By James T. Hammond
jhammond@scbiznews.com 
Published July 24, 2009

South Carolina’s homebuilders are riding out the housing industry collapse better than the rest of the nation, according to a new report from a University of South Carolina economist.

The necessary factors are in place for homebuilders to see their business rebound in the coming months, according to new data from researchers at the Moore School of Business.

Doug Woodward, who leads the University of South Carolina’s business research center in the Moore School, told attendees of the Home Builders Association of South Carolina annual convention in Greenville that U.S. leading economic indicators are starting to trend up, after six months of decline.

He said the ongoing crisis in the financial markets continues to drag down activity in what he calls the real economy, where goods and services produce real wealth.

“Until these issues are resolved, your industry and the entire economy are not going to thrive,” Woodward said. “But I am more optimistic than I was a couple of months ago.

“I believe there are stable markets in our economy, and housing is one of them,” he said.

As far as the financial markets that have produced the longest recession since 1933 are concerned, he said, “We’re going to have to get back to some regulation.”

“We’ll get through this; we have before,” he said, noting that 12 recessions occurred between 1797 and The Great Depression, and another 12 recessions have occurred since World War II.

Today, home sales have increased for the first time since March 2006.

“This is not going to be a Great Depression,” he said, adding that a depression event is typically characterized by more than 15% unemployment nationwide and that recovery takes five years.

He also sees a silver lining: “If history is any lesson, the deepest declines are followed by the fastest recovery. Let’s cross our fingers and hope we have that kind of recovery.”

Positive signs, according to Woodward, are:

• The federal stimulus is just getting started, and the impact will begin to be felt possibly early next year. “It will make a difference,” he said.
• Interest rates remain low and will stimulate home purchases when credit loosens.
• Housing affordability is high in South Carolina when median incomes are compared with median home prices.

“Affordability is huge,” Woodward said.

An inaugural copy of the S.C. Housing Market Report, written by Joseph C. Von Nessen of the Division of Research at the Moore School, further analyzes the affordability issue and finds that housing affordability is the highest it has ever been in South Carolina.

“Since July 2006, housing affordability has increased by 34%,” Von Nessen writes in the quarterly report. “South Carolina’s housing market is in a strong position relative to the rest of the nation.”

Von Nessen cites Federal Housing Finance Agency figures that show the Spartanburg metropolitan statistical area ranks sixth in the nation in housing appreciation, and South Carolina ranks 20th overall.

Woodward’s forecast is for a recovering economy that will not bring with it a return to the levels of housing demand from the mid-2000s.

“The housing market in South Carolina and across the nation is establishing a new equilibrium level where the number of housing units demanded will likely be between 40% and 60% of the market sales that were occurring at the peak of the housing boom in late 2005/early 2006,” the S.C. Housing Market Report states. “Economic growth beyond this point will be slow and steady as the national economy rebounds.”