River Cities Business Journal: Construction

Today's News-Herald

LAKE HAVASU CITY - A streak of declining single-family home permits in Lake Havasu City has ended. August saw 47 permits issued for single-family homes, up from 37 in July. The uptick ended a streak of three straight months of declining single-family permits since April.

But August's numbers fall short of last summer's mark, when development officials issued 71 permits for single homes. In addition, more homes are sitting on the market.

Although permits for new single-family homes show an increase after three down months, the entire housing market is gloomier compared to last year, with more than double the number of homes for sale. A total of 1,198 single-family homes were on the local market this August, compared to 534 last August, according to the Havasu Real Estate Report.

Bud Schulz, executive director of the Colorado River Building Industry Association, said, “We are still below a year ago. August figures are more encouraging than July.

“We are fluctuating up and down on the low side.”

The summer of 2005 yielded more housing construction. June through August of 2006 had single-family permits of 65, 66 and 71 sequentially, with an average dollar valuation of $8.7 million a month.

Meanwhile, this summer cooled off substantially.

June (42), July (37) and August (47) were all down from 2005's pace. However, the average dollar valuation of those homes is about $8.6 million a month - down slightly from the previous year in terms of dollar impact.

Schulz said the home construction and real estate industries do not always mirror each other.

“It's really not really good news. Construction materials have gone up - hardware, plastics, roofing, wire, all of that stuff,” Schulz said. “Copper is at an all-time high. Materials have dramatically increased the cost of construction.”

Things might not change before the end of 2006 in Lake Havasu City's construction market, Schulz said.

“We probably aren't going to see too much of a difference in pattern from now into December,” he said.

Nationally, the median price of homes sold in the U.S. in August declined year-over-year for the first time in 11 years, according to news reports. Compared to last year, sales transactions dipped 12.6 percent.

In Lake Havasu City, 112 single-family homes sold in the month of August - 24 of which were new homes. That is down from 182 one year ago and 204 in August 2004, according to the Havasu Real Estate Report. Houses on the market at the end of August are listed as follows:

€ $100,000 and $200,000 - 56

€ $200,001 and $300,000 - 440

€ $300,001 and $400,000 - 311

€ $400,001 and $600,000 - 264

€ $600,001 and above - 127

Schulz described the economic outlook as in “cyclical limbo” since the local economy is in between a busy summer travel season and the approaching holidays.

An ample supply of labor is vital to construction growth in Arizona. Although Schulz said there is neither an excess nor a significant shortage of construction laborers at this time, worker supply is one of the factors that can change quickly.

Some groups, such as the Mohave County Minutemen, have accused Arizona developers of breaking the law by using illegal immigrant workers. Heightened border patrols, in addition to a National Guard presence, led to more illegal immigrant arrests this summer.

“To have an endless supply of immigrant labor is a bad practice,” Schulz said, adding that government agencies can't go out and start arresting business owners without giving them reliable and affordable means for checking immigrant worker status.

All laborers in the construction industry should play by the rules, regardless of whether there is a labor shortage or not, he said.

Permits for single-family homes averaged 87 homes a month in 2004, according to the Havasu Real Estate Report. Through the first eight months of 2006, the monthly permit average is 52.