Gamblers Turn to Housing

A number of venues, from online entity Hedgestreet.com to the Chicago Mercantile Exchange, have recently started providing consumers with the opportunity to bet on price increases in the housing market. One broker-investor in San Francisco bet $4,000 that the median price of a single-family home in his area wouldn’t rise above $729,000 in the third quarter of this year. When the numbers from the National Association of Realtors® came out in November, he walked away $5,000 richer. Chicago Mercantile Exchange, the largest futures exchange in the U.S., has announced that it will begin offering trading in U.S. home prices in April. The exchange will offer trading in housing-price futures based on the median home price in each of 10 U.S. cities. “The idea of betting on the value of everyday items has been around for some time,” said Felix Carabello, the exchange’s associate director of alternative investments. “The housing boom is what caused it to resonate with home buyers and others.” The cost of investment in the exchange’s derivatives is too high for everyday home owners, however, and it’s necessary to sign up with a broker to participate. (www.inman.com)
Inman News; Janis Mara

[Return to top]

Limits on Homes Push Up Prices

Economists increasingly are concluding that the shortage of affordably priced housing in Washington, D.C. and other major U.S. cities on the East and West coasts is a result more of restrictions on development than high construction costs or other market forces. “It simply takes too long and is too expensive to move through the development process,” said Mark Vitner, senior economist at Wachovia Securities, especially in areas where the population and demand for housing are growing the fastest. Anti-housing restrictions have increased as home owners have grown more powerful and more willing to use their power to stop or greatly restrict development in their neighborhoods through the political and regulatory processes and the courts, according to a recent National Bureau of Economic Research study of 316 U.S. cities since the 1950s. “Changes in housing-supply regulations may be the most important transformation that has happened in the American housing market since the development of the automobile,” said Edward L. Glaeser, a Harvard economist and one of the authors of the study. For example, in Montgomery County, Md., where the average price of a home is more than $560,000, a temporary moratorium on building was imposed earlier this year after a controversy over a developer’s violation of height restrictions. The county already had banned most development in one-third of the jurisdiction set aside as an agricultural reserve. Under pressure from residents’ groups, it is considering further restrictions on building in the reserve by churches and nonprofit institutions. (www.rismedia.com)
RisMedia.com (12/14/05); Beth Bresnahan, Washington Times

[Return to top]

Don’t Be Fooled by TV Shows, Extreme Makeovers Take Time

Television viewers can watch the “Extreme Makeover” crew gut and reconstruct a 100-year-old farmhouse in one week, while in real life it’s standard to wait six times that long for special-order floorboards. Steve Gately and his wife Lisa Dewey are planning to spend years renovating the 1925 Dutch Colonial revival house they purchased in 2001. They installed a white picket fence in 2002, requiring some professional help after getting through only a third of the initial coat of paint. In 2003, with a new ceiling, drywall and a bathroom, they transformed unfinished basement space into a guest room. Last year, they installed central air conditioning and this year they have completed a front porch. There is one obvious financial advantage to spreading out the home-improvement bill over the years, according to Jim Lapides of the NAHB Remodelors™ Council. “Instead of taking out a big loan and then paying off the interest over time, you’re generally paying off the principal all at once,” he said. (www.chicagotribune.com)
Chicago Tribune (12/4/05); Jeff Turrentine, Washington Post

[Return to top]

Americans Swallow Hurricane Anxiety to Build Coast to Coast

Coastal construction is still booming in most places even though Americans have just endured back-to-back the two most destructive hurricane seasons in their history, with insured losses topping $54 billion this season, almost doubling last year’s record, according to the Insurance Information Institute. A lopsided 53% of Americans inhabit the 25% of U.S. land that is coastal. In Florida, where hurricanes are most prevalent, 98% of the population is in coastal counties. The U.S. coastal population has grown by two-thirds since 1960, mirroring growth of the entire country, according to data from the U.S. Census Bureau. Property prices usually rise with proximity to the shore. The average value of a coastal home has climbed to $308,845, almost 50% more than inland, according to Dataquick Information Systems. The federal government’s flood insurance program has expanded 16-fold since 1978 to cover more than $800 billion worth of assets. Claims from this past season will surpass $23 billion, according to Eugene Kinerney, a spokesman for the program, which will be more than the total payouts in the system’s 36-year history. (www.insurancenewsnet.com)
Insurance Newsnet (12/4/05); Jeff Donn, Associated Press

[Return to top]

Home — Floors: For Cold Feet

Demand for ceramic tile and marble bathroom flooring has been growing for about 10 years, as a wider variety of materials has hit the market and people are investing more of their equity in their homes, according to Vince Butler, a Clifton, Va. contractor and vice chairman of the NAHB Remodelors™ Council. The increasingly common solution to those cold floors is underfloor electric heating that can be installed in new construction or a renovation. Nearly 6 million square feet of electric radiant heating systems were sold last year, up from 2 million in 2003, according to the Radiant Panel Association, which is based in Loveland, Colo. Manufacturers and home owners say it usually costs about 10 cents to 15 cents a day to keep a small floor warm. (www.wsj.com)
Wall Street Journal (12/3/05); Sara Schaefer Munoz

[Return to top]

Factory-Built Homes Are Quicker, Cheaper and Catching on With Buyers

With housing prices beyond the reach of many families in Boston’s northern suburbs, a growing number of buyers are turning away from traditional stick-built construction in favor of less expensive modular homes, helping to push sales of factory-built homes in those neighborhoods to record levels. In New England, one out of every 10 new homes is modular, up from one in 20 in 1990, according to NAHB’s Building Systems Council. “Choosing between stick-built and modular is like choosing between espresso and latte,” said NAHB spokesman Eric Fulton. “They both get the job done. Which you choose is simply a matter of taste.”  Modular homes typically cost about 10% less than stick-built homes, depending on the style and size, Fulton said. And weather delays are not an issue with modular homes, he said. From factory floor to move-in day, it typically takes about three to four months to complete a modular home, compared to eight or nine months for a traditional home. (www.boston.com).
Boston Globe (11/20/05); Brenda J. Buote

[Return to top]