Nation's Building News Online: May 10, 2004Print All Articles Text Version |
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Builders Convince Government to Consider Hatchery Salmon in Endangered Species ListingsIn a victory for the home building industry, the Bush Administration is overhauling the way Pacific Northwest salmon are listed under the Endangered Species Act (ESA). In a proposed rulemaking this month, the National Marine Fisheries Service will require hatchery salmon to be considered in determining whether many subpopulations of the fish should be listed as endangered, something that the federal government has never done before. “For years, NAHB has advocated considering wild and hatchery salmon before listing the species under the ESA,” said NAHB President Bobby Rayburn. “The federal government’s proposal to include hatchery salmon may finally show that this species is not actually endangered, as many groups would have us believe.” The Building Industry Association of Washington State (BIAW) was instrumental in getting the government to move on this issue after a federal judge for the Eastern District of Washington ruled in favor of a petition by the association for the Fisheries Service to decide by May 30 whether to de-list eight salmon subpopulations in which hatchery salmon had not been included. "Our suit got the government to address de-listing issues after two-and-a-half years of untenable delay," said BIAW President Gary Cronce. "Salmon have been returning in record numbers the last several years, and there is no reason to restrict private property rights for a species that never should have been listed under the ESA in the first place." This February, NAHB and the Oregon Building Industry Association teamed up to fight the listing of the Oregon coho salmon, arguing in an amicus brief filed in federal court that the listing was arbitrary and capricious. The judge agreed with the home builders and ordered the Fisheries Service to consider the listing further. His ruling was upheld by the Ninth Circuit Court of Appeals. “NAHB’s efforts in the endangered species arena are beginning to show results,” said Rayburn. “Once the Fisheries Service considers hatchery salmon in the subpopulations, there is a chance that the salmon can be taken off the endangered list,” said Rayburn. “This would be a tremendous victory for NAHB and its members, particularly in the Pacific Northwest.” For more information on regulatory issues, e-mail Michael Mittelholzer or call him at 800-368-5242 x8660; on legal questions, contact Tom Ward x8230. Building News Coast To CoastCement Crunch Throws a Wrench in Home BuildingBuilders in Florida are bracing for a worldwide cement shortage. Inventory has been drastically reduced at suppliers, forcing builders to slow their production schedules. The Florida Concrete and Products Association blames China's construction frenzy for the shortage, although the opening of two new mills in the state could alleviate the crunch. The Florida Department of Transportation's Maryemma Batchelder has heard of significant jumps in home prices in response to the cement shortage. Green Gets RealGreen construction is popping up in affordable developments in many cities as builders begin to understand its benefits to lower-income residents. Home owners achieve substantial cost savings with energy-efficient appliances, heating systems and windows and plumbing fixtures that use less water, among other things. One home owner in the South Bronx neighborhood of New York City is able to heat his three-family, 4,000-square-foot building for just $225 per month due to the energy-saving features installed by developer Les Bluestone. However, many developers balk at eco-friendly projects because of the costs involved as well as the difficulty of persuading buyers to pay more money upfront to take advantage of long-term savings. A number of state and local governments have responded with incentive programs for developers willing to adopt green building practices. For instance, builders in New Jersey receive as much as $7,500 for energy-saving features; while those in California are forced to embrace green construction if they hope to win tax credits for low-cost housing. Homes More Affordable in First QuarterLower home prices, coupled with income gains, boosted the National Association of Realtors' housing affordability index from 138.7 in the fourth quarter of 2003 to 144.1 during the first three months of this year. The national median home price reached $170,800 in the first quarter, but NAR reports that the average family earned enough to purchase a residence costing $246,100. Dwellings are still affordable in the current quarter, according to NAR, despite recent jumps in mortgage rates. Taking Basements to the Next LevelToday's home owners are taking the finished basement to a new level in order to maximize space without a more expensive above-ground addition. Before basement projects can commence, home owners must consider water problems and take care to install multiple sump pumps and dehumidifiers, keep gutters clean and make sure water flows away from the foundation. They also must decide how to heat the area, with options including radiant and zoned heating. Radon tests are recommended as well. Experts say the most popular basement projects involve saunas, lap pools, bowling alleys, home theaters complete with seating and concession stands, dance floors, weight rooms and wine cellars. Some even want extra bedrooms or in-law apartments in the basement. These improvements can range in price from $18,000-$40,000 for a basic playroom to more than $100,000 for more extensive work. Do-it-yourself projects typically cost less, but experts urge home owners to leave all but the painting to professionals. Home Buying Getting Out of Reach in Some Metro AreasResearch by the Fannie Mae Foundation on the affordability of homeownership concludes that median-priced housing remains within financial reach of buyers in Philadelphia, Atlanta and Houston but is drifting away from working families in Chicago, Denver, Seattle and the nation's capital. A home at the median price — which neared $169,000 nationwide last year while the median income was at $54,500 — already has become unaffordable for New Yorkers, Bostonians and residents of Los Angeles and San Francisco, according to the study. The escalation in property prices combined with stagnant incomes has particularly strong implications for public workers, notes Fannie Mae Foundation President and CEO Stacey Stewart, who says such employees could find it next to impossible to purchase homes in the markets where they work. After Years in the Suburbs, Many Blacks Return to City LifeIn a reversal of past housing trends, upper- and middle-class African Americans increasingly are seeking a return to inner-city neighborhoods after years of living in the suburbs. Some experts say the trend reflects the failure of America's suburbs to provide a welcoming integrated environment for many black families, while others say it is also an attempt on the part of African Americans to reclaim their roots in the city communities where they were raised. While the interest in moving to the city is growing among African Americans, Rice University sociology professor Stephen Klineberg notes in a recent poll of Houston-area families that four times as many white suburbanites are looking to relocate to the city this year than were the year before. The movement of both white and black middle-class families into inner-city communities is transforming cityscapes across the country, in cities such as Pittsburgh and Atlanta, as land values and development projects are on the rise. However, the trend is creating conflict between long-time residents and the newcomers who are changing the face of their neighborhoods. In Houston's Third Ward, for example, local activists are campaigning against the changes by urging existing residents not to sell their homes to developers. "We want to find people who will make this community better by becoming part of its fabric, not by changing its fabric," notes Rep. Garnet Coleman, who represents the Third Ward and other surrounding communities in Houston. Investing in Outdoor Upgrade, From Landscaping to DecksHome owners in many areas are spending a significant amount of money on landscaping and other outdoor projects, averaging $317 per family last year. Decks and patios are the most valuable improvements, allowing home owners to recoup more than 100% of their investment when they sell. In addition, the American Homeowners' Association estimates that top-notch landscaping will add another 7%-15% to a property's resale price. The most attractive landscaping, according to experts, involves regional styles, low-maintenance gardens, natural fences, trellises, ponds and fountains. Home owners also are increasingly interested in balconies, outdoor lighting and upscale front doors. As for outdoor kitchens, some are shelling out as much as $25,000 on outdoor ovens, bars, sinks, grills, fireplaces and seating. Remodeling Growth SlowsHarvard University's Joint Center for Housing Studies reports that remodeling expenditures rose 2.5% in the first quarter, down from a 7.7% growth rate during the same period of last year. The decline can be attributed to higher interest rates. Even with the drop in activity, however, home owners spent an unprecedented $125 billion on improvements in 2003; and directors at the Joint Center expect strong home resales, income gains and the improving job market to continue to fuel the remodeling market. "101 Cost-Effective Ways to Increase the Value of Your Home" author Steve Berges believes home owners will concentrate on projects that enhance the appearance of their dwellings as interest rates edge up. He recommends that those interested in high-yielding improvements consider adding storage sheds, garages, home offices or pantries; installing new faucets, appliances and flooring; repainting; and purchasing new window treatments, furniture and accessories, among other things. Innovative Boston-Area Buildings at a Green StandardCity planners, property owners and developers in the Boston area are