Builders Find That Smaller Homes Are Selling Well These Days

Smaller new homes are turning into a bright spot for some home builders. KB Home’s smaller model helped it achieve a 62% increase in year-over-year orders in the third quarter. The trend is being driven partly by the fact that more customers are first-time buyers who have less to spend. Nearly 80% of KB Home’s customers are buying a home for the first time. At Pulte Homes, its most popular designs today are 100 to 200 square feet less than the most popular plans in 2005-2006. So the lower-priced homes don’t seem bare-bones to buyers, open floor plans and 9-foot ceilings provide a sense of roominess. Fireplaces are an option. To hold down costs, Corian is a standard for kitchen counters instead of granite. Appliances are standard models instead of pricier stainless steel. Luxury builder Toll Bros. says demand is down across the board, and not just for larger homes. Company officials say they, too, see an increased interest in smaller homes but believe that home buyers will someday return to wanting larger properties. Smaller homes, they say, reflect a down economy and tighter credit rather than an appetite for less space. “We see the demand for smaller homes, but it’s not as though there’s huge demand for smaller homes but no demand for larger homes,” says Kira McCarron, a Toll Bros. spokeswoman. “There is still a demand for luxury homes.” (www.usatoday.com)
USA Today (12/17/09); Stephanie Armour

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Active Adults Opt for Rental Units

Like the general housing market, the active-adult market has been struggling because of the current economic downturn. Part of the population is hesitant to buy because the home they have kept for more than 30 years is not worth as much as it was just a few short years ago, according to Bill Becker, president of the William E. Becker Organization, and Bill Feinberg, president of Feinberg & Associates. Many people also often realize they need to sell their current home before they are able to move to a new community. In an attempt to offset costs and sell out properties, builders are starting to shy away from the old way of selling condominiums to active adults. Many previously established buildings are being converted to rental units due to a lack of available funding in the current economy. Luckily, rental units are becoming more desirable among this age group, say Becker and Feinberg. And many communities have experienced an increase in occupancy after switching to rental units. (www.globest.com)
GlobeSt.com (12/21/09); Alyson Graia

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Signs of Life Emerge in Commercial Real Estate Lending Market

Although several positive developments appear to be emerging in the real estate capital markets, a financing gap is expected to continue, according to David Lynn, managing director and head of U.S. research and investment strategy with New York-based ING Clarion. The commercial mortgage-backed securities (CMBS) market has shown signs of life and spreads have narrowed, he says, among signs pointing to a thawing in the real estate capital markets. However, “commercial mortgage debt remains both expensive and difficult to obtain. We believe that the lending environment will continue to improve over the next year, including an increasing volume of CMBS originations. These improvements will not, however, likely be enough to fully address the $1.1 trillion of commercial real estate debt that will mature over the next three years (2010-2012). With underwriting requirements remaining tight, traditional balance sheet lenders under stress and reluctant to lend and regional bank failures rising, we expect a continuing financing gap in the market.” (www.nreionline.com)
National Real Estate Investor (12/7/09); David Lynn

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Home, Rethought as Theater and Stage

New Hampshire home builder Tedd Benson says we need houses that are both affordable and high-performance. Built to last with high-quality materials, high-performance houses usually cost more. To make them affordable, Benson says, we have to rethink the whole process: the way we build houses, the things we include in a mortgage and how we assess value when we decide to buy a house or take a pass. He makes his houses affordable without skimping on quality because he does not provide what he calls “tricked-out interiors,” which often are trendy and quickly outdated. Instead, his interiors are modest, and more than half of his construction budget is allocated to things home owners cannot undertake themselves or do with a loan, such as buying home building materials and engaging various trades to do the site work; erecting the foundation walls and building frame; enclosing it with an exterior “skin”; and installing the electric, plumbing and heating and cooling systems. Energy efficiency is also a priority because it will reduce utility bills for the initial home owners and for every subsequent owner. High-performance features are affordable because the interiors are modestly outfitted in a way that can easily be upgraded over time and paid for out of the owners’ paychecks. For example, Benson said, a floor can be tastefully finished by sanding and sealing the plywood subfloor. Or for a few hundred dollars more, you could make a finished subfloor look more upscale by using 1-by-6-inch wood planks instead of plywood. He noted that oiling the planks before sealing them will enhance the look by adding depth. His kitchen countertops are plastic laminate with oak edging, the type he had in his own house for 25 years. He cuts cabinetry costs by 40% or more by installing only the cabinetry boxes and drawers, leaving it to the owners to add doors later. Though unorthodox, Benson said this gives owners all the storage they need, and the informality it creates can be surprisingly inviting. (www.washingtonpost.com)
Washington Post (12/19/09); Katherine Salant

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The High-Rise Urban Farms of the Future

Vertical farming technologies are increasing the possibilities of cultivating crops much more efficiently. Moving farms into buildings might change the way much of humanity grows its food. And while vertical farming is on the cusp of blooming, the main hurdle isn’t technology; it’s one of engineering and funding. “We know how to grow food inside,” says Dickson Despommier of Columbia University, known as the founder of the modern vertical farming concept. “That’s not the problem. What we don’t know yet is how to integrate the technology into a tall building. That appears to be a simple, but perhaps expensive engineering problem.” Because offland farming uses a fraction of the water land farming does, Despommier believes that vertical farming will take root first in “water challenged” areas of the world, like the Middle East. Land use (mainly forestry and agriculture) and its impact on the earth’s natural carbon cycle has been given much attention by policymakers looking to reduce carbon emissions. “Every indoor acre you farm gives around five to six outdoor acres for the trees to grow back and suck up more carbon,” says Despommier. “That gives someone a chance to catch up with the climate change issue. Vertical farming allows the possibility to giving land back to what it was intended for and that is producing hardwood forests.” Despommier estimates that if a city were to give the nod, a viable vertical farm would spring up within a year. “That’s why a prototype would be a good place to start,” writes Despommier in the New York Times. “I estimate that constructing a five-story farm, taking up one-eighth of a square city block, would cost $20 million to $30 million.” (www.greenerbuildings.com)
GreenBiz.com (11/24/09); GLOBE-Net staff

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Advocates Eye New Plan for Jobless Borrowers

Groups are meeting with officials at the Treasury Department, HUD and in the White House’s National Economic Council to have them take part of an existing $75 billion program to help home owners modify mortgages and put it in a program that would help the jobless stay in their homes. A program proposed by Philadelphia Unemployment Project Director John Dodds would give home owners who have been unemployed during the recession a loan fixed at 31% of the family’s income for two or three years or until the primary wage earner finds employment again. Lenders and loan services would receive payments from the $75 billion in bank bailout funds allocated for home owner assistance to cover their losses; however, they would be required to modify the loan payment down somewhat before government payments would begin. A recently unemployed home owner with a $1,000-a-month mortgage, who receives $1,600 a month in unemployment compensation, could need to pay $496 a month, or 31% of their jobless income. The other $504 would be paid in the form of a loan from the government directly to the lender. The program is envisioned to work with the existing mortgage modification program, known as the Home Affordable Modification Program. Under the plan, the jobless home owner’s principal and interest would be adjusted down before the borrower would receive the new loan. When the borrower is employed again, monthly payments would be at this modified level, not at the 31% of their household income at the time of being unemployed or at their original level. Home owners would cover the government loan by required additional payments at the end of their 30-year mortgage, or when they refinance or sell the home. (www.marketwatch.com)
MarketWatch (12/21/09); Ronald D. Orol

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