Tuesday, March 24, 2009

'Construction has really carried our state's economy for many years'

From the Oregonian:

EUGENE -- The story isn't dramatic when one home builder after another goes idle. It doesn't make the front page or the top of the newscast like the momentous, 1,000- and 2,000-employee layoffs at Hynix last fall or Monaco Coach this winter.

But the effects on a local economy from the attrition of home builders are arguably larger, said Elliot Eisenberg, the Washington, D.C.-based senior economist with the National Association of Home Builders.

At peak construction pace in recent years, Lane County home builders finished about 1,500 houses per year and that sustained as many as 6,000 jobs while it lasted -- more than the University of Oregon and more than PeaceHealth employ, Eisenberg said.

"When you build 1,500 homes, you are the largest employer in town, bigger than health care," he recently told a gathering sponsored by the Home Builders Association of Lane County.

Now the annual house production has plunged to about 400, and the loss of employment locally has been devastating, he said. "It's a two-thirds decline. You're losing tons of jobs."

New construction, he said, creates income and jobs for Oregonians and additional revenue for local governments, Eisenberg said. But he doesn't go so far as to recommend building houses to prime the economic pump.

But Eisenberg does suggest that local governments back off on the fees, taxes and systems development charges they levy on builders. This would lower house prices, stimulating demand and construction, he said.

Lane County saw 199 fewer homes built in 2008 than in 2007. Eisenberg's model predicts a job loss the first year of 796, a $38 million drop of income circulating in the community and $5.6 million in taxes and fees for local governments.

A snapshot of February housing starts shows a continuing decline in home building. Lane County builders applied for 13 single family home permits from local governments in February, compared with 49 in February 2008, a 73 percent decline.

"Construction -- both residential and commercial -- has really carried our state's economy for many years. When we collapsed, the state's economy collapsed," said John Chandler, executive director of the Oregon Home Builders Association.

As bad as it is in Lane County, Eisenberg said, it's much worse in other parts of the country where home builders far overshot the market during the housing boom and demand is sharply down.

"You're about average. You really are dead average," Eisenberg said, "What's going to happen to you guys is you're going to be buffeted by the national trends. If the banking sector gets unwound and starts lending again, things will get better. If the banking system stays clogged up, the arteries are very tight and you will suffer along like everyone else."

17 homes is much less than the long-run average so this will help to reduce the glut of inventory.