residential work.
“A year ago it was up 10 percent, so its no longer contributing to the metropolitan area as a whole” in terms of driving additional growth, said Chad Wilkerson, a regional economist for the Fed.
Moody’s Economy.com also anticipates growth in housing-related employment in Kansas City to slow down significantly this year, from 6 percent to 1 percent. Those numbers include construction workers, building suppliers, landscapers, architects, engineers, bankers and real estate agents.
“It is important to keep in mind that the Kansas City housing market did not see the kind of expansion that we witnessed in some areas of the coasts,” said Magi Kirilova, a Moody’s analyst.
“Therefore, the corresponding slowdown will not be as pronounced, either. While strictly construction payrolls will be impacted the most, the housing-related sector as a whole will see an aggregate slowdown in growth.”
Kirilova added that a subtler impact of the slowdown may be in other aspects of the local economy that benefited from the recent housing boom, when people were buying and furnishing new homes, or refinancing and using the extra cash to make other purchases. The National Association of Home Builders estimates buyers of new homes on average spend $8,500 on furnishings.
Wray, a professor of economics at the University of Missouri-Kansas City, said Americans have weathered ups and downs in the real estate market before, but never at a time when so many were overextended on their credit.
Wray said a recent report by The Wall Street Journal online, citing statistics prepared by First American LoanPerformance, indicated that 14.1 percent of all mortgages in Kansas City were subprime loans. Of those subprime borrowers, 14.2 percent were delinquent.
Wray said Kansas City was in the “middle of the pack” when it comes to the looming problems associated with subprime loans nationwide.
“I don’t think Kansas City will be left alone,” Wray said. “When homes foreclose, this depresses prices in a market where they already are going down.
“It’s true real estate goes up and down, but we’ve never had a decline in values when the housing market is so indebted.”
Builders cut back
Right now, however, the people facing the brunt the housing downturn locally have been the builders and those directly associated with construction. “No doubt, everybody involved in new home construction is definitely being affected, and those towards the front end of new house starts more than the back end,” McCray said.
After several years of record growth, single-family housing starts fell 21 percent last year in Kansas City after several years of record growth.
For the year, the total number of permits issued for single-family homes was 9,404, down from 11,905 in 2005, according to the Home Builders Association of Greater Kansas City. That downward trend deepened in the first two months of 2007 with 1,016 permits issued, about 50 percent fewer than the same period last year.
The slowdown was prompted by a glut of new houses sitting empty on the market, about 5,400 according to the latest report by the Kansas City Regional Association of Realtors.
Source:
http://www.kansascity.com/194/story/64613.html
“We started feeling the slowdown as far back as last summer,” McCray said. “When it really slowed down or stopped was since the beginning of the year. Our sales are off 40 percent.”
With roughly one of every 10 jobs somehow connected to the housing industry, experts warn that the current market slowdown could affect people you ordinarily would not consider. At the end of 2006, there were an estimated 114,000 people employed in housing-related jobs in metropolitan Kansas City, according to Moody’s Economy.com.
Just as the national housing boom helped drive recent growth, the slowdown now serves as a drag on the U.S. economy.
Last week, the outplacement firm Challenger Gray & Christmas reported that announced job cuts in real estate, construction and mortgage lending nationwide surged from 4,764 in the first quarter of 2006 to 21,245 in the recently completed quarter.
That’s almost as many job cuts in one quarter as there were in all 2006. For all of 2006, there were 22,814. The cuts in housing-related industries stood in contrast to the overall job cut numbers, which in March fell to an eight-month low.
“While many have predicted that the housing market has hit bottom, the situation seems only to worsen as home builders continue to report slumping orders,” said John A. Challenger, the chief executive of Challenger Gray & Christmas. “Now we are seeing the impact hit traditional as well as subprime mortgage lenders as demand for loans declines and the number of foreclosures skyrockets.”
Ripple effects
Although the Kansas City market did not boom as much as some other markets — and isn’t expected to collapse like some — the slowdown is being felt locally.
“Every one of my builder customers has laid somebody off,” said Mark Hosking, senior vice president of Morrill & Janes Bank, a construction lender. “They’re also telling me their suppliers are laying people off.
“The layoffs go all the way through the industry. All the way down to Deffenbaugh, because people need fewer portable toilets.”
The housing slump is reverberating from building sites to corporate office suites.
Kansas City-based NovaStar Financial recently announced it was shedding about 350 employees, including 50 people at its headquarters on Ward Parkway. The once high-flying company, which specializes in making loans to customers with shaky credit histories, has lost roughly $1 billion in market value amid the meltdown in the national subprime lending industry.
H&R Block Inc. also has seen its stock suffer as it tries to shed its subprime lending unit, Option One Mortgage Corp. of Irvine, Calif. Block itself in the last three quarters has written down an estimated $250 million tied to bad home loans.
Despite these individual examples of trouble, however, the broader regional economic statistics so far have not been alarming.
The Federal Reserve Bank of Kansas City estimates there are 51,800 construction jobs in the area, virtually unchanged from January 2006. About half involve residential work.
“A year ago it was up 10 percent, so its no longer contributing to the metropolitan area as a whole” in terms of driving additional growth, said Chad Wilkerson, a regional economist for the Fed.
Moody’s Economy.com also anticipates growth in housing-related employment in Kansas City to slow down significantly this year, from 6 percent to 1 percent. Those numbers include construction workers, building suppliers, landscapers, architects, engineers, bankers and real estate agents.
“It is important to keep in mind that the Kansas City housing market did not see the kind of expansion that we witnessed in some areas of the coasts,” said Magi Kirilova, a Moody’s analyst.
“Therefore, the corresponding slowdown will not be as pronounced, either. While strictly construction payrolls will be impacted the most, the housing-related sector as a whole will see an aggregate slowdown in growth.”
Kirilova added that a subtler impact of the slowdown may be in other aspects of the local economy that benefited from the recent housing boom, when people were buying and furnishing new homes, or refinancing and using the extra cash to make other purchases. The National Association of Home Builders estimates buyers of new homes on average spend $8,500 on furnishings.
Wray, a professor of economics at the University of Missouri-Kansas City, said Americans have weathered ups and downs in the real estate market before, but never at a time when so many were overextended on their credit.
Wray said a recent report by The Wall Street Journal online, citing statistics prepared by First American LoanPerformance, indicated that 14.1 percent of all mortgages in Kansas City were subprime loans. Of those subprime borrowers, 14.2 percent were delinquent.
Wray said Kansas City was in the “middle of the pack” when it comes to the looming problems associated with subprime loans nationwide.
“I don’t think Kansas City will be left alone,” Wray said. “When homes foreclose, this depresses prices in a market where they already are going down.
“It’s true real estate goes up and down, but we’ve never had a decline in values when the housing market is so indebted.”
Builders cut back
Right now, however, the people facing the brunt the housing downturn locally have been the builders and those directly associated with construction. “No doubt, everybody involved in new home construction is definitely being affected, and those towards the front end of new house starts more than the back end,” McCray said.
After several years of record growth, single-family housing starts fell 21 percent last year in Kansas City after several years of record growth.
For the year, the total number of permits issued for single-family homes was 9,404, down from 11,905 in 2005, according to the Home Builders Association of Greater Kansas City. That downward trend deepened in the first two months of 2007 with 1,016 permits issued, about 50 percent fewer than the same period last year.
The slowdown was prompted by a glut of new houses sitting empty on the market, about 5,400 according to the latest report by the Kansas City Regional Association of Realtors.
Source:
http://www.kansascity.com/194/story/64613.html
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