showing an increasing interest in environmentally friendly and energy-efficient "green" building techniques. The Genzyme Corporation recently opened its headquarters in a new green building in Cambridge, MA, as construction began in Boston on the new Biosquare Research Building D, also a green project. Green building aims to reduce consumption of energy and other resources by using sustainable materials, recycling waste and providing inhabitants with easy access to public transportation. These methods require special materials and trained experts, and therefore green buildings can cost between 1% and 16% more to develop, but supporters say the buildings are less costly in the long run because they operate more efficiently and attract quality renters. Several Massachusetts communities have made green building a priority by providing builders and property owners with incentives, such as making the permit process easier for buildings with green features. In addition, Boston Mayor Thomas Menino has appointed a task force of owners, engineers, contractors and other professionals to make recommendations for a city-wide green building policy by this fall. For buildings to officially qualify as "green," they must register with the U.S. Green Building Council, which rates buildings according to its Leeds standards (leadership in energy and environmental design). The group has certified about 100 buildings since 2000 and is currently evaluating about 1,200 more. The Home's Emotional CenterKitchen designs now focus on more than just cooking, with the comfort of relatives and friends who gather there now taken into consideration. For many families, this room is used as an entertainment space or place to relax at the end of the day. In response, dining areas and breakfast nooks are being filled with sofas, upholstered benches, chairs or stools with cushioned seats and contoured backs and coffee tables to encourage lengthy gatherings. Removing other dining areas — such as a breakfast room or stools at the kitchen island — also fosters close relationships among family members, as they are forced to eat together in the same room and table. Extended-Family Option? Think Privacy, RespectFor the over 2 million American households in which an elderly parent lives with an adult son or daughter, finding an affordable home with enough space and privacy to accommodate all occupants can be a difficult task. One option that is becoming increasingly attractive for multigenerational families is to purchase a custom-built home with two master bedroom suites. According to industry estimates, the extra suite typically increases the price of the residence by about $20,000. Experts advise adult children to provide their elderly parents with enough private space to make them feel comfortable and independent. "It can be very difficult to balance the privacy needs of the senior against the privacy and needs of the adult child and his or her family," cautions geriatrician Dr. Cheryl Woodson. Families should take a number of factors — including health and financial concerns — into consideration when making the decision to combine living spaces. Experts say multigenerational living arrangements are often short-term as these factors change over time. Housing Boom Lifts Forest-Products IndustryStrong housing demand has boosted first-quarter profits for a number of timber companies, including Louisiana-Pacific Corp., Boise Cascade Corp. and Georgia-Pacific Corp. First-quarter net income at Louisiana-Pacific, for instance, surged from $1.5 million during the same period last year to $110 million. Low interest rates and mild weather in the West and Midwest fueled home building activity during the first three months of the year and drove up lumber and plywood costs, which Bank of Montreal timber analyst Stephen Atkinson believes will cool when activity slows in the traditionally slower fall season. Despite the recent jump in mortgage rates, backlogs at many of the nation's builders will help the industry retain profitability during the next several quarters. Rising Interest Rates Can Benefit Real Estate, TooRising interest rates do not have to spell doom for the real estate industry and actually can offer some positives, according to Standard & Poor's analysts, who note that mortgage companies have less cause to worry about loan prepayments since refinancing will be less attractive to consumers. With the refi decline, in turn, private mortgage insurers could see fewer defaults on policies that cover lenders on lower downpayment loans, considering that most refinancing borrowers do not need the coverage because they have substantial equity. Higher rates also do not necessarily mean a dramatic slowdown in business for home builders and real estate agents as long as jobs and incomes are rising, too. Moreover, the performance of real estate investment trusts should improve because rates advance as the economy improves, which means that office buildings and hotel rooms will be in greater demand. Mortgage Bankers Predict Healthy Real Estate Market Through 2006Mortgage Bankers Association Chief Economist Doug Duncan believes low inflation will prevent significant hikes in interest rates during the coming years. He predicts that 30-year mortgage rates will hover around 6% at the end of 2004 and climb to a little higher than 7% by the end of 2006. The decline in refinancing activity will cause a drop in originations from $3.8 trillion in 2003 to $2.57 trillion in 2004, $1.96 trillion in 2005 and $1.85 trillion in 2006. However, purchase loans will rise from $1.27 trillion in 2003 to $1.38 trillion in 2004 and $1.42 trillion in 2006. While home prices continue to appreciate by about 4% annually over the next few years, MBA forecasts resales to slip 1.7% this year and to fall nearly 7% in 2005. By historical comparisons, however, sales activity will still be robust. Move-Up America Links Builders to New-Home Buyers' BrokersWith the help of Move-Up America, builders in Austin, Houston, Dallas, Fort Worth, San Antonio, Atlanta, Charlotte and Tampa know for sure whether prospective buyers are on track to sell their current home in time to purchase one that they have under construction. Move-Up America engages in what is called home buyer contingency management, pairing new-home buyers with a brokerage agent to sell their existing property at a discounted commission rate of 1.5%. The individual agent working for the buyer of the resale dwelling earns a 3% commission, and the new-home buyers are given a rebate equivalent to 3% of their sale profit. Move-Up America monitors the sale process and gives builders frequent updates, letting them know if the purchase contract should be cancelled because the buyers are having difficulty selling their current residence and/or with obtaining financing. "We are kind of the builders' eyes on the real estate market," explains company co-founder Clay Woodard. The company's clientele typically consists of builders of large residential developments that construct 100-plus units annually, such as Ryland Homes, Beazer Homes, Morrison Homes and Wilshire Homes. The Rich Demand Quality, A Designer SaysAffluent home buyers want quality, but Florida-based interior designer Tamara Tennant told attendees of the recent International Builders' Show that this class of customer does not want quality defined by builders or designers. Though these buyers can afford residences encompassing tens of thousands of square feet, many choose smaller-scale designs with room for family gatherings and so-called "committed-purpose spaces" and "stay-at-home interiors." Interior designer Marc Thee insists, "They want efficiency, functionality and useable luxury." Among the features that insiders say are preferred by today's wealthy buyers are low ceilings, casitas or separate guest houses, and central courtyards and other spaces that merge the interior and exterior. Single-story dwellings with towers, rustic finishes, warm colors and minimal details are also popular among rich buyers as they focus on simplifying their lifestyles. Bungalows With a Higher PowerVacant churches are dotting the landscape in many cities and rural areas as church membership declines or congregations consolidate. The buildings often are given to immigrants looking to establish worship spaces. However, developers in some cities are putting these empty churches to use as museums, nursing homes, restaurants, art galleries and housing. A developer in Denver, for instance, shelled out $2 million to renovate an aging Methodist Episcopal church that now offers a dozen condominiums — one costing as much as $600,000. Developers in Washington, D.C.; Greenville, S.C.; Nashville; and San Diego have completed similar projects. Some churches are even converted into single-family homes, like the Nazareth United Church of Christ in New Orleans. The church was purchased by landscape architect Alan Mumford for $90,000, renovated for $135,000, and recently sold for nearly $330,000. Stained-glass windows, high ceilings and other design elements are generally preserved during the conversion process. Open Your Mind to the Home Automation EraInformation Society Technologies' HOMETALK project involves an open-source home automation and networking platform that links previously unconnected machines — ovens and phones, for example — via a homogenous reference point or Residential Gateway, which can deploy this technology convergence through the required hardware and software protocol stacks. "We offer it back in open-source in order to allow for input by other parties and to quickly gain adoption by developers," explains inAccess Networks CEO Christos Georgopoulos, who notes that creating a standard platform and integrating the developer community is the HOMETALK partners' goal. HOMETALK includes speech-enabled graphical user interfaces so that user interaction is more natural; the system can be controlled from a PDA or garden-variety telephone by either programming or uttering into the handheld the HOMETALK-based system's desired functions. "The central control/automation engine of HOMETALK [called HERMES] includes a scheduler...It can register alarms that the user sets