Nation's Building News Online: October 25, 2004Print All Articles Text Version |
|
Sponsored by Countrywide Home Loans National Builder Division |
|
Refuting Housing Bubble Alarmists, Fed Chairman Greenspan Sees Home Owners in Good Financial ShapeWeighing in on the housing bubble debate that has started percolating in the news media again now that interest rates are on the rise, Federal Reserve Chairman Alan Greenspan told America’s Community Bankers last week that reports of speculators bidding up housing prices to the bursting point are wrong. Appearing at the association’s annual convention on Oct. 19, Greenspan said that the most likely participants in speculative trading in the housing market are investors in single-family rentals and second homes, but in 2003 they accounted for less than 11% of total home mortgage originations. In his most detailed public comments on housing in some time, the chairman indicated that he was not that worried about a collapse in housing prices, noting that he did expect the appreciation in home values to begin slowing down from the rapid pace of the past few years. “Overall, while local economies may experience significant speculative price imbalances, a national severe price distortion seems unlikely in the United States, given its size and diversity,” Greenspan said. “Chairman Greenspan has not taken his eyes off housing because he is well aware of the central role it has been playing in reviving growth in the nation’s economy,” said NAHB President Bobby Rayburn. “His comments are reassuring and they also confirm the continuation of the remarkably strong marketplace that home builders have been seeing as the economy shifts into higher gear.” Reiterating a point he has made before, Greenspan said that typical home buyers don’t have the ability to trade properties the way investors can buy and sell shares on Wall Street, contrary to the underlying assumption of those who have been forecasting housing price bubbles. “But upon sale of a house, home owners must move and live elsewhere,” he said. “This necessity, as well as large transaction costs, are significant impediments to speculative trading and an important restraint on the development of price bubbles.” The chairman also shared his view that home owners are in a good position to weather any price adjustments that should occur, pointing out that in three-fourths of all outstanding first mortgages home buyers made downpayments of 20% or more and that home owners on average owe on their homes only 45% of what these properties are worth. “Even though some downpayments are borrowed, it would take a large, and historically most unusual, fall in home prices to wipe out a significant part of home equity,” Greenspan said. “Many of those who purchased their residence more than a year ago have equity buffers in their homes adequate to withstand any price decline other than a very deep one.” Examining a rise in household debt over the past five years, Greenspan said that some of the increase is due to a dramatic number of renter households becoming home owners. Since the early 1990s, the Fed has calculated that the conversion of renters into home buyers is responsible for about one-tenth of the home mortgage debt currently outstanding and that overall household debt as a percentage of income is 8% higher than it would have been if the ratio between home owners and renters had remained stable since 1992. “One can scarcely argue that those previous renters are less well off since becoming home owners,” he said. The low mortgage rates of recent years have also enabled home owners to improve their financial stability, Greenspan indicated. “The enormous wave of mortgage refinancing, which ended only in the fall of 2003, allowed home owners both to take advantage of lower rates to reduce their monthly payments and, in many cases, to extract some of the built-up equity in their homes,” he said. Greenspan said that some of the cash from refinancing was used to pay down more expensive, non-tax-deductible consumer debt or to make purchases that would otherwise have been financed by more expensive and less tax-favored credit. Several months into the effort of the Federal Reserve to switch from stimulative to neutral monetary policy through a slow but steady series of interest rate hikes, mortgage rates remain at historically affordable levels and single-family housing production and sales are poised to set new records this year. Building News Coast To CoastFlipping Out the 'Flophouse'Developers in San Francisco are hoping to make single-room occupancy (SRO) projects more appealing to the public. These apartments comprise just 350 square feet or less and historically have required tenants to share bathrooms and kitchens. They have long been called "flophouses," relegated to the poorest neighborhoods and infested with crime. Now, however, developer Charles Breidinger will build 102 SRO units in South Beach, ranging in size from 240-270 square feet and featuring their own bathrooms and kitchenettes. The units, with monthly rents of $750 to $1,000, are expected to attract students and new college graduates. Developers Joe Cassidy, Amon Murphy and the Bernal Heights Neighborhood Center may soon follow suit with new projects; while landlords may seek permission to convert existing commercial buildings and other structures into SROs. "These conversions could help fill the gap of affordable housing and create a successful downtown," remarks landlord attorney Brett Gladstone. However, such projects are generating opposition from land-use experts and others who do not approve of the relaxed open-space requirements enjoyed by SRO developers. Aging Baby Boomers Buying Larger Homes Instead of Retirement CondosNot all retirees want to downsize into condominiums, a trend that is evident in Pennsylvania's Bucks and Montgomery Counties. No less than eight active-adult communities comprised of single-family homes are in the works there, with dwellings averaging 2,200 square feet and priced at about $439,000. Like those who move into smaller homes when they retire, these baby boomers want maintenance-free lifestyles. Single-family, age-restricted developments cater to their needs by offering numerous social activities and recreational amenities while charging a monthly fee for landscaping, snow removal and other upkeep. Speak Clearly and Carry a ManualThe Microsoft Home — a 3,000-square-foot prototype built off a conference center at the company's Redmond, WA-based headquarters — features an array of gadgets that may or may not catch on with home owners in the coming years. A computer network links all of the dwelling's systems to the Internet. In the real world, many existing home owners already have the building blocks of so-called smart homes, namely security alarms and programmable dimmers and thermostats; however, they are not all connected like they are in the demonstration residence. The Microsoft Home, among other things, allows visitors to leave front-door voice-mail messages, which are sent to a universal inbox with e-mail and telephone messages. It also boasts numerous microphones that launch certain systems by way of simple voice commands; hand scanners that permit residents to enter without keys; and scanners that read radio-frequency identification tags to determine the contents of pantry shelves, the cleaning instructions on clothing labels and whether or not children's clothes meet pre-specified dress codes. "We're not saying everything will turn out this way, that this is the vision of the future," says Microsoft's Pam Heath, who gives tours of the demonstration home. Metal Going Over TopMore than a quarter of new homes built in 2002 had metal roofs, according to the National Roofing Contractors Association, rising from 4.2% in 1996. The group also estimates that 15.6% of re-roofing work involved metal roofs in 2002, versus just 3.2% in 1996. Aluminum, steel, tin, and copper roofs are gaining popularity for their appearance, wind