Housing market continues strong pace in 2005

To paraphrase the great American humorist Mark Twain, reports of the housing boom's death have been greatly exaggerated.

Despite warnings from analysts and economists in 2004, the nation's housing market continued to set new records and home builders are just as optimistic for 2005.

The year got off to a solid start, with housing starts jumping nearly 5 percent in January to a seasonally adjusted annual rate of 2.2 million units. That is the highest pace in 21 years, according to the Commerce Department. Housing starts in the first month of 2005 were 12 percent higher than during the same period in 2004.

"Builders are striving to keep up with demand and with mortgage rates and other market conditions still very favorable, they see strong months ahead," said Dave Wilson, president of the National Association of Home Builders, in a news release. "The single-family market, in particular, is crying out for supply and increases in housing prices are symptomatic of a market that's being buoyed by demand while constrained by land-use controls in many areas."

The increase is house prices is having an impact on the Flagler County market, according to Russ Forrest, owner of Russell Forrest Custom Homes and president of the Flagler County/Palm Coast Home Builders Association.

"Where we used to have good business for entry-level housing, it really doesn't exist anymore," he said. "It's probably just a shift in the market away from entry level to medium and upper end."

Forrest said the entry-level end of the housing spectrum is the only part slowing in Flagler. Beyond that segment of the market, the home builders expect a strong year again in 2005.

"I think all you have to do is drive through Palm Coast as the biggest example," Forrest said. "You still have a lot of lots with trees on them and somebody owns that land and wants to build a house on it."

Forrest said the building materials supply shortage that affected some builders in 2004 was not as bad as it might have seemed.

"I don't think it was a particularly bad year," he said.

Forrest said builders with established relationships with suppliers and those committed to major building projects likely fared better than smaller builders.

"Depending on where you fit into that equation, it might have been a rough year to get supplies," he said.

The year is already gearing up to be a strong one for local home builders, with permit activity remaining at high levels.

However, building permit activity in the first two months of 2005 could reflect the school impact fee that went into effect in February, said Jason Gambone, Palm Coast director of development services.

"The numbers are pretty high, but they could be affected by the fee coming into effect," he said.

Still, Gambone said there are few signs of a slowdown in the local housing market.

"We're getting a lot of new subdivision proposals," he said. "In terms of the speculation, it's extraordinarily high. I think that at least from an industry standpoint, judging by those applications, people are projecting a strong future."

Home builders nationally are also expected a solid year in 2005.

"On the whole, builders are still expressing very positive views of conditions in the housing market," said the NAHB's Wilson.

The biggest drag on builder attitudes are rising land costs, the NAHB said.

"The main concern builders are citing right now pertains to availability and pricing of lots for development, which itself is a symptom of strong demand," said NAHB Chief Economist David Seiders. "Demand, in turn, continues to be driven by solid job and income growth, low mortgage rates and the investment aspects of homeownership."

New home construction was highest in the south, rising just under 19 percent in January. Winter storms in the Midwest and West pushed housing starts down, but permit activity increased nearly 2 percent nationally