directly through the telephone by performing voice recognition," explains HOMETALK's Jan Sedivy. With voice recognition, elderly and handicapped people could perform tasks that would otherwise be impossible or difficult on the platform. HOMETALK's advantages include lower development time, a common language and the potential to concentrate on value-added service rather than connectivity. The platform will be tested in Madrid and Athens between June 2004 and May 2005. Strategies for SuccessMost whole-house contractors, which conduct home-performance tests and undertake shell and HVAC improvements, have gained their knowledge from energy-efficiency programs, according to a study. There are a number of strategies these professionals can employ to succeed in an uncommon trade. For example, those who have achieved success have done so by forging partnerships with practitioners in other trades, imposing inspection fees to attract serious clients and weed out the merely curious and implementing a hands-on customer-service approach. Allowing home owners to take measurements and perform certain tasks with the contractor lets the clients see the home's problems firsthand and helps to seal the deal. When presenting home owners with project estimates that are more costly than they anticipated, some contractors have been able to secure jobs by immediately providing finance options. Moreover, successful contractors perform only essential diagnostic tests during the inspection process and conduct others during or after installation, saving themselves both time and money. Training is also important; and most whole-house contractors depend on apprenticeship programs, conferences and print materials to prepare their workers. Xerox Offers Speedy Multifunction DeviceXerox recently rolled out two multifunctional printers, the WorkCentre M20 and M20i. The machines merge color printing, copying, scanning, faxing and e-mail capabilities. Both are equipped with ID Card Copy to copy double-sided documents onto one side of the paper; ScanSoft's PaperPort SE 9.0 to convert scanned documents into PDF files; and ScanSoft's OmniPage SE 2.0 to transform documents into an editable format. The higher-end M20i also boasts compression technology to scale-down files for speedy delivery via email or fax. The M20 and M20i are priced at $1,649 and $2,199, respectively. Color Laser Printer Product Face-OffTechnology expert Scott Koegler recently tested out three color laser printers — the HP Color Laser 3500n, Konica Magicolor 2350EN and the Lexmark C510 — to determine how they handle typical printing jobs like letters, Web pages and rudimentary brochures. Each printer can be purchased for around $1,000; and they are all in the same class in terms of speed and general abilities, are network ready and have UBS connectors. Attaching the printers to a LAN is easy and makes the capability ideal for small business networks. However, Koegler says the HP Color Laser 3500n prints color pages a lot faster than either of the others, because it applies all four printer colors all at once, instead of separately. In Capitol Hill Visits, Home Builders Return to Annual Stomping GroundMore than 700 builders from across the country arrived in the nation’s capital on April 28 to take part in the NAHB Legislative Conference and seek support from members of Congress on a host of issues to help advance the housing agenda on Capitol Hill. Builders conducted 334 individual meetings with their representatives and senators and called on their federal lawmakers to take action on the following NAHB legislative priorities: Government Sponsored Enterprises On April 1, the Senate Banking Committee approved S. 1508, the “Federal Enterprise Regulatory Reform Act of 2004.” The bill would revamp the regulatory structure of government sponsored enterprises (GSEs) Fannie Mae, Freddie Mac and the Federal Home Loan Bank System. “Our mission on this front is to stop Senate bill S. 1508 from moving in the United States Senate,” NAHB President Bobby Rayburn told hundreds of builders before they embarked on their Hill visits. “S. 1508 is bad for housing and bad for the economy. We need to make sure that members of Congress understand that we will not standfor passage of a bad bill that could cripple our nation’s housing finance system at a time when our economy needs housing to stay strong." NAHB believes that the legislation could open the door to the complete privatization of Fannie Mae and Freddie Mac and is so flawed that it cannot be fixed through amendments. Specifically, there are three elements in this bill that NAHB finds most divisive and harmful to housing — receivership, the structure of the new regulator and capital requirements. The receivership provision of the legislation would allow the regulator to liquidate a GSE in the remote event of failure, unless Congress acts to specifically override that decision. This endangers the GSEs’ position in the international finance markets, which would increase their borrowing costs and ultimately harm home buyers and providers of rental housing through higher mortgage credit costs. The proposed structure of the new regulator — a single director with an advisory board that includes the secretaries of the Department of Housing and Urban Development and the Treasury and the chairman of the Securities and Exchange Commission — puts housing on an unequal footing with financial safety and soundness. Further, by placing all the power in the hands of a single director with an advisory board that has no real clout, the GSE regulator could be subject to partisan political influence. NAHB prefers a governance structure with balanced representation from experts in safety and soundness and those committed to the GSEs’ housing mission on a board with executive authority over the regulator. Finally, the legislation allows the regulator to arbitrarily raise minimum capital requirements for the GSEs, without a process for reducing them. This would have the effect of taking capital out of the housing market and make it more difficult for the secondary market institutions to perform their housing mission. Affordable housing goals for the GSEs were incorporated into the final legislation and are a notable improvement, but this is more than offset by the bill's shortcomings, leaving NAHB staunchly opposed to S. 1508. Homeownership Tax Credit Since last year’s Legislative Conference, where it was a top priority, support for the homeownership tax credit has increased enormously in both chambers of Congress. Currently, House bill H.R. 839 has the support of more than 60% of the chamber’s 435 members and Senate bills S. 198 and S. 875 have a combined backing of nearly half of the Senate. “This amount of bipartisan support sends a signal that this is good public policy,” Rayburn told builders. “However, we need to continue to grow cosponsorship for these bills this year because if there is an appropriate tax vehicle moving in Congress in which we can attach this legislation, we will need to show a huge amount of support in order to make it happen.” Modeled on the Low Income Housing Tax Credit, the credit has been included in the Administration’s budget proposals for the past four years. By providing builders with a tax credit of up to 50% of the cost of constructing a new home or rehabilitating an existing property, the tax credit would help provide affordable workforce housing and is good for the economy. Each year, the credit is expected to produce 50,000 new or rehabilitated homes and generate $2 billion of private equity investment. It would also create 122,000 jobs and generate $4 billion in wages and $2 billion in federal, state and local tax revenues and fees. FHA Zero Downpayment Mortgage Insurance Program H.R. 3755, the “Zero Downpayment Act of 2004,” is currently pending in the House. Sponsored by Reps. Patrick Tiberi (R-OH) and David Scott (D-GA), the bill would allow the Federal Housing Administration (FHA) to offer a single-family zero downpayment mortgage insurance program. Companion legislation has yet to be introduced in the Senate. The proposal was first introduced in the Administration’s FY 2005 budget and HUD has estimated that 140,000 families would be able to achieve homeownership annually if this program were enacted. In late March, Rayburn testified before the Housing and Community Opportunity Subcommittee of the House Financial Services Committee in support of the bill, and urged lawmakers to amend the legislation to allow condominiums and cooperative housing units to qualify for the program. In a victory for NAHB, this provision was subsequently added to the measure by Rep. Bob Ney (R-OH), chairman of the subcommittee, and the panel approved the legislatioin on May 5. The full committee is expected to consider the bill before the Memorial Day recess. Association Health Plans Association health plan (AHP) legislation was also a focus of last year’s conference, and, due in part to the lobbying efforts of home builders at that time, the House subsequently approved AHP legislation H.R. 660 last June. This year, builders focused on urging senators to support and cosponsor companion bill S. 545. The soaring cost of health care is a national concern affecting builders and millions of small businesses, and it has forced more and more small business employers to drop coverage for their employees in recent years. Recent studies indicate that AHPs could help small businesses reduce their health insurance costs by 15%-30% annually and the Congressional Budget Office's conservative estimate states that between 330,000 and two million workers and their families who are currently uninsured would obtain coverage under the plans. President Bush has made passage of AHP legislation a key component of his domestic agenda for 2004, and several times this year he has called on the U.S. Senate to approve the measure. Senate Majority Leader Bill Frist (R-TN) has indicated an interest in moving the legislation forward this year. To read any of the legislation discussed above, click here, and enter the bill number in the box at the upper left. For further information, e-mail Michael Strauss, or call him at 800-368-5242 x8252.
Photos by Herman Farrer Housing SnapshotMortgage interest rates were up last week for the seventh week in a row as expectations continued to grow that the Federal Reserve Board would start increasing its federal funds rate sooner rather than later. Prior to indications of a turnaround in the job market in March, many economists weren't expecting to see any change in Fed policy until after the November elections. Now those same economists have moved up the date to early or mid-summer, and Chairman Greenspan has announced that deflation is no longer a concern for the central bank. Keeping inflationary pressures under control in a vigorously expanding economy will be shaping Fed policy in the period that lies ahead. The cost of a 30-year, fixed-rate mortgage is now above the 6% threshold, but as the cost of home financing does rise over the coming 12 months it is still expected to remain at relatively affordable levels. News from the Labor Department on employment in April confirmed that the national economy is at long last perking up. The unemployment rate for the month dropped from 5.7% to 5.6%, and 288,000 new jobs were created. Job creation in this year's first quarter was also revised upward by 66,000. Worker productivity in the first quarter increased at a 3.5% rate, compared to 2.5% for the same quarter a year earlier. The cost of framing lumber continued to climb, reaching $460 per 1,000 board feet last week, according to Random Lengths. While remaining at sky-high levels, plywood and oriented strand board prices weakened slightly. The mill price for 15/32-inch 3-ply CDX southern westside plywood was $520 per 1,000 square feet and OSB was $490. Mortgage Interest Rates30 Year Fixed Rate: 6.12\% Housing Starts: Mar. 2004Total: 2.007 million\% New Home Sales: Mar. 2004 *1.228 million Existing Home Sales: Mar. 2004 *6.48 million * Seasonally Adjusted Annual Rate For Working Families, Affordable Housing Is in Short SupplyIt has been the best of times and the worst of times for housing in America. It’s been the best of times for the 68% of families — an all-time high — that have achieved the dream of homeownership and the economic benefits that come with it. And it’s been the worst of times for millions of families that struggle to find housing that meets their needs. While we can take pride in our outstanding homeownership rates, we must remain committed to meeting the housing needs of all Americans. The statistics are staggering. Millions of the nation’s working families spend more than half of their income on housing or live in seriously substandard conditions. These aren’t just statistics. This means that millions of Americans struggle to find an adequate living environment. It means that millions of mothers and fathers must worry about providing adequate shelter for their children. A recent study by the National Housing Conference (NHC) found that the median income of the nation’s elementary school teachers, police officers, licensed practical nurses, retail salespersons and janitors is well below the amount needed to qualify for a median-priced home in the United States. Even more telling, families dependent solely on the income of a janitor or retail salesperson pay more than 30% of their income — the upper limit of affordability — for a two-bedroom apartment in the nation’s 60 largest metropolitan areas. And in markets as diverse as Boston, Dallas and West Palm Beach, FL, apartment rents often require more than 30% of household income for two-income families. The statistics point to a chronic affordability problem. It is absolutely essential that our communities take the steps necessary to ensure an adequate supply of housing that is affordable to working families. Our cities and towns need housing that is affordable for teachers, police officers, firefighters and other public servants, as well people working in the service and retail industries. These are the people who teach our children, keep our streets safe and provide the services we depend on. A growing number of working Americans are forced to commute long distances, or they live in housing that simply does not meet their needs. These working people are an important part of the social fabric. A community suffers when the people who provide its essential services go home to another city or town at the end of the workday. We need four things if we are to solve this problem:
The solutions to our nation’s housing affordability crisis will not come easily. This problem demands the attention of the private sector — builders, developers, lenders, architects, citizen groups — as well as that of government at all levels. This is a problem we cannot ignore. Our nation’s families deserve real and lasting solutions. Consumers Win Latest Round in Canadian Lumber DisputeIn another winning round for housing affordability, free trade and millions of U.S. consumers who are feeling the pinch of soaring lumber prices, a North American Free Trade Agreement (NAFTA) panel announced its April 19 decision that U.S. lumber producers are not threatened with injury from Canadian trade practices. “For the second time, a NAFTA panel has determined the U.S. lumber industry’s injury threat allegations are baseless and contrary to law,” said NAHB President Bobby Rayburn. “We call on the Administration not to engage in any legal delays and to allow the implementation of this decision. It’s high time to roll back the 27% duties on Canadian lumber and end the hidden tax imposed on American home buyers and renters.” An International Trade Commission (ITC) ruling in May of 2002 that the U.S. lumber industry was threatened with injury by Canadian lumber imports allowed the U.S. Commerce Department to impose countervailing and anti-dumping duties on Canadian softwood lumber shipments into the U.S. Last fall, NAFTA determined that the ITC had not provided adequate substantiation for that decision and it gave the commission 100 days to reconsider the case. The ITC then reaffirmed its original finding. The NAFTA verdict released on April 29 rejected the ITC’s latest decision because it “is not in accordance with the law and is not supported by substantial evidence.” NAFTA gave the ITC until May 10 to once again attempt to prove its threat-of-injury analysis. With the price of framing lumber reaching $460 per 1,000 board feet for the week ending May 7 — up more than 40% from the beginning of the year and at its highest level since July of 1999, according to Random Lengths — Rayburn noted that the NAFTA decision could not have come at a better time. “It is absurd for U.S. lumber producers to complain they are being harmed by legitimate competition from Canada,” he said. “The duties are icing on the cake for domestic producers — artificially boosting their profits and lumber prices at the expense of U.S. consumers.” For more information, e-mail Michael Carliner at NAHB, or call him at 800-368-5242 x8376. A Housing Price Bubble Does Not Exist, Freddie Mac Economists SayA healthy run-up in home prices over the past several years shouldn’t be misconstrued as a sign that there is a bubble that’s getting ready to burst, Freddie Mac economists said last week. “We believe that at the national level a house-price bubble does not exist, and, in nearly all metropolitan areas, rising home values are firmly rooted in economic fundamentals,” wrote Amy Crews Cutts and Frank Nothaft in special commentary from Freddie Mac’s Office of the Chief Economist. The economists said they don’t expect to see residential real estate values crash because inventory levels are at record low levels. Also, the transaction costs involved in selling a house average $20,000 compared to a $9.95 commission on an online broker, and that’s an impediment to the type of speculation that led up to the stock market crash of the 1990s. The Freddie Mac analysts also calculated that it has been less expensive to own than to rent similar properties since 2000, and the cost of owning a home has been generally declining for more than 10 years. “Thus, it is understandable that homeownership rates keep rising even with a weakened economy,” they wrote. “Clearly, some localized housing markets are at risk — those with a highly inelastic housing supply, such as San Francisco, for which demand shifts translate into large price movements — and they could see a fall in home values if demand drops,” according to Nothaft and Cutts. “But that is not a bubble, it’s just fundamental volatility.” To read the complete commentary, including three charts, click here. Eye on the EconomyBy David F. Seiders, NAHB Chief Economist The Federal Reserve held monetary policy steady at the May 4 meeting of the Federal Open Market Committee (FOMC), keeping the federal funds rate target at 1%. As expected, however, the Fed substantially altered the message conveyed by the FOMC press release, indicating that shifting economic conditions are likely to prompt monetary tightening sooner than previously anticipated. The key changes in economic conditions since the last FOMC meeting on March 16 involve a surprising pickup in payroll job growth as well as a firming up of measures of core inflation in March. The FOMC statement said that “hiring appears to have picked up” and that “incoming inflation data have moved somewhat higher.” The FOMC still views the upside and downside risks to sustainable economic growth as “roughly equal” but now also views the risks of rising and falling inflation as balanced. That means the Fed is no longer concerned about the possibility of deflation. The Fed’s signals about future policy prospects no longer are couched in terms of “patience.” However, the FOMC statement continued to refer to low (if not falling) inflation as well as slack in resource markets (particularly the labor market), and stressed that the current extraordinary degree of policy accommodation “can be removed at a pace that is likely to be measured.” That means the Fed is in no rush to start raising rates and that the rate increases, when they begin, are likely to be gradual. Market expectations of inflation and Fed behavior appear to be in line with NAHB’s interest rate forecasts … Current levels of long-term rates reflect market expectations of inflation that appear to be within the Fed’s unspoken target range (1.5%-2.0%), and the FOMC statement actually went out of its way to make that point. Long-term rates also incorporate expectations of future short-term rates, and the Fed controls the short end of the rate structure. The markets are placing high probability on an initial rate hike by the Fed this summer (June 30 or Aug. 10), followed by a “measured” process that will gradually raise the federal funds rate toward a neutral position that neither stimulates nor impedes the economy. NAHB’s forecast currently assumes that the Fed will raise the funds rate by 25 basis point at the Aug. 10 FOMC meeting and that this short-term rate will be 1.5% by the end of 2004 and 3.0% by the end of 2005. Long-term rates are bound to rise to some degree as this process unfolds, even though current rate levels already incorporate expectations along those lines. We currently expect the fixed-rate home mortgage to be around 6.3% by the end of this year and 7.0% by late 2005. The shifting economic and financial market tides have not weakened the housing outlook … The economic recovery process has quickly evolved from a jobless affair into a full-fledged expansion involving strong growth of economic output together with highly respectable job growth. The job growth, in turn, inevitably will generate stronger growth of personal income as the expansion proceeds. These developments are all positive for housing demand. But the higher long-term interest rates and the earlier Fed tightening provoked by the sudden brightening of the job market and the pickup of core inflation are bound to exert some drag on housing demand over time (the initial effects actually appear to be positive). So where does all this leave the housing sector? Frankly, a pickup in growth of employment and household income, along with associated upward pressures on interest rates, has been part and parcel of NAHB’s forecasts for some time. The only real surprise relates to timing, as things have happened faster than expected. At this point, we’re assuming that the interest rate negatives and the job/income positives roughly balance out, leaving NAHB’s housing forecasts about where they were prior to the release of the stunning employment and inflation reports. Actually, the whole package of developments strengthens the chances that our upbeat forecasts for housing and the economy will be achieved! Home prices also have firm foundations, and price ‘bubbles’ are rare … The recent surge in interest rates has energized various media sources and market analysts who have been beating the house price “bubble” drum for years. The higher rates, they theorize, will burst house price bubbles in a lot of places, and analogies are being drawn between the current situation and both the early 1980s and 1990s when price declines were recorded in some areas. The analogies to those earlier periods actually are quite strained for a number of reasons. First, recent rates of price increase have not approached the outsized increases recorded in many areas prior to the declines of the early 1980s or early 1990s. Second, the recent episode has not involved acceleration of house prices and unsold inventories at the same time, a combination that suggests unhealthy speculation. Third, the earlier price reversals occurred during periods of serious economic dislocation when job losses were mounting and various markets were experiencing serious out-migration as a result. We’re now almost 2-1/2 years past the bottom of the national economic recession of 2001, employment growth is picking up nicely for the nation and employment levels have bottomed out in virtually all markets. When confronted with such compelling counterarguments, some bubble theorists point to high vacancies and rent concessions in rental housing and contend that shifts from ownership to rental tenure will upset the excellent supply-demand balance in the single-family market and lead to price declines. But how many home owners will give up their dream homes and their historically low mortgage payments (that are locked in for many years) to grab at temporary rent concessions down the street? NAHB Chief Economist David Seiders analyzes the economy from the point of view of the housing market every other week in the free e-newsletter, “Eye on the Economy.” The preceding is a reissue of his May 5 edition. To subcribe to “Eye on the Economy,” click here.
Want more economic information? Find it in our publications. Find more in-depth information in our three economics publications, Home Builders Forecast, Housing Market Statistics and Housing Economics. All are available by subscription.
To learn more or to order any of these three NAHB economic publications, visit the Economics Publications Information section of the NAHB Web site or call 800-223-2665. Sarbanes Blames ‘Ideologues’ for Impasse Over GSE Reform LegislationThere are “ideologues” in Congress and in the Administration who are intent on changing the status of government sponsored enterprises (GSEs) Fannie Mae, Freddie Mac and the Federal Home Loan Bank System, Sen. Paul Sarbanes (D-MD) warned in remarks to the NAHB Executive Board on April 27 at the National Housing Center in Washington. “Some have argued that we’ve put too much of our resources in housing,” Sarbanes said. “They think housing is getting a break because these institutions are receiving a boost. They want to privatize the GSEs and remove the ‘G’ and ‘S’ from the equation and just make them enterprises.” “Congress has deemed housing a national priority,” he added. “Homeownership makes a tremendous difference in improving a neighborhood. It strengthens communities and builds pride in communities. It is a real source of wealth building for ordinary people and gives them a degree of economic stability and security.” Last month, the Senate Banking Committee narrowly approved S. 1508, legislation put forth by committee chairman Richard Shelby (R-AL) to restructure the regulatory framework of the GSEs. The bill was opposed by NAHB because it is bad legislation for the nation’s home buyers and represents a retreat from the national policies that have expanded housing opportunities over the past several decades. Because the bill passed largely along partisan lines and is opposed by the Administration, most congressional observers believe it has little chance of moving forward this year. As ranking member of the Senate Banking Committee, Sarbanes had offered an alternative amendment that would have sufficiently addressed the nation’s housing concerns at the same time as it assured the soundness and safety of the housing GSEs; but it was voted down, also largely along party lines. “There is no argument from anybody on the need to improve the regulatory framework of the GSEs,” Sarbanes said. “We are open to improving their safety and soundness. In the course of doing so, we are very concerned that we don’t give up or severely curtail their housing mission.” He outlined concerns over S. 1508 provisions on structure and governance, minimum capital requirements and receivership provisions. The legislation provides for a single regulator for all three GSEs, structured to allow an independent director to make all major decisions with input from a non-voting advisory board. “We need to structure the regulator in such a way so that more housing people are involved in the decision-making process rather than a single regulator. If you get the wrong person, you are in trouble,” said Sarbanes. The measure also provides the regulator with overly broad authority to adjust the minimum capital standards of Fannie Mae and Freddie Mac, which would have the effect of taking capital out of housing and dampening innovations in the residential finance market. “We were willing to raise these requirements for safety and soundness reasons, but we don’t want to run the risk that some regulator can choke these enterprises or squeeze them to death for other reasons,” he said. Sarbanes described the critical issue of receivership as “very difficult,” noting that there is no need to grant a regulator such authority as long as the safety and soundness issues are properly addressed. “My perception is this was driven by ideology as a way to move the GSEs along the path to privatization. Why take those risks if you can come along with an approach that significantly enhances their safety and soundness? I can give what I view as a consensus bill that would offer strong support except for the ideologues who want to take capital away from housing.” While the bill’s receivership provisions were watered down in committee to grant the regulator authority to liquidate a GSE unless Congress passes a joint resolution opposing such a move, NAHB has said that these stipulations would nevertheless open the door to the complete privatization of Fannie Mae and Freddie Mac and make investment in these institutions less attractive, resulting in higher mortgage interest rates. The Administration, however, ultimately opposed the bill because in its view the receivership provisions were not strong enough. “This is a rigid ideological view from the Administration. We have to be very cautious and careful to change the system. The GSEs have created the most effective and liquid housing mortgage finance system in the world. It’s not by chance that more than two-thirds of our citizens own their own homes. We must protect the ability of Fannie Mae and Freddie Mac to carry forth their mission of serving low-income and middle-income families,” Sarbanes said. In assessing the negative short-term outlook for S. 1508, Sarbanes said, “For the moment, we’ve avoided placing the housing finance system in serious jeopardy.” Briefly touching on two other housing issues, Sarbanes expressed support for the Sec. 8 voucher program and thanked NAHB for its support of the HOPE VI program, a unique initiative that has contributed to the revitalization of some of the most difficult public housing neighborhoods in the country. The Administration is proposing to eliminate this program in its FY 2005 budget. To read the legislation, click here, and enter S. 1508 in the box at the upper left. For further information on this issue, e-mail Michael Strauss or call him at 800-368-5242 x8252. Photo by Herman Farrer Provisions in Habitat Reform Bill Supported by BuildersIn April 28 testimony before the House Resources Committee, the nation’s home builders expressed support for the majority of the reforms in H.R. 2933, the “Critical Habitat Reform Act of 2003,” a conservation measure designed to ensure species’ protection and accommodate the needs of the communities and states where they reside. “We believe that several provisions within H.R. 2933 offer a real legislative solution to the current crisis regarding critical habitat,” said Don Walters, Jr., a home builder and developer from Flagstaff, AZ, and president of the Northern Arizona Home Builders Association. “However, we are concerned that the requirement in the bill linking critical habitat designations to the recovery planning process may unintentionally create a new litigation threat and place a higher regulatory burden on landowners.” Testifying on behalf of NAHB, Walters said that this designation would blur important distinctions between the guidance of recovery plans and the regulation of critical habitat. For example, he noted that the U.S. Fish and Wildlife Service had used recommendations from working drafts of the recovery plan for the cactus ferruginous pygmy-owl as justification for residential density requirements. Several other provisions in the bill designed to protect the environment and allow local communities to expand and thrive were endorsed by NAHB, including the exclusion of habitat conservation plans and other species management and conservation plans from critical habitat designations. “By codifying these important practices, the legislation would provide powerful incentives to private landowners to continue entering into such agreements to ensure species conservation and preservation,” said Walters. The legislation would also require the U.S. Fish and Wildlife Service to take into account the direct, indirect and cumulative economic impacts when designating critical habitat and would establish statutory definitions for two key terms relating to critical habitat under the Endangered Species Act — “geographical area occupied by the species” and “essential to the conservation of the species.” “Protecting our nation’s wildlife in a way that is cost-effective and clarifying the meaning of these terms will help to ensure that common-sense conservation policies and programs — and not litigation — will drive the critical habitat designation process. With the notable exception of linking critical habitat and recovery planning, NAHB believes that H.R. 2933 makes great strides in this direction,” said Walters. To read the legislation, click here, and enter H.R. 2933 in the box at the upper left. For more information, e-mail Jason Lynn at NAHB or call 800-368-5242 x8307. Photo by Herman Farrer NAHB Unveils Virtual 'Get Out The Vote' Election Web ServiceNAHB unveiled a new, virtual "Get Out The Vote" election Web site service that allows members, their families and their employees to register to vote, conduct their own voter registration drives, support their candidates and get an absentee ballot. NAHB unveiled the Web service — Election 2004 — during the recent spring board of directors meeting in Washington, D.C. It is available on the NAHB Web site at www.NAHB.org/elections. The election Web site contains helpful features, including:
Members who wish to donate to either candidate are encouraged to use the Web site and include the candidates' tracking numbers:
The tracking number indicates to the candiate's campaign how much support he is receiving from the building industry. To register to vote, go to the Home Builders Helping Americans Vote Web site. Member associations also can post the Home Builders Helping Americans Vote logo and link to the site on their home page. NAHB will be working with its state and local association partners to spread this information to as many members as possible. For more information on Home Builders Helping Americans Vote or the election Web site in general, e-mail NAHB's Marie Zenner or call her at 800-368-5242 x8279. NAHB Kicks Off General Liability Insurance InitiativeIn an effort to solve the home building industry’s growing general liability insurance (GLI) crisis, NAHB last week kicked off an intense effort designed to bring new GLI products to the market. Working in partnership with Marsh, the global risk management firm, NAHB is gathering exposure and loss information from builders, remodelers and trade contractors. That information will be used to evaluate the industry’s risk management needs and to create new GLI products. The information gathered from NAHB members will be held in strict confidence and will not be seen by NAHB members or staff. Revenues from the new products generated as a result of this initiative will be shared with state and local home builders associations. Over the next three weeks some 42,000 builder, remodeler and trade contractor members will receive a mailing about this initiative. The mailing will include an insurance survey and a consent letter that gives Marsh permission to contact a builder’s insurance carrier to obtain loss-run information. It will also include additional information about this GLI initiative. Those who do not receive the mailing are strongly encouraged to go on line to find the materials, or to contact NAHB. To obtain a copy of the GLI survey or consent letter, click here. Or contact the NAHB Member Service Center at 800-368-5242 x8600. If you have specific questions about the data collection initiative, e-mail Brett Diggs or call him at x8453 or e-mail Clayton Traylor or call him at x8490. All completed surveys, consent letters and related materials should be sent to Marsh, c/o Jessica Hatch, 1166 Avenue of the Americas, New York, NY 10036.
University of Housing Offers 'Risk Management and Insurance for Building Professionals' "Risk Management and Insurance for Building Professionals," offered by The NAHB University of Housing, is a course designed to help builders and developers avoid, minimize and transfer risks and, where possible, buy insurance and make insurance claims. Click here and type “Risk Management and Insurance for Building Professionals” in the keyword field for more information on this course. Review Your Accounting Reports to Protect Yourself From Fraud The sixth in a series about preventing fraud from affecting your business.
It’s never a good idea to let reports of any kind pile up without reading them. Besides missing out on the opportunity to improve your operations by taking action on the data, you could be letting an employee rob you blind. Here’s how to prevent that from happening in your company. The Nature of Accounting Reports Good business practice dictates staying in touch with your daily and monthly financial activity. If one of your employees handles your financial transactions and has access to your assets, it becomes even more critical to receive and carefully review accounting reports every month. Become familiar with the following report formats and the information they contain: Summary reports. Standard balance sheets and income statements are good examples of summary-style reports. They consolidate the results of a number of transactions for a given period of time into specific, detailed accounts (e.g., workers’ compensation insurance) or more generalized account groups (e.g., compensation and fringe benefits). Summary reports can be prepared at the account level. Even if you’re primarily interested in the most summarized version of the document, ask for the “account-level” report. You can quickly see what accounts make up the total. Summary reports can be very useful for “big picture” purposes and trend spotting. However, if you only look at the most summarized versions, you may miss or overlook vital information. Supporting schedules. A supporting schedule is simply a list of what makes up an account balance. These are generally prepared for balance sheet accounts. Typical supporting schedules show a detailed listing of accounts payable or accounts receivable (both of these should be shown in an “aging” format; i.e., analyzed by the length of time they have been unpaid). “Change” reports. What’s changed since last month? Last quarter? Last year? These reports typically show the most recent month’s balances, another column showing the prior month’s (or prior quarter’s or prior year’s) balances and remaining column(s) that show the dollar and/or percentage change since the previous report period. Change reports are especially useful for balance sheet reports, which I’ll discuss in detail in the next article. As you review the report, confirm that the account balances listed for the previous month, quarter or year agree with prior change reports you’ve reviewed. (Note: Accountants usually ask if the balances “roll forward”; i.e., if you start with the prior beginning balance and account for the increases and decreases, the result must agree with the ending balance.) Many accounting systems allow users to change balances for prior reporting periods. That is why it’s especially crucial to reconcile the current change report’s prior balances with historic balances that you have reviewed for a given period. If you are focused on current balances and activity, but the prior balance has been altered, you won’t see accurate results. Variance reports. These documents show how actual results differ from expected or estimated results. One column shows planned results, another column the actual results and the remaining columns show the difference (variance) in dollars and/or percentages. Examples of variance reports include budget vs. actual reports (generally account-based reports) and estimated vs. actual job cost reports (usually structured to show estimated and actual costs by job stage for individual jobs). Remember, however, that you may be seeing only a portion of the financial activity entered into the books. For example, materials costs may be on target for jobs A, B and C, yet other costs may be included on the books that have not been assigned to any of those jobs. Crosscheck Your Data It is important to periodically crosscheck variance reports with backup data to make sure the sum of the parts equals the total. I typically suggest to clients that they prepare an account-based “profit & loss by job” report and check the account totals against a “company account totals” report. A clever embezzler could also alter the budget or estimate to cover up unusual activity, but an astute owner who is in touch with the numbers would likely spot that subterfuge. If you don’t adopt a “hands on” approach to your accounting system and regularly confirm the accuracy of your reports, it can be fairly easy for someone to carefully select, or modify, the information that you see. Recommendations
Your internal financial statements have a story to share. If you consistently review them and take just a little extra time to confirm the accuracy of the data they contain, you’ll be in a good position to discover any significant unusual financial activity. That goes a long way toward preventing inside jobs. Diane C.O. Gilson, CPA, CIA, is a Certified QuickBooks ProAdvisor and MasterBuilder ProAdvisor, author, trainer and construction accounting coach, as well as a frequent speaker at The International Builders’ Show and The Remodelers’ Show. Her firm, Info Plus Accounting PC/CPA, offers bookkeeping and support services to help construction companies do more accurate and timely job costing and run better management reports. Contact Gilson via e-mail, or call her at 734-544-7620. Earlier Articles in this Series
'Financing and Cash Management' Available at BuilderBooks.com "Financing and Cash Management," by Dennis J. Rourke and available at BuilderBooks.com, teaches how to master the primary financial concerns of builders — continuity, stability, profitability, investor satisfaction and meeting financial commitments. By combining people and money with a solid business plan, builders can be building high quality, high profit homes far into the future. To view or purchase this publication click here, or call 800-223-2665 to order. 'Accounting with QuickBooks Pro®' Available at BuilderBooks.com"Accounting with QuickBooks Pro® for Home Builders and Remodelers," including a CD-ROM with a trial version of QuickBooks Pro®, is available through BuilderBooks.com. From writing payroll checks to generating up-to-date income statements, this book will help you get the maximum benefit from your accounting system. To view or purchase it online, click here or call 800-223-2665 to order. Other Business Management Publications Available at BuilderBooks.com BuilderBooks.com also offers a variety of other publications about business management. To view or purchase these publications online, click here. Want More Information About Effectively Managing Your Business? NAHB’s Business Management Department offers a variety of online resources to help you run your business better and more profitably. Click Business Management Tools for articles about human resources, financial management, sales, production, technology, customer service and other business-related topics. In addition, visit the NAHB Software Users Network Discussion Forum (SUN) to ask technology consultants and other builders what they think of various software packages and applications. Subscribe to NAHB’s Business of Building e/Source NAHB’s Business of Building e/Source is your monthly electronic guide to the hot issues and emerging trends in home building business management. You’ll find practical advice, tricks of the trade and sound business guidance — all delivered monthly, straight to your desktop, in a quick and easy-to-read format. Business of Building e/Source is available free to NAHB members and their employees. To subscribe, click here on the members only side of www.nahb.org. University of Housing Offers Courses on Customer Service and Business Management The NAHB University of Housing offers a course on business management designed to help builders improve their business and profitability. For a list of current offerings, click here. Search keywords: “Introduction to Business Management.” The NAHB University of Housing offers designation programs for builders and remodelers interested in improving their productivity and profitability. Click here for a list of NAHB designation programs. Supreme Court Decision Brings Good News on Residential Construction EquipmentIn a solid victory for the nation’s home builders, an April 28 decision by the U.S. Supreme Court upheld federal Clean Air Act (CAA) preemptions against state and local governments from setting their own standards to control emissions from new motor vehicles, including residential construction equipment. “This will ensure that state and local governments trying to achieve new air quality levels are not doing it on the backs of home builders,” said NAHB President Bobby Rayburn. “We now have the ammunition for builders and developers to beat back any overreaching regulations of new construction equipment, like local governments in Texas tried to do just recently.” The Supreme Court overturned a decision by the Ninth Circuit in the case of Engine Manufacturer’s Association v. South Coast Air Quality Management District, a lawsuit against regulations that would have required certain fleet owners in the Los Angeles area to purchase or lease alternative-fueled vehicles. The Supreme Court noted that the lower court’s interpretation of the CAA confused actual emission control “standards” with the means of “enforcing standards.” The high court also found that other parts of the decision made “no sense.” NAHB participated in the case as part of an amicus coalition that included the American Trucking Associations, the Construction Industry Air Quality Coalition, ARTBA and the Taxicab, Limousine and Paratransit Association. Over the past few years, NAHB has supported state and local home builders associations fighting overregulation of new construction equipment. “As state implementation plans are being developed over the next few years, this decision should provide some solid arguments to help carefully construct local air quality regulations in favor of local builders and developers,” said Rayburn. For more details about the case and the court decision, e-mail Mary Lynn Pickel or call her at 800-368-5242 x8485. Storm Water Permit Guide Available at BuilderBooks.comNAHB has prepared a builder’s guide to help association members comply with U.S. Environmental Protection Agency (EPA) and state storm water permitting requirements. EPA has recently stepped up its enforcement of the storm water rules, which it has repeatedly called a national priority. The guide provides information on storm water requirements that affect NAHB members. It will be available through BuilderBooks.com beginning June 1. In addition to information on federal and state storm water permitting programs, “Storm Water Permitting: A Guide for Builders and Developers” contains information on more than 50 of the most commonly used Best Management Practices; sample Storm Water Pollution Prevention Plans; and tips on compliance, including how to handle visits from inspectors. It also features a CD ROM of U.S. EPA and state general permits, Notices of Intent and many other forms and guidance that can be use to help ensure compliance with state requirements. “In Georgia, we see compliance as a necessary part of doing business every day. This book will help get you on the right track,” said Rick Porter, of Richport Properties, Inc., Tucker, GA. To view or pre-order a copy of the storm water permitting guide, go to www.builderbooks.com. Stillman Knight Honored for Affordable Housing EffortsStillman D. Knight, Jr., has been selected by NAHB and the Neighborhood Development Collaborative as the 2004 recipient of the Robert J. Corletta Award for Achievement in Affordable Housing. Knight, an apartment developer from Mobile, AL, is the deputy assistant secretary for multifamily housing programs at the U.S. Department of Housing and Urban Development. Before being tapped by the Bush Administration for his current position, Knight was an active member of NAHB for almost three decades, serving the association as an Executive Committee member and in several other leadership positions. “Stillman always understood the importance of NAHB and its role in educating Congress and the Executive Branch on housing issues and on keeping housing a national priority,” said NAHB President Bobby Rayburn. “He focused on the concept that everyone in our society deserves a good, safe and affordable place to live, and he always strove to keep that at the center of every issue we championed.” At HUD, Knight is responsible for the overall management, development, direction and administration of multifamily housing programs, including FHA Multifamily Mortgage Insurance, project-based rental subsidy programs, housing for the elderly and persons with disabilities and community-based initiatives. The award is named in honor of Robert Corletta, a long-time executive director of multifamily operations at NAHB who died in 1998. Corletta was recognized by his peers as a visionary in the affordable housing industry, particularly for his efforts supporting congressional passage of the Community Reinvestment Act. Enacted in 1977, the legislation requires banks and other lending institutions to help meet the credit needs of the communities in which they operate and has enabled affordable housing to be created in many low- and moderate-income neighborhoods across the country. In 1978, Corletta co-founded NDC, a non-profit corporation whose mission is to help re-build America’s communities through the creation of affordable housing and comprehensive community development. Presented annually during NAHB’s spring board of directors meeting, the Corletta Award pays tribute to individuals who have shown extraordinary creativity and dedication in advocating for advances in affordable housing. Past recipients of the award include Rep. Nancy Johnson (R-CT); Robert Gould, vice president of Reilly Mortgage Group; Ted Dinerstein, chief executive officer of the Dinerstein Companies; Larry Swank, president of The Sterling Group; and Judith Siegel, president of The Landex Corporation. High-Density Housing an Opportunity for ‘Urban Quality’ DesignBy Thomas Cox, AIA Competition has always been fierce in this sector, and today’s renters and buyers are more demanding than ever when it comes to high design. They want to be surrounded by special features and amenities, they want to entertain guests, they want to be proud of where they live. So what does this mean for the multifamily developer? What will it take to remain competitive? Sadly, the rising cost of building new for-sale and rental housing (especially in growing urban areas), will push many developers out of this segment of the business. Those who do succeed in this increasingly competitive market will have to strive to improve and utilize new techniques, materials and design principles. Multifamily developers — both for-sale and rental — will have to use better, newer construction methods such as modular construction, off-site manufacturing and pre-fabrication. Many of these techniques help save time, control quality and eliminate waste. Different Materials Needed Concrete and steel have to be used in taller residential structures. Building as high as five stories pushes wood framing to its absolute upper limits. Developers of higher density housing need to go higher, since they generally are looking to build 100+ units per acre. Using Type 3 modified construction, which is a wood hybrid technique, allows for up to 150 units per acre. Higher densities are going to require Type 1 construction, utilizing concrete forms and steel framing. Higher densities are not the only factor driving the shift from wood to concrete and steel. It's also about limiting liability. Water intrusion through walls, windows and roofs can create huge construction defect issues. The most important advantage to using concrete and steel construction is the materials’ resistance to expansion or contraction due to variations in moisture and temperature. Because concrete and steel don’t support fungal growth, using concrete and steel also helps prevent mold problems. And steel framing has the highest strength-to-weight ratio of any building material — it doesn’t rot, warp, split or crack, or serve as a banquet for termites. Building with concrete and steel also helps with phasing and value engineering — it eliminates worries about the fluctuating costs of lumber, which we see as becoming increasingly important. In the last year, lumber prices have increased about 50% and plywood prices have increased about 100%. It should be noted, however, that steel also can be expensive and difficult to obtain right now because it’s in high demand, here and in other countries such as China. Building with concrete and steel helps eliminate waste — a huge advantage, especially with larger buildings. By using steel panelization, builders see very little waste, and any unused steel can be recycled. In fact, about 60% of the steel used in steel panelization already comes from recycled products. Another advantage: there’s less mess on the job site itself, so cleanup time is minimized. The use of concrete and steel does not present any major obstacles to design. In most instances it actually helps, because it can be more flexible. There are occasional design issues in which other materials have to be used to create an architectural detail, but concrete and steel work well with other materials. And steel framing creates further benefits by going up straight and true. Some architectural operations can be achieved only with steel framing. Panelized construction of steel stud walls makes it possible to mock up entire floors before development actually starts so that design changes can be made prior to the final fabrication. This can be an extraordinary opportunity to fine-tune final designs for maximum benefit. While I believe concrete and steel is inherently a better type of construction, it is more complex and difficult. It requires a trained workforce in many instances — and sometimes those workers can be hard to come by. There aren’t a lot of people trained in this area yet, at least not in the residential construction industry. That puts those in the commercial construction industry in a good position to move into high-rise construction. Making the change from wood to concrete and steel construction can be difficult, but once you do, it is easier in the long run. Builders can order panels with all studs and rough openings pre-cut for the "carpenter" to assemble. These panels can result in easier installation for workers — more of an assembly process. Ultimately, this helps reduce construction time and creates a more consistent product, since framing pieces are manufactured in a controlled environment and once on-site are impervious to weather. Style, But Within Budget One of the challenges of designing a high-rise is creating an “urban quality” design in a cost-effective manner. Density is part of the solution, since increasing density allows for better profits. In fact, higher densities may be the only way to make urban projects pencil out because of high land costs. It costs between $250 to $300 a square foot to build high-density projects of steel or concrete. There are other issues as well: When you go higher, the city may require larger setbacks and more parking. Today’s developers are finding public/private partnerships crucial to developing high-rise housing. Cooperation with local jurisdictions pays off, from the initial vision state to gaining the necessary approvals. Many high-rise communities are benefiting from striking exterior designs that are made possible by architectural creativity and fresh thinking. These structures have assumed a new sense of scale and character — they offer a mix of low- and high-rise buildings, which helps create nice streetscapes. A new breed of buyers and renters demands high design; they want to live somewhere that’s cool and contemporary. Today’s looks are much more modern, although many draw upon elements of traditional design. Many of the newest high-rises are offering never-before-seen architectural features — both inside and out. These unique designs feature vibrant color schemes, eclectic detailing, commercial windows and the creative use of different materials such as industrial metal siding and concrete block. The move towards higher-density housing in urban areas and the drive to provide a variety of first-class amenities and appointments represent a trend that is emerging in cities throughout the nation. According to demographics experts, these communities are catering to more sophisticated renters and buyers who are changing the face of multifamily design. It can be a challenging market to satisfy, but with the proper planning and know-how, multifamily developers are successfully appealing to this market by providing exceptional floor plan design, distinctive architecture, lifestyle conveniences and five-star luxuries. Thomas Cox is the senior principal with Thomas P. Cox: Architects (TCA), which offers a wide range of contemporary architectural design in single and high-density multifamily residential, mixed-use and urban infill projects. TCA has received awards from the American Institute of Architects, Gold Nugget Awards at the PCBC, NAHB’s Pillars of the Industry, the Best in American Living Awards and the Urban Land Institute. TCA is currently designing high-profile projects with leading developers throughout California and the Western United States.
'Density by Design' Available From BuilderBooks.com In "Density by Design, New Directions in Residential Development," available at BuilderBooks.com, builders will discover the latest trends in residential development and get details on innovative projects that work. Both single-family and multifamily housing projects are covered in diverse locations such as suburban, urban and new communities. This book includes detailed information on the development process, prices and costs, site and floor places, lot sizes and setbacks, street designs and more. To view or order this publication, click here, or call 800-223-2665 to order.Build a Brand: Become a Household NameOne of the most important assets any company can have is a brand. Branding differentiates your company from the competition. Think of all the large companies worldwide. Every one of those companies, and many others, has a certain brand they worked hard to develop and protect: Volvo — safety; Ford — quality; Harley Davidson — tradition; FedEx — overnight delivery, guaranteed. Their companies’ branding rolls off your tongue. Sure, these are very large companies. But the basic principle is the same for them as it is for remodeling companies. The question to ask is, “How can we brand our own companies?” Keep in mind that branding is more than just putting a sign on your vehicle. Much more. Branding reflects everything you do or will do as a company. Laying the Foundation To become a household name among potential clients, you should follow some branding basics:
Know Your Clients If you are like many design/build companies, you probably don’t need to advertise in the Yellow Pages because a lot of your customers come from referrals. Instead, determine who your clients are and how you acquire them and then build a presence where they are most likely to be found. For instance, many of our company’s clients are involved in community service projects. Consequently, we actively support the community service organizations running those projects and work with individuals involved in those organizations. We have developed a presence in a way that directly relates and resonates with our clients, we garner positive local publicity, plus we help our community. Stay Focused and Spend the Time We pride ourselves on our professionalism. From the first time a customer contacts us to well after we have completed the project, everything we do, every contact we have with that customer, says “professional.” Our reputation is important. It is part of our brand. So we promote ourselves by promoting our reputation. Our aim is to continually forge a direct relationship between our logo, name, image and professionalism. This does take time. Even the big boys did not create their branding overnight. Procter & Gamble has worked for 167 years to become a household name; Pepsico, a century. Of the top 25 brands in the world, Microsoft is the youngest — at 20 years old. Sometimes building a brand means moving people around or out. We take a different approach to hiring employees. We maintain the philosophy that we can teach a person how to estimate, but we cannot teach that person how to interact well with others. Therefore, we look for the personality we feel is a great fit and then teach the skills. You cannot take the skills and then teach a personality. Look for the people who meet your company’s brand and train them. You have to constantly look for ways to get your company in front of the public. It takes persistence and a proactive marketing campaign, but your goal should be to have your company as the premier company in your industry. Get in the newspaper, on television, on the radio or in magazine articles. Hold offices in community service or volunteer organizations, donate your services to worthy causes and hold seminars. Show your brand by your attitude, dress, look, paper work, communication, answering the telephone, office, trucks, employees — the list continues. Everything you do should ultimately result in building the brand of your company. Branding is a well-planned process and may take some time, but it pays off in the end. You need to be the first company people think of when they think of your industry. Erik Anderson is vice president of Anderson-Moore Builders, Inc. in Winston-Salem, NC. He also currently serves as vice president of the Home Builders Association of Winston-Salem. For more information, contact Anderson via e-mail. Publicize May as National Remodeling Month in Your MarketFact: one in every eight people in the United States is considered an “older” American, according to government statistics. Fact: more than 35 million people have indicated that they want to remain in their homes — age in place — as they get older. Fact: May is Older Americans Month. NAHB's Remodelors™ Council has joined the U.S. Administration on Aging to co-celebrate Older Americans Month and National Home Remodeling Month by providing consumer information about remodeling homes to help make them safer and more comfortable as their owners grow older. Take advantage of the opportunities surrounding National Remodeling Month by helping publicize and emphasize to home owners the importance of hiring qualified, professional remodelers. Contact your local council to find out about plans for the month and join this campaign. It's not too late.The National Remodelors™ Council has downloadable material to help promote National Remodeling Month, including proclamations, public service announcements, press releases and consumer-oriented articles about unversal design, aging in place and more. Visit www.nahb.org/remodelingmonth for more information.
Nominate the Best of the Best for Remodelor™ of the Year Applications for the Remodelors™ Council’s most prestigious awards program, the Remodelor™ of the Year Award, are now available online at www.nahb.org/remodelors under the Awards section. The Remodelor™ of the Year Award recognizes exemplary NAHB involvement at any level, superior business management and an outstanding contribution to the remodeling industry. Councils should nominate individual remodelers, but the nominee must write his or her own entry essay. The winner will be announced at the Remodelors™ Council Gala during the 2004 Remodelers' Show in Chicago (Oct. 8). Local Councils Honored With CADRE Awards The Council Awards for Demonstrating Remodeling Excellence (CADRE) is awarded to local Remodelors™ Councils for superior member service in the categories of:
Entries are available online at www.nahb.org/remodelors under the Awards section and due by Sept. 3. The winner will be announced at the Remodelors™ Council Gala during the 2004 Remodelers' Show in Chicago (Oct. 8). For information, e-mail the Remodelors™ Council or call 800-368-5242 x8216. University of Housing Offers Courses and Designation Programs The NAHB University of Housing offers a variety of business management courses and professional designation programs that set builders and remodelers apart from the competition. For a complete list of current offerings, click here. Remodeling Publications and Resources Available Through BuilderBooks.com BuilderBooks.com offers a variety of remodeling publications online. To view or purchase these publications, click here. Survey Says Buyers Want Laundry Rooms, Linen ClosetsLaundry rooms topped the “must have” list of the 10 features home buyers say they most want in a home, according to a consumer preference survey conducted by NAHB. The nine other items that would influence their purchase decision, in order of importance, included a linen closet, exhaust fan, exterior lighting, walk-in pantry, rear deck, dining room, front porch, lot with trees and ceiling fan. Gopal Ahluwalia, NAHB vice president for research, presented the survey findings at the construction forecast conference at the National Housing Center in Washington on April 21. In addition to determining overall consumer preferences, the survey also determined buyers' most popular kitchen and bath features; most popular floorplans; most popular outdoor features; where consumer preferences might differ from the national sample among blacks, Hispanics and Asians; and more. For instance, while laundry rooms topped the “must have” list among all respondents and all races, the other top 10 items varied according to race. Top 10 Items That Influence Purchase Decision
Rank National Black Hispanic Asian 1 Laundry Room Laundry Room Laundry Room Laundry Room 2 Linen Closet Linen Closet Dining Room Exhaust Fan 3 Exhaust Fan Exterior Lighting Exterior Lighting Dining Room 4 Exterior Lighting Exhaust Fan Linen Closet Exterior Lighting 5 Walk-in Pantry Dining Room Walk-in Pantry Linen Closet 6 Deck in Rear Separate Shower Enclosure Exhaust Fan Separate Shower Enclosure 7 Dining Room Ceiling Fan Ceiling Fan Water Temperature Control 8 Front Porch Deck in Rear Fenced Yard Walk-in Pantry 9 Lot with Trees Patio in Rear Patio in Rear Island Work Areas 10 Ceiling Fan Walk-in Pantry Built-in Shelving Double Pane Windows According to the survey, the five most popular kitchen features included: Popular Kitchen Features
Of the five most popular bathroom features, the survey reported that consumers preferred: Popular Bathroom Features
The five specialty areas consumers preferred incuded: Speciality Areas
The most popular outdoor features reported by consumers included: Popular Outdoor Features
Regarding home technology, buyers wanted: Home Technology
Ahluwalia reported that the survey found some differences in the types of homes preferred by the different population groups. These included: Type of Floor Plan Preferred
Parking Preferred
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