IBJ staff report
Local and national economists are hopeful regarding 2019, even as the year 2018 ended with a fiscal thud.
While job numbers remain strong, the market faces a variety of uncertainty, from the impact of recent interest rate increases to battles over U.S. trade.
All this has industry groups like the Greater Gateway Association of Realtors edgy about the prospects.
The group played host Dec. 12 to National Association of Realtors Chief Economist Lawrence Yun, Ph.D., who said he doesn’t see the potential for a severe recession. The factors that trigger such downturns are not present. Surging oil prices have done it in the past, but America is now more energy independent, he said. And raising interest rates too quickly is unlikely because of The Fed’s understanding of how its actions impact the economy.
Also, he said, consumer confidence and business confidence remain very high.
Still, in speaking to his audience, Jun said workforce shortages, impact fees and local zoning restrictions are disincentives for residential developers and builders nationwide and in the St. Louis region.
“We are in a rare situation nationwide where there are actually more job openings than people looking for jobs,” said Yun, “and this is evident in the homebuilding industry where there are severe shortages in carpenters, welders, electricians and plumbers. In addition to workforce shortages relevant to new home construction, excessive municipal fees and regulations imposed on developers are driving builders from markets where adequate housing inventory is in great demand.”
Jim Alexander, senior vice president of economic development for the St. Louis Regional Chamber, spoke on the regional outlook at the same meeting.
The Greater St. Louis area, made up of 15 counties and just under 3 million people, has slipped to the 21st largest metro area in population, he said. There are a million households and a workforce of about 1.5 million.
About a third of the population lives in Metro East. The median income is slightly higher than the country’s, but pockets like Edwardsville and Glen Carbon are significantly higher.
The MSA jobless rate heading into the end of the year stood at just under 3 percent (the U.S.’ was at 3.7 percent), and one of the things that keeps the area more stable is its diversity of industries, with no one industry serving as the lion’s share of employment. Things are stable enough that many companies can’t fill open jobs, he said.
Growth sectors that are expanding include health care, social assistance, financial, professional and business services, manufacturing and trade, transportation and utilities.
On the other hand, mining, logging and construction are all down, he said.
When the next round of unemployment numbers come out, Alexander expects them to show the 100th straight month of job growth.
Still, population numbers in the St. Louis region are going to have to pick up if the area is going to stay competitive, he said.
Alexander shared a recent story about a failed effort to attract a 2,000-job project. The St. Louis region was one of six under consideration.
In the end, St. Louis came in third, behind two other metro areas that each had population growth higher than the national average. The deal is still being negotiating and so the names of the other communities are not yet known.
The company didn’t feel the St. Louis area was prepared to take on 2,000 jobs, he said.
“These were $100,000 jobs,” Alexander said. “They said if this was a 600-job project, you probably would have won it.”
Realtors express worries
The surge in commercial development across Edwardsville and Glen Carbon is offset by a prolonged lack of new housing stock, partly caused by regulatory barriers like impact fees, Realtors say.
According to Madison County Planning & Development, building permit fees – namely utility tap-on fees and permits – for 10 municipalities in the county add anywhere from $2,165 to $12,165 onto the price of a new home, with Edwardsville’s and Glen Carbon’s total fees per home ranking as the highest. The village of Glen Carbon recently enacted a one-year moratorium on the school district impact fee, effective Jan. 1, but as a whole impact fees remain a deterrent.
New home starts in Madison County year-to-date, according to MarketGraphics Research Group data, total 183, 5.2 percent lower than all of 2017 and 32 percent down from 2016. In St. Clair County year-to-date, new home starts total 256 as compared to 261 in 2017 and 327 in 2016. Monroe County stats reveal a total of 57 new home starts year-to-date, down from 85 in all of 2017 and 108 in 2016.
Kyle Anderson, CEO of Greater Gateway Association of Realtors, said the lack of entry-level and middle-market housing stock across the Metro East – particularly in Edwardsville and Glen Carbon – is keeping potential first-time homebuyers from achieving their ownership dream.
“There’s tremendous disparity in available housing stock in particular pockets of the Metro East market,” Anderson said. “Our members are feeling the strain trying to find housing that exists at every economic level. We know first-hand of couples in their twenties and thirties who want to buy in our market but have to choose from low-end, below-standard stock or homes valued at $500,000 and up. They just can’t find it in our area, so they choose to live elsewhere. We’re asking our local governments not to initiate any additional policies that exacerbate this. There’s already a buyers’ exodus, and it’s attributable to disincentives for residential developers as well as a lack of existing housing inventory.”
Edwardsville/Glen Carbon Chamber of Commerce President said that while Edwardsville and Glen Carbon are enjoying record levels of new commercial development, such is ultimately tied to healthy residential development.
“Our market has seen a surge in commercial development that will hopefully continue in coming years,” said Desiree Bennyhoff, president and CEO of the Edwardsville/Glen Carbon Chamber of Commerce. “That said, an increasing population is critical to sustain new shopping and dining establishments that come with that growth, for the health of our businesses, our residents and the community as a whole.”