Jagoe Homes has laid off approximately 18% of personnel this week, with co-owner Bill Jagoe saying it’s an unfortunate reflection of the downturn in the market. It’s not a problem specific to Owensboro, as homebuilders nationwide have begun reporting similar sizable layoffs.
During the pandemic, interest rates dropped significantly, consumer and builder confidence was high, and demand for new homes spiked — all good signs for homebuilders such as Jagoe.
Those factors are all working against builders now.
Interest rates this year jumped to as much as 7.25%. Supply shortages continue to drive up construction costs and delay build times. A November report from the Census Bureau showed year-over-year declines nationwide in the number of new home construction (down 9%) and building permits (down 10%).
Meanwhile, the National Association of Home Builders (NAHB) reported in November that builder confidence dropped for an 11th straight month — marking the lowest confidence reading since June 2012, with the exception of the onset of the pandemic in the spring of 2020.
“Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” NAHB Chairman Jerry Konter said in a release.
Similarly, a November report from Fannie Mae showed consumer confidence in housing hit a new low since the created the Home Purchase Sentiment Index (HPSI) in 2011.
The local housing market had been faring better than the rest of the country, but October’s report finally showed a decline — and reflects the struggles homebuilders such as Jagoe are about to face.
According to the Greater Owensboro Realtor Association, the 141 units sold locally during October 2022 was down from 150 sold the month prior, and was also lower than each of the last two years for October. (November’s numbers have not yet been published.)
Other signs of a slowing market were the days on market jumping from 52 in September to 68 in October, number of sales pending dropping from 154 to 128, and number of active listings rising from 243 to 289.
“It’s kind of really settled back into the same demand we had in 2019,” Jagoe said.
Jagoe said over the last four years the company has “probably more than doubled” their employment. Some of that is due to continued expansion, while some jobs were actually created due to supply and labor shortages.
But with demand down and less inventory to build, the company doesn’t need all those jobs right now.
“Last year we had a month when we wrote 120 contracts,” Jagoe said. “That’s way above normal, which is somewhere between 45 and 60. We had to have manpower to handle that, but that’s just not gonna happen now.”
Jagoe said their layoffs span numerous departments in Owensboro, Bowling Green, Evansville, and Louisville, along with some remote workers from further locations.
He said it won’t delay any of their current projects, though.
“It won’t affect anything we’re building,” Jagoe said.
Most significantly, Jagoe Homes is in the early stages of building Heatherstone, a new community on U.S. 60 West near Audubon Elementary School. Groundwork has been ongoing for weeks, and Jagoe hopes they can begin construction on the first homes in summer 2023. Heatherstone will have 333 homes, making it the third-biggest community Jagoe has built in the county.
Jagoe said while it’s a difficult time for builders, it’s not as bad as the Great Recession that hit from 2007-09.
“This is different from the great financial crisis,” he said. “Rates went way down and really spiked up quickly. There’s not like a financial crisis out there, there’s just so much uncertainty in the market.”
Jagoe also hopes they rebound from this the same way they did 13 years ago.
“In 2009, we started building in Bowling Green,” Jagoe said. “Now we’re the largest market share of any market share of builder in Bowling Green — and Owensboro, Evansville, and Newburgh.”
Jagoe added, “I think by the third quarter we’ll start seeing things really pick back up. We’ve got new developments coming in the summer, opening up in some new towns we’re not even in yet.”
