Clark County’s home building slump affects other sectors

Clark County’s home building downturn was worse last year than in other parts of the state, and the impact continues to affect a cross section of local suppliers, furniture stores and auto sellers who blame slow housing starts for their own slumping sales.

“When people move, they go on the market for furniture,” said Tom Craig, president of the Sparks Home Furnishings in downtown Vancouver. Sparks’ sales were down 30 percent in December, marking the end of one of the slowest years on record for home building in the county.

Builders put up less than half the homes last year as were built in 2007, according to the Department of Community Development, which tracks monthly building permit reports. From January through December, only 592 permits were issued to build single-family homes in unincorporated Clark County, down from 1,245 permit in 2007. Permits issued in 2008 were worth an estimated total of $130.4 million, down by nearly 50 percent from the $250.8 million in 2007. That means the local economy — builders, subcontractors, lumber and electrical suppliers, plumbers and dry wall crews — took at least a $120.4 million hit. The totals do not include home building permits issued inside city limits within the county. But those totals are substantially less than the county numbers.

Local business owners say they’ve been feeling the pinch, a problem that could last through the first half of the year, if not longer, said Brett Bryant, executive vice president of Vancouver-based First Independent Bank.

“Of course it will ripple throughout the economy,” he said of a downturn that has been extremely difficult for businesses that were accustomed to Clark County’s historically strong housing market. Each year from 2003 through 2005, more than 2,100 county permits were issued to build single-family homes.

Subdivision builders took full advantage of Clark County’s desirable proximity to Portland’s job market, which led to a frenzy of overbuilding that was bound to slow down, Bryant said.

“It’s important to realize that past housing markets were artificially inflated,” he said, perhaps more so than in other parts of the state.

Statewide, the number of housing permits also dropped through most of the year, although not as dramatically as in Clark County, said Glenn Crellin, director of the Washington Center for Real Estate Research in Pullman.

Through October, 12,348 permits were issued to build single-family homes in Washington, down 43.7 percent from the 21,934 permits issued during the same period in 2007. Through October, Clark County’s home building had dropped by 50.7 percent.

“The Portland area as a whole has performed less well than the state (of Washington) and the Seattle area,” where year-over-year building permits dropped by 42 percent through October, Crellin said.

“They are still horrible numbers, but computer science and the health sciences industries have remained strong in Seattle,” he said.

Crellin said the Portland metro area has fared better than Los Angeles, Las Vegas and Phoenix, where home building activity has faltered for more than a year.

“It will take years to work off the overbuilding,” said Tim Duy, an economics professor at the University of Oregon.

The resulting inventory of homes for sale has already begun to affect the sellers of building supplies, where prices are flat and store traffic is down, said the assistant manager of a local lumber store who did not want his name used.

Those who sell luxury items are also affected, Duy said.

Without the ability to leverage home-equity loans, “Consumers have less access to easy sources of capital,” he said.

That has factored into 40 percent and 50 percent drops in new automobile sales, according to Alan Webb, owner of the Alan Web Mazda-Dodge dealership in Vancouver.

But Webb said he is encouraged by recent “good foot traffic,” a sign he said typically signals the return of customers to the automobile market.

“Cars wear out and people can’t stay away from purchasing them forever,” Webb said.

Car seller Gene Bradshaw agreed, adding that Clark County is still a good market.

“It’s real simple to say there are fewer housing starts, so the economy is in the ditch, and I’m sure it’s a contributing factor, but how much it contributes is hard to tell,” Bradshaw said.

Duy also said restaurants must adapt to the current economic climate.

That’s what Beaches restaurant owner Mark Matthias did over the past few months with a la carte menu items that eliminated the need to purchase higher-priced meals.

“We can adapt really quickly and we already have,” said Matthias, who has operated the Vancouver waterfront restaurant since 1995. “That’s your best bet to get through tough economic times.”

Meanwhile, builders are hoping that this year’s lower mortgage interest rates will help clear some of the unsold new home inventory and bring buyers back to the market.