resistance and energy efficiency. According to the Florida Power & Light Co., homes with white galvanized metal roofs cost about 23% less to cool in the summer months than those with dark-gray shingle roofs. Home owners can choose from a wide range of colors and styles, but they must be prepared to fork over anywhere from $5 to $7 per square foot. In comparison, asphalt shingles cost just $2-$3 per sq. ft. Moreover, home owners must spend extra to install snow rails to prevent injuries and damaged gutters and downspouts, considering that snow and ice slide off metal roofs. By installing them over plywood or oriented strand board, meanwhile, they can block out some of the din resulting from rainstorms. New Software Suite Promises to Link Costs, Schedule, MoreHungarian software vendor Graphisoft has developed a new product suite aimed at improving planning and cash-flow analyses for construction projects. The company calls the package a Virtual Construction solution, and like Graphisoft's previous design-related software, Archicad, the new products use 3D models. However, rather than allowing contractors to use 3D tools for the creation of 2D plans, the newest products generate 3D construction models in order to help contractors improve the cost- and time-efficiency of the planning, estimation and construction processes. "We want to take 2%-3% out of the cost of really large construction projects through constructibility analysis," says Graphisoft CEO Dominic Gallello. The company is also offering negotiated construction services, such as set-up and administration support for small projects. The total software package is priced around $6,000, and a stand-alone model to be used for estimation is also available for $4,000. Suddenly Steel Has Industrial StrengthSteel makers, both in the United States and worldwide, are benefiting from an increase in global demand for steel that has tripled prices for some types of the material and boosted investor interest in the industry. The present boom is being attributed to economic conditions in China over the past several years that have helped increase the demand for steel by an expected 17% this year. With the Beijing Olympics scheduled for 2008, analysts predict China's demand for steel will remain strong for at least another three years. The much-awaited upswing is also expected to be sustained because steel makers do not appear poised to significantly boost capacity or build more major plants. In the United States, steel makers are generally improving production and capacity at existing facilities rather than building new ones. Likewise, capital spending has not risen much among Chinese and other foreign steel makers. Meanwhile, consumers — especially smaller companies and those in the auto sector — are feeling the pinch as steel prices continue to rise with no significant decline in sight. In Cement, There's an Ebb, FlowFlorida and other states across the country are experiencing a cement shortage due to building booms in both the United States and China and slower delivery of overseas shipments. As a result, the cost of materials and new-home prices have jumped while building schedules have been drawn out. However, the recent hurricanes slowed construction in hard-hit areas of Florida, allowing contractors in other parts of the state to get their hands on enough cement to satisfy existing orders. To remedy the shortage, which is expected to worsen once again as soon as widespread rebuilding begins, the Florida Home Builders Association is pressuring federal lawmakers to eliminate tariffs on cement imports from Mexico. These tariffs are equivalent to over 60% of wholesale prices. The Sibling SqueezeOwners of large dwellings increasingly are forcing their children to share bedrooms to keep from spoiling them and to help them learn to share. One San Francisco-based real-estate agent says 33% of buyers snapping up $3 million-plus homes put their children in the same bedroom. Others note that parents often keep shared-room arrangements after they trade up to bigger houses. With 37% of new homes having four or more bedrooms and married couples having an average of just 1.92 children, experts say most families have plenty of space for separate bedrooms. However, many parents prefer to have their children bunk together so extra bedrooms can be transformed into home offices and media rooms, among other things. Single Family, Condo StyleThe national homeownership rate is on pace to hit a whopping 70% next year, with much of the growth tied to retirees between the ages of 55 and 74. Homeownership in this age category rose just 9% during the 1990s but will likely post a 15% growth rate for the 2000-2005 period. Between 2005 and 2015, homeownership in the age 55-to-74 group is expected to soar 36%. Most older home owners would rather pay $500-$1,500 per month on maintenance than perform such tasks themselves, making condominiums a popular alternative to the traditional single-family home. With single-family dwellings outnumbering condominiums 15-to-1, according to the Census Bureau, builders could find it profitable to "condo-ize" conventional single-family homes in the future. Demand for condominiums already has pushed the median price close to the $200,000 mark, surpassing the median single-family home price, says Economy.com economist Celia Chen. The Look of Tax SoftwareTax-preparation software vendors are increasingly adopting Microsoft interfaces to make tax preparation easier for companies that work with Microsoft programs on a daily basis. For instance, preparers using CCH's IHand can access its Tax Research Network without exiting Microsoft Word or Excel. Meanwhile, Intuit plans to use an Outlook interface with its ProSeries software; and TaxSimple will make it easy for preparers to create letters, invoices and cover pages in Word. Vendors like Petz Enterprises are also turning to Web-based processing, which allows companies to consolidate results via the Internet instead of installing software at every location. Others are rolling out Web-based tax organizers, but Creative Solutions marketing vice president Jack LaRue says the fact that two-thirds of accountants lack Web sites poses a challenge. Power of Eminent Domain Used to Halt Pennsylvania SubdivisionAn unfolding case involving a developer in York County, PA, fits the profile of a disturbing trend in land use law in which local governments increasingly are using their power of eminent domain in order to curb growth. After Pennsylvania builder and developer Peter Alechix acquired approximately 80 acres of prime land in West Windsor Township in 2002, he received approvals for Lauxmont Farms, a 51-lot subdivision of high-end, single-family homes. He quickly found clients interested in several parcels and construction began. This May, however, the Board of Commissioners of York County adopted an ordinance to condemn the property in order to create an 825-acre park that would preserve farmland, archaeologically significant areas, and Indian-heritage and historic farmland structures. The developer claims that none of these are applicable to his property, and the county did not initiate condemnation proceedings against any of the other land needed for the park. It is unclear whether the project is part of the larger local comprehensive plan or whether the county has the financial ability to pay for the land it wants to take for the park. In state court, the developer is arguing: (1) that the county does not have the power or right to condemn the property; (2) that the county has not provided sufficient security and immediately available funds to pay just compensation; and (3) that the county committed procedural errors in the condemnation proceedings. The York County Builders Association and the Pennsylvania BA are supporting the challenge. In addition, NAHB, through its Legal Action Fund (a link for members only), agreed earlier this month to provide funding in support of the developer’s litigation. For more information on this case, e-mail Mary Lynn Pickel, NAHB’s director of legal services, or call her at 800-368-5242 x8485. Housing SnapshotMortgage applications to buy and refinance homes were up last week as interest rates for fixed-rate mortgages continued to decline. Adjustable-rate financing was up just a tad. The Labor Department reported that unemployment filings declined by a seasonally adjusted 25,000 at the end of last week. The Consumer Price Index for September rose 0.2%, bringing inflation for the first nine months of this year to 3.5% compared to 1.9% for all of last year. The new week opened with ongoing concerns about oil prices and with the dollar weakening. The Conference Board's Leading Economic Indicators fell 0.1% in September, the fourth consecutive monthly decline in that index, suggesting that the economic expansion has lost some of its momentum heading into the final quarter of the year. Lumber prices continued to offer encouraging news for the nation's home builders last week. Framing lumber prices dropped to $365 per 1,000 board feet, according to Random Lengths, down $13 from the prior week, but still up from $319 a year earlier. The price of 15/32-inch 3-ply Southern (west-east) exterior sheathing fell from $315 to $290 per 1,000 square-feet, compared to $535 a year earlier. Oriented strand board declined from $240 to $215, compared to $465 at the same point in 2003. Mortgage Interest Rates30 Year Fixed Rate: 5.69\% Housing Starts: Sep. 2004Total: 1.898 million\% New Home Sales: Aug. 2004 *1.184 million Existing Home Sales: Sep. 2004 *6.75 million * Seasonally Adjusted Annual Rate Make Housing a Winner on Election DayThe Nov. 2 elections (this link is for NAHB members only) are fast approaching, and it’s time for you to do your part to ensure that housing is a winner when the votes are tallied. Where the candidates in local, state and national races stand on housing provides an important measure of their fitness for office. As a member of this industry, it is incumbent upon you to find out where the candidates stand on the housing issues and to share that information with your friends, neighbors, business associates and customers. Housing issues are figuring prominently in this year’s presidential and congressional elections. That is no small tribute to the power that home building has demonstrated recently in leading the nation’s economy to higher ground and in increasing the financial health of the record number of American families who are home owners today. It is also an indication of the growing concern in this country over the need for affordably priced housing that will enable our workforce to live in or near the communities they serve. And it is a result of the ongoing efforts of NAHB to ensure that housing receives the prominence it deserves in the current election cycle. To promote a national housing agenda this summer, NAHB supplied a housing policy agenda for the platform committees of both political parties, and we established a notable presence at the Democratic and Republican national conventions. That included a series of ads in special daily convention issues of the National Journal that made a highly favorable impression on the lawmakers and delegates attending those events. We also hosted receptions for congressional leaders and cosponsored media briefings. We supplied a housing policy agenda for the platform committees of both political parties. To let our members know the positions of the two presidential candidates on issues that are important to us, we asked President George W. Bush and Sen. John Kerry several questions, and we have published their responses in a special report. At our board of directors meeting in Columbus, Ohio, on Nov. 2 we heard directly from the President about how he intends to increase housing opportunity in this country. For yet more information on the full range of housing policies that need to emerge from the elections, NAHB and four other national groups in Washington have put together a consensus report describing those issues in great detail. All of this is information that will help you make the right decisions for the housing industry and your business on election day. As the elections enter their final days and weeks, this is also a time for participating in the grassroots campaign efforts that are occurring across the country. Here’s how you can help make a difference:
Don’t let this political season pass you by. Housing is a major concern of America’s electorate and it is an issue that commands the support of men and women on both sides of the political aisle. This is your opportunity to ensure that when the ballots are counted on Election Day, they will spell victory for the candidates who stand tallest for housing and the American dream. 2004 Election Night Viewers GuideAn inveterate observer of presidential and congressional races, Pete Rintye, staff vice president of NAHB’s Legislative and Political Relations, has prepared an election night guide that will help television viewers follow the results. Listed chronologically are the closing times of the state polls as they are currently set for Nov. 2. Although there is always the possibility of court orders for longer hours or other unforeseen events affecting closing times, the outline below provides a reasonable timeline from which viewers can check for news reports of election results as the polls close. All times are listed as eastern standard time. Incumbents are listed in the close races to watch for the House and Senate; both candidates are listed in the contests for open seats. 6:00 p.m. — 19 Electoral Votes
7:00 p.m. — 70 Electoral Votes
7:30 p.m. — 40 Electoral Votes
8:00 p.m. — 197 Electoral Votes
8:30 p.m. — 6 Electoral Votes
9:00 p.m. — 99 Electoral Votes
10:00 p.m. — 27 Electoral Votes
11:00 p.m. — 77 Electoral Votes
12:00 a.m. — 5 Electoral Votes
Wet Weather Slows Home Starts in September, But Production Headed for a RecordUnusually wet weather across much of the country slowed the pace of home building in September, but strong permit issuance and rising backlogs of unused permits indicated that builders were poised to pick up the pace in coming months. The U.S. Commerce Department reported that housing starts declined 6% from the best monthly pace of the year in August to a still-solid rate of 1.9 million units on a seasonally adjusted annual basis in September. Meanwhile, issuance of new permits, which can provide an indication of future building activity, rose 1.8% last month to a rate of more than 2 million units, and the number of permits that had been issued but not yet used rose to the highest level since the 1970s. “Builders would have started more homes last month, but just took a rain check in a lot of cases,” said NAHB President Bobby Rayburn. “In fact, given all the weather-related issues in September, today’s report is pretty encouraging. We’re in good shape heading into the fourth quarter.” The decline in housing starts was largely attributable to a 27% slump in the storm-weary Northeast, where lingering precipitation saturated many building sites. Starts were down 8% in the West, 4.6% in the Midwest and 1% in the South, a region where many states were unaffected by the hurricanes that battered Florida. Single-family starts in September fell 8.2%, but multifamily activity rose 4.7%. Building permits for single-family homes last month held firm at August’s impressive level, and permits for multifamily units were up 8.2%. Permits were up in every region of the country except the West, which experienced a marginal 1.3% decline. “In terms of our housing forecast, today’s report is right on the money,” said NAHB Chief Economist David Seiders. “Every single region was up for the third quarter, and it’s now clear that housing continued to contribute to economic growth in that period. There’s also little doubt that we’re looking at another record year for single-family home building in 2004 — up about 6% from last year’s record, to 1.6 million units.”
Register for NAHB's Fall Construction Forecast Conference Live Webcast Get the latest forecasts on housing starts, project budgets and other economic bellwethers of the housing industry at NAHB's Fall Construction Forecast Conference at the National Housing Center in Washington, D.C. or from the live Construction Forecast Conference Webcast on Wednesday, Oct. 27. Click here to register for the Webcast. Builder Confidence Rebounds Strongly in OctoberRobust home buyer demand brought on by improving economic conditions, low mortgage rates and strong house-price performance boosted builder confidence in the market for new single-family homes to its highest level of the year this month, according to the NAHB/Wells Fargo Housing Market Index (HMI). The HMI for October rose five points to 72, more than offsetting a four-point decline in September and equaling its reading of a year earlier. “Rates on long-term mortgages have averaged well below 6% for many weeks now, and adjustable-rate loans have been around 4%, providing a powerful incentive to buy a home,” said NAHB President Bobby Rayburn. “Another factor that’s undeniably contributing to builder optimism is the large turnout of prospective buyers at model homes and sales offices,” noted NAHB Chief Economist David Seiders. “The HMI component gauging traffic of prospective buyers has remained above 50 since May, which is a strong run for that index and a positive sign for potential sales activity.” The index is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes, prospects for sales activity in the next six months and the traffic of prospective buyers. Any number over 50 on the index indicates that more builders view sales conditions as good than poor. Each of the HMI’s component indexes rose in October, with the largest gains registered for current sales activity (up five points to 78) and expected sales in the next six months (up nine points to 84). The component gauging traffic of prospective buyers rose two points to 54. “We’re headed for another record year for new-home sales in 2004, and the long-term outlook is still very encouraging,” said Seiders. “Most builders are looking forward to a healthy marketplace moving into 2005.”
Register for NAHB's Fall Construction Forecast Conference Live Webcast Get the latest forecasts on housing starts, project budgets and other economic bellwethers of the housing industry at NAHB's Fall Construction Forecast Conference at the National Housing Center in Washington, D.C. or from the live Construction Forecast Conference Webcast on Wednesday, Oct. 27. Click here to register for the Webcast. Existing Home Sales Rebound in SeptemberA fairly steady decline in mortgage interest rates since June helped increase sales of existing single-family homes 3.1% to an annual pace of 6.75 million in September, the National Association of Realtors® reported on Oct. 25. Last month’s sales activity was 1% above the 6.68-million unit pace of a year earlier, and it was the third-highest level on record. Home resales had declined in July and August. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage declined from 5.87% in August to 5.75% last month. “Since 1971, there have been only five months when mortgage interest rates were lower, and all of those have been during the last year and a half,” said David Lereah, the association’s chief economist. “The good news is that interest rates have been fairly stable over the last month, hovering near generational lows, and that is increasing the purchasing power of buyers trying to get into the housing market,” he said. Housing inventory levels at the end of September rose 0.4% from August to 2.45 million, a 4.4-month supply, the Realtors® reported. Existing home sales in September rose 7.8% in the West, 4.1% in the Northeast and 3.7% in the Midwest. They slipped 0.7% in the South.
Register for NAHB's Fall Construction Forecast Conference Live Webcast Get the latest forecasts on housing starts, project budgets and other economic bellwethers of the housing industry at NAHB's Fall Construction Forecast Conference at the National Housing Center in Washington, D.C. or from the live Construction Forecast Conference Webcast on Wednesday, Oct. 27. Click here to register for the Webcast. Study Gloomy About Prospects for Southern California Without Solution to Area’s Housing CrisisSouthern California is on the verge of a “quality of life meltdown” over the next 20 years if it doesn’t quickly find some ways to address a growing imbalance between its housing supply and the needs of its growing population, according to a new study by the Greater Los Angeles and Ventura Chapter of the Building Industry Association of Southern California and the Los Angeles County Economic Development Corporation (LAEDC). The region needs to do a far better job of building housing in the first two decades of this century, when its population is projected to grow by more than six million residents, than it did between 1990 and 2004, when Los Angeles County saw the actual construction of about 160,000 units and the accumulation of a housing shortfall of more than 282,000 units, according to the report, "Meeting the Housing Challenge in Los Angeles and Ventura." The housing shortage has contributed significantly to a more than $131,000 increase in the average price of a new home in Los Angeles County and almost $156,000 in Ventura County since 2000, the study found. “With more than 10 million people already calling Los Angeles County home, and the number estimated to increase dramatically in coming years, we simply are not building enough homes to meet demand,” said Jack Kyser, chief economist for LAEDC. “If demand continues to outpace supply, we’ll not only see higher home prices, the housing shortage will soon have a negative rippling effect across all sectors of the county’s economy,” he predicted. On what awaits the area if it doesn’t come to grips with its growing housing crisis, the study envisions a bleak scenario in which:
“We need courageous leadership to step up to the plate and bring an end to the crisis and prevent a regional meltdown," said Ray Pearl, executive officer of the home builders association. “Who will lead to curb the skyrocketing price of buying a home? Who will lead to increase the supply of homes to meet the growing population? Who will lead to solve the gridlock on our roads and freeways?” Among the solutions proposed in the study:
“We face serious problems with dire consequences, and it’s going to take strong leaders with clear-cut solutions to solve our region’s housing problems,” said Pearl. “The outcome of doing nothing will only turn the housing crisis into a quality of life catastrophe.”
Register for NAHB's Fall Construction Forecast Conference Live Webcast Get the latest forecasts on housing starts, project budgets and other economic bellwethers of the housing industry at NAHB's Fall Construction Forecast Conference at the National Housing Center in Washington, D.C. or from the live Construction Forecast Conference Webcast on Wednesday, Oct. 27. Click here to register for the Webcast. Eye on the EconomyBy David F. Seiders, NAHB Chief Economist Available monthly data show that growth of U.S. economic output (real GDP) picked up strongly in July — on the heels of a disturbing decline in June — and that growth remained solid in August and September as well. NAHB is estimating 4.1% annualized growth in real GDP for the third quarter, up from 3.3% in the second and definitely in the above-trend range that has positive implications for the labor market. Economic momentum was good as the fourth quarter began, although record-high oil prices and associated weakening in consumer spending and net exports will take some toll on economic growth for the quarter. NAHB currently is projecting 3.6% GDP growth for the final quarter of the year, bringing projected year-over-year growth for 2004 to a robust 4.4% — equivalent to the most recent Blue Chip consensus (which includes NAHB). Payroll employment growth was disappointing in September but the job market still is improving … Above-trend rates of GDP growth have been generating improvements in the U.S. labor market since mid-2003, and that process is likely to continue in coming quarters. The average pace of improvement has been less than robust, however, and month-to-month changes in payroll employment have hardly been systematic. Indeed, the condition of the labor market remains a key issue in the presidential campaigns as the November election approaches. The employment report for September hardly clarified the labor market situation. The unemployment rate held at 5.4%, only a percentage point below the cyclical peak in June of last year. Furthermore, payroll employment increased by only 96,000 in September, and the private sector component grew by only 59,000 jobs. The length of the average workweek showed no gain at all, and the index of aggregate hours worked in the nonfarm business sector posted only a marginal gain. The Labor Department discussed likely adverse net impacts of the series of hurricanes on employment growth in September, but declined to give an estimate of the impact — saying only that “payroll employment continued to trend up in September.” Private sector estimates of the hurricane effect average about 50,000 jobs, and this adjustment would put September close to the average monthly gain for the year to date (about 175,000). NAHB’s forecast shows an ongoing uptrend in payroll employment and a further downward drift in the unemployment rate in coming quarters, despite good growth in labor productivity (output per hour). But there will be no more employment reports before the elections. Core inflation firmed up in September, moving toward the upper end of the Fed’s tolerance range … Core inflation (excluding food and energy) subsided during the June-August period from the accelerated month-to-month rates recorded earlier in the year, confirming the Federal Reserve’s judgment that “transitory factors” had affected those readings. But key measures of core inflation firmed back up in September, keeping inflationary pressures on the radar screens of both the central bank and the financial markets. The first alert was sent by the core Producer Price Index (PPI) for September. This measure posted a year-over-year advance of 1.9%, up from 1.5% in August and less than 1.0% late last year. The second alarm was sent by the core Consumer Price Index (CPI), which posted a 2% year-over-year increase in September — the highest for the year. The chain-core CPI (incorporating floating weights) was up to 1.6%, the highest for this year and double the pace of late 2003. Recent core inflation rates certainly are not high by historical standards, but the Fed definitely will be on guard against further increases. Although the central bank has not precisely defined its tolerance range for inflation, the balance of public statements suggests the Fed will fight against core inflation (of the floating-weight variety) above 2%. Oil prices remain a key wild card in the economic outlook … High oil prices definitely pose a threat to the U.S. and global economic recoveries. Prices recently hit record levels ($55 per barrel for WTI light crude), demand is quite strong, hurricanes in the Gulf of Mexico have disrupted supply and major uncertainties surround the supply situation in other parts of the world. These uncertainties include the standoff between the huge Yukos company and the Russian government, rebel activity in Nigerian oil fields, strikes by Venezuelan oil workers, ongoing disruption of Iraqi oil supplies and the threat of terrorist attacks on key Saudi oil facilities. Higher prices of gasoline, heating oil and natural gas figure to take some toll on U.S. growth in the fourth quarter, partly through the export market, and NAHB’s baseline (most probable) forecast for GDP growth has been trimmed a bit as a result (to 3.6%). Our forecast assumes that oil prices will recede before long, averaging about $40 per barrel (WTI) in 2005. But it’s not hard to construct a crisis scenario where prices hang around recent records for an extended period. This scenario involves weaker U.S. and global growth as well as efforts by U.S. and foreign central banks to support economic activity (probability: 20%). The Fed is likely to increase short-term rates another notch before year-end, despite the oil price surge … At the conclusion of the Sept. 21 Federal Open Market Committee (FOMC) meeting, the Fed described the risks to both sustainable economic growth and price stability as “balanced,” characterized its monetary policy stance as “accommodative,” and said further rate increases would occur at a “measured” pace on the path back to monetary neutrality. The Fed presumably still adheres to the basic judgments expressed on Sept. 21, and NAHB’s forecast still shows one more quarter-point hike in the federal funds rate this year — specifically, at the Nov. 10 FOMC meeting. We assume the Fed will go ahead with this adjustment despite the prospects for a fourth-quarter slowdown in GDP growth, partly because of the recent firming up of core inflation. There’s been a good deal of speculation about possible influences of record-high oil prices on Fed management of monetary policy. Although the Fed undoubtedly will pursue a more stimulative policy path if oil prices truly threaten the economic expansion, Chairman Alan Greenspan recently went out of his way to say that situation is not imminent. Indeed, he downplayed the negative impacts oil prices are having on the economy, in absolute terms and in comparison with the oil price spikes of the 1970s. Greenspan also said that the recent runup in oil prices was “attributed largely to Hurricane Ivan” and that “part of the recent rise in spot prices is expected to wash out over the longer run.” Long-term rates remain quite favorable although upward pressures should be developing soon … Long-term interest rates have receded since mid-year despite the 75 basis point increase in short-term rates implemented by the Fed since June 30 and the high probability of further rate hikes before long. Indeed, the 10-year Treasury yield now is about 4%, compared with 4.7% on June 29. The bond markets apparently are shrugging off evidence of firming core inflation and are focusing largely on the prospects for slower economic growth as well as less aggressive increases in short-term rates by the Fed (compared with earlier expectations). NAHB’s baseline forecast suggests that this set of expectations is not likely to materialize and that long-term rates will begin to gravitate upward before long. We’re currently projecting a quarter-point increase in bond and mortgage rates by year-end and another percentage point rise during 2005. But, again, a lot depends on the course of oil prices. Slippage of housing starts in September does not signal fundamental weakness in the market … Housing starts fell by 6% in September, including an 8% reversal of single-family starts (multifamily moved up by nearly 5%). This decline prompted widespread discussion in the media about a fundamental downshift in the single-family market related to erosion of consumer confidence/sentiment in the August-September period as well as to anecdotal reports of consumer resistance to high house prices in some areas (such as Las Vegas and Southern California). Actually, the falloff in single-family starts was associated primarily with unusually wet weather in many parts of the country (including the entire East Coast). Issuance of building permits was up by 2% in September, and the backlog of unused permits moved up to an historically high level in the process. This pattern clearly shows the influence of weather conditions on starts in September and the large permit backlog bodes well for single-family starts in October. Furthermore, economic and financial market conditions certainly are supportive at this time, and NAHB’s Housing Market Index (based on monthly surveys of single-family builders) showed a solid increase in October. Greenspan downplays role of speculation in recent home price surge … House prices surged in the spring and summer as falling mortgage rates energized home buyer demand while builders faced severe land-use constraints in many parts of the country. Several major Wall Street media outlets (including Fortune and Barron’s) argue that speculators also have fueled the process, bidding up prices with the intention of “flipping” the properties in short order for quick gains. Greenspan addressed this issue during a speech given to a group of bankers on Oct. 19. He noted that large transactions costs are “significant impediments to speculative trading in homes” (compared with financial instruments or commodities) and an “important restraint on the development of price bubbles.” Greenspan also pointed out that speculation ordinarily does not involve owner-occupied residences — home owners must move and live elsewhere — and that participants in speculative trading most likely are investors in single-family rental and second-home properties. In this regard, he cited evidence that mortgage borrowing by such investors amounted to only about 10% of total home mortgage originations in 2003, up from other recent years but still not that big a deal. While conceding that local economies may experience significant speculative price imbalances, Greenspan stressed that “a national severe price distortion seems most unlikely” in the U.S. 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 Oct. 20 edition. To subcribe to “Eye on the Economy,” click here.
Now Available: HousingEconomics Online HousingEconomics Online is the new online publication from the leading economists at NAHB. Available at BuilderBooks.com, HousingEconomics Online combines unique scientific research with practical applications providing insights that are original, useful and written in terms that builders, manufacturers and housing finance professionals can understand and apply to their own businesses. This interactive Web site at the executive level provides critical data and information quickly, easily and frequently and includes the following features:
For more details, go to HousingEconomics Online at BuilderBooks.com. Register for NAHB's Fall Construction Forecast Conference Live Webcast Get the latest forecasts on housing starts, project budgets and other economic bellwethers of the housing industry at NAHB's Fall Construction Forecast Conference at the National Housing Center in Washington, D.C. or from the live Construction Forecast Conference Webcast on Wednesday, Oct. 27. Click here to register for the Webcast. Smart Solutions: Builder Forms Coalition to Fight Code RewritesRocky Mount, NC, has had land development codes (LDCs) since 1982. However, in 2002, the City of Rocky Mount Planning Board spearheaded a complete rewrite of its existing LDCs that, if implemented, would adversely affect the home building industry for both builders and new home buyers. Russ Davis, of Deanhardt & Davis, Inc. and a member of NAHB’s Single Family Small Volume Builders Committee, decided he would fight the city's LDCs rewrite. Some of the proposed changes included:
“[The proposed code rewrites] would have greatly burdened affordable housing as well as housing in general,” said Davis. Under the LDC changes, home buyers would have had to foot higher land development expenses and many would have been priced out of the market. North Carolina’s Division of Water Quality also requires developers and municipalities to reduce impervious surfaces. The purpose is to curtail nitrogen runoff into local watersheds, as dictated by stormwater management plans. However, several of the proposed LDC changes would have significantly increased impervious surfaces in Rocky Mount. In addition, developers would have had to increase the size of their lots to meet minimum lot size requirements and satisfy proposed LDC changes. That would have reduced the number of usable lots per tract — as well as profits. “Where you could get 50 lots out of a tract under current codes, you would get just 45 or less lots under the proposed rewritten codes,” Davis said. Deanhardt & Davis owns a 60-acre tract consisting of 115 lots that the company hadn’t planned to develop for another two years. The project went through the city’s zoning and plan review process and received approval. Land development estimates were based on the existing LDCs. Under the proposed code rewrites, however, the project’s profitability would have been greatly impacted. The rewritten LDCs were slated to go into effect last December. The Solution: Davis Forms Coalition to Defeat Proposed LDCs Davis discussed the dilemma with local Realtor® Ken Sikes and other industry professionals and concluded that they needed to form a coalition before approaching city officials. Sikes convinced Jeff Osborne, president of the Rocky Mount Area Association of Realtors®, to join. Davis discussed the coalition with 2003 Rocky Mount Home Builders Association president Tim Freeman, who saw the need for a coalition, as well. Osborne and Freeman each appointed three members to the coalition from their respective organizations. Davis had been involved with similar groups in the past and knew how a coalition should be structured. He also knew that builders and Realtors® in Charlotte, NC, facing some of the same issues, had formed the Real Estate and Building Industry Coalition (REBIC) to combat them. Davis contacted REBIC Executive Vice President Mark Cramer for help. He also contacted Tim Minton, director of political affairs for the North Carolina Home Builders Association, who helped put together a strategic plan for Davis and his peers who formed the group, the Building Industry and Real Estate Coalition (BIREC). Each member contributed seed money. They also received contributions from the Rocky Mount Realtors® and the local home builders association. BIREC hired an attorney who helped the group establish 501(c)(3) non-profit status. BIREC’s first task was to inform the Rocky Mount Planning Board that it wanted to be involved in the LDC discussions. The planning board’s response was lukewarm at first. Then Davis brought a BIREC prepared statement to a city council meeting. “It was hot with facts,” he said. Davis had collected information about all the construction permits Rocky Mount had issued in the past four years and then given that information to David Crowe, NAHB’s senior staff vice president of federal regulatory and housing policy. “David crunched the numbers and gave us some data to put in the statement that explained the income, tax revenue and jobs the construction industry had contributed to Rocky Mount’s economy,” Davis recalled. BIREC’s statement also offered soundly researched alternatives to the problematic LDC rewrites. As he read the document to meeting attendees, Davis stressed repeatedly that the coalition wanted to work with the planning board and the city, not against them. He asked that BIREC be consulted on all future planning and growth issues. The Payoff: Rocky Mount Removed the Adverse Stipulations After attending more than 30 planning board and city council meetings on the LDC, BIREC convinced the City of Rocky Mount to remove the sidewalk, street widening and landscaping stipulations, among others, from the rewritten LDCs. Land development costs did not increase and builders did not have to pass higher costs on to home buyers. What’s more, BIREC is a force involved in all the city’s development and real estate related issues. “They took notice of us,” Davis said. “Now they consult us first when they have planning issues. It’s a win-win for us, the city and especially the general public.” What You Can Do “Small builders generally are not positioned to work with municipalities,” Davis observed, “but if a community or industry, in our case, is not united in its efforts, it will lose.” He offers the following advice for NAHB members facing local issues that could threaten their businesses:
Have you or someone you know developed a smart solution to help the industry? If so, contact Jill Tunick at 800-368-5242 x8461 so we can share your solution.
The NAHB University of Housing Offers Courses on 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.” These Three Technologies Can Help Refine Your Market ResearchTechnology is constantly evolving and revolutionizing all aspects of life as we know it, including market research. Those in the housing industry have endless opportunities to utilize these research technologies to better understand and reach their target markets, to better hear their thoughts and to better meet their needs. Dial Groups: To Better Hear Your Market's Thoughts Have you ever observed a focus group that turned into one person’s agenda? Or needed a megaphone so someone could be heard? Dial groups can alleviate these and similar dilemmas. Like conventional focus groups, dial groups bring individuals together in a moderated setting so they can give their opinions on a particular point of interest. However, dial groups go a step beyond because they offer a greater range of participant response — accessible to all viewers instantaneously. With dial groups, participants utilize hand-held dial devices to answer the various questions. They respond using a defined scale that appears on their dials, the data is collected by the system immediately and viewers can see the results of the gathered quantitative responses. This approach, paired with moderator freedom, allows viewers to delve deeper into the true opinions of their participants. Dial groups are useful to the housing industry — for home builders, marketers, developers and architects — because research teams are able to test floor plans, designs and community concepts quantitatively with the dials to reduce participant bias as well as qualitatively to gain further insight. Dials can be used to test participant reactions to direct mail, Web sites and other marketing information. They can also test advertising concepts such as brand and names. Lifestyle Segmentation: To Better Understand Your Target Market’s Needs Have you ever wondered how retailers decide where to build their next store? Or how they know that a certain corner will bring more business than the one across the street? Along with a great deal of analysis, retailers use lifestyle characteristics of the market to determine what locations will bring them the most success. Real estate communities can now do this as well through lifestyle segmentation. Lifestyle segmentation is the division of a heterogeneous market into relatively homogeneous groups on the basis of the market’s attitudes, beliefs, opinions, personalities and lifestyles. By means of this segmentation process, marketers can understand the target audiences that they most want to reach. Focusing on Those With a Propensity to Buy More marketers today prefer segmentation profiling over standard random sampling procedures. The main reason is that segmentation profiling allows marketers to focus marketing efforts on prospects with a greater propensity to buy their product as opposed to spending precious marketing dollars on a random, low-interest group. In addition to cost-savings, segmentation provides the necessary background for understanding the target prospect better. Lifestyle segmentation also has the benefit of being a more sophisticated process. The target population is defined not just on the basis of one or two criteria (age, income, etc.); it takes into account a broader set of criteria (i.e., geography, spending habits, education, occupation, etc.). This allows more meaningful and evolved target market definitions. Lifestyle segmentation is beneficial to the housing industry because it specifies target groups most likely to move into a certain area or community. Thus, developers can have a better estimate of demand for their product before solidifying plans. Web Surveys: To Get the Same Results — Quicker and at Lower Cost Web surveys are helpful to the housing industry because developers can access immediate opinions on plans for their communities and can reach a broader audience unlimited by geographic boundaries. Web surveys work similarly to traditional research techniques in all aspects except the survey medium itself. Research experts still determine objectives and timelines with their client, utilize sample size and sampling methodology, conduct the survey and deliver results at its conclusion. Of course, the major difference is the opportunity to utilize Internet technology as a survey medium. Web surveys offer the advantages of quick turn-around and elimination of costs that are associated with traditional fielding and data entry. A Web survey tool gives clients the opportunity to view “real-time” results as participants complete the Web survey. Internet surveys typically sample from a panel of pre-qualified respondents with valid e-mail addresses. Once sample size is determined, invitations for the survey are e-mailed to the selected sample group. Web links to the survey can be posted on client Web sites, as well. Survey respondents are voluntary and look at the information as being helpful; often, respondents are rewarded for their participation in Web surveys. Rob Adams is president of Brooks Adams Research, a Richmond, VA-based full-service market research company with a national client base. Adams focuses on the housing industry and is a past speaker at Building for Boomers & Beyond: Seniors Housing Symposium. For more information, e-mail Adams, or call him at 866-680-3704.
Subscribe to 'Sales + Marketing Ideas' Magazine for Cutting-Edges Information For additional cutting-edge sales and marketing information, subscribe to NAHB’s "Sales + Marketing Ideas" magazine. Call 800-368-5242 x8192 or visit www.smimagazine.com to subscribe or order a copy. Click here to learn about membership benefits of the National Sales and Marketing Council and the Institute of Residential Marketing. The Institute of Residential Marketing Offers Courses and Designation Programs for Sales & Marketing Professionals The Institute of Residential Marketing (IRM) offers four designation programs for sales and marketing professionals:
For more information on these designation programs, click here. BuilderBooks.com Offers Sales and Marketing Publications Online BuilderBooks.com offers a variety of sales and marketing publications online. To view or purchase these publications, click here. A New Prototype CommunityMixing Affordable, Market-Rate Single-Family Detached Homes With Seniors ApartmentsAs a rule, most seniors don’t want to live in a community occupied solely by other seniors. Although they enjoy living with people their own age and in the same life stage, they also want to live with people of all ages — and with families. Based on this relatively simple yet revolutionary concept, the city of La Quinta in the Coachella Valley of eastern Riverside County, CA, decided to address its affordable housing shortage by developing a single community to serve two types of buyers. Called Miraflores, the 204-unit, gated community artfully combines seniors housing with affordable and market-rate single-family detached housing. It creates a sense of place and belonging for everyone who lives there, regardless of age, life stage or the price of their home. Miraflores represents the future of affordable housing not only in La Quinta, but also throughout California. A Public/Private Venture A public/private venture to develop a full master-planned community, Miraflores was far ahead of its time when city officials first envisioned the community in the late 1990s. The goal was to provide affordable housing for lower-income residents — especially families — and seniors, while creating a sparkling, new community that, although affordably priced, would be embraced by the city of La Quinta as a whole. After more than 18 months of intense study to determine the community’s feasibility as an affordable housing enclave, Miraflores was planned on a 40-acre site within the city's redevelopment district. The groundbreaking took place in 1999. The community features Mediterranean-inspired architecture, open space, landscaping and abundant walkways that encourage neighborhood interaction and pedestrian circulation. It also provides facilities for meetings and parties and recreational amenities like a clubhouse, multi-purpose room, patio, lap pool, outside game area and gardening areas. Initially priced from approximately $98,000-$158,000, the 86 for-sale, single-family detached homes were at first marketed to families earning 80% or less of the median income for Riverside County. Homes ranged in size from 1,760-2,100 square feet. Stylish floor plans featured central courtyards, three to five bedrooms, two-and-a-half baths and a wide variety of special options and amenities. While all homes were affordably priced, the city decided, at the builder's request, to sell a portion of the homes to first-time and lower-income buyers and the rest at market rate to bolster sales since many interested buyers had higher incomes and didn’t qualify for the affordably priced homes. A Popular Choice With Families Whether affordably priced or market-rate, Miraflores' single-family detached homes were extremely popular with families. In fact, 41% of Miraflores' households have children. The mix of affordable and market-rate pricing worked well, and the for-sale neighborhood quickly sold out. All homes have similar architectural styling and neighborhood character, which makes the community’s affordably priced homes purchased with financial assistance indistinguishable from the market-rate homes. According to Terry Henderson, a member of the city council who also chairs the city's redevelopment agency, a combination of financing sources made it possible to build the affordable homes. The builder drew on redevelopment agency funds, private capital, non-profit entities, low-income housing tax credits, municipal bonds, downpayment assistance programs, home owner association fee buy-downs and intermixed market-rate housing. The largest percentage of Miraflores' home owners consists of teachers, followed by retail workers and retirees. Other occupations include nursing, medical professions, law enforcement, construction and secretarial work. "The concept for Miraflores was to create a fully integrated residential community that provided high-quality, affordable for-sale and rental housing opportunities for a wide range of workers and retirees," Henderson said. Local Builder Involvement Construction of 118 duplex senior apartments within Miraflores began in March 2002. Built by DC&TC, LLC, a division of La Quinta-based Desert Cities Development, and owned and managed by LINC Housing Corporation, the single-story units feature Mission-style architecture. They are being rented to residents ages 55 years and older with annual incomes at 50% or less of the average median income. Michael Shovlin, a principal of DC&TC, said his firm's mission is to plan and build quality affordable housing in partnership with public entities such as the La Quinta Redevelopment Agency. He said his company immerses itself in the community, gathering information and input through outreach programs and ongoing communications with residents, city officials and other community stakeholders. "We see ourselves as more than developers," Shovlin said."We live here and are members of this larger community." SEASONS at Miraflores, the new seniors neighborhood, includes 93 one-bedroom units with monthly rents starting at $467 (the average market-rate rent for a comparable unit is $750) and 23 two-bedroom units with monthly rents starting at $561 (the average market-rate rent is about $900). Situated near Miraflores' community green space and central village park, the senior apartment neighborhood has its own 2,970-square-foot clubhouse, which serves as the neighborhood activity center. The facility features a library, media room, full kitchen, computer learning center, arts and crafts space, exercise and laundry rooms and a community room where residents can enjoy holiday parties, morning coffee and pastries, bingo and an array of social and educational events. In keeping with Southern California's outdoor lifestyle, a pool and furnished patio area also are available to senior residents. SEASONS at Miraflores won a silver award for small active adult community in the 2004 Best of Seniors Housing Design Awards competition. Long Beach, CA.-based Community Housing Management Services, a nonprofit entity that provides property management services for SEASONS at Miraflores, spread the word about the new community and its affordable rents to local seniors through informational meetings, ice cream socials, watermelon nights and other creative activities. As a result, SEASONS at Miraflores was 62% leased just six weeks after opening in April 2003. Financing and Other Challenges Financing for the seniors project totaling $16.3 million came from three sources: $9.39 million from the City of La Quinta Redevelopment Agency in the form of a residual receipts loan; $3 million from Fannie Mae tax-exempt bonds; and $3.9 million in equity invested via Low Income Housing Tax Credits. Because the tax credits are applied on a building-by-building basis and require a building to be fully leased before a credit is granted, leasing representatives had to work closely with prospective residents to ensure that each duplex was fully leased before the next duplex could be shown. Another challenge unique to Miraflores — but indicative of the type of problems that can arise — was a Native American campsite with archeological significance that had to be accommodated in the site planning. To accomplish that, the campsite area was preserved as open space and planted with a variety of desert flora. The community plan created a visual amenity that accentuates Miraflores' sense of openness and further enhances its character as a low-density residential community. Catering to Active Adult Lifestyles Miraflores' seniors housing neighborhood represents several important trends in building successful communities for 55+ residents. First, seniors don't want to live in traditional two-story homes. Regardless of their fitness and dedication to exercise, they prefer to live in single-story homes or apartments that require little or no maintenance. And, although they probably don’t have younger children at home, seniors want to be able to accommodate their older children and grandchildren. They also want enough space to comfortably entertain family and friends. For obvious reasons, handicap accessibility is important. Older residents also want amenities as part of their lifestyle package. They have no intention of spending their days playing cards or watching TV. They want facilities such as pools and recreation centers to make their lives more active and enjoyable. Many prefer to live in gated communities like Miraflores where they feel more secure. And, not surprisingly, they want peace and quiet. It's becoming clearer from experience and more sophisticated market research that active adults aren’t all that different from anyone else who wants to rent an apartment or buy a home. Active adults have different tastes, economic requirements and lifestyle needs. They seek their own level of community camaraderie, enjoyment and lifestyle activity. At the end of the day, like everyone else, they desire a secure, comfortable place to live in a more traditional neighborhood setting. A benefit of Miraflores' housing mix is that it allows seniors to live near their grown children and their families. Grandparents and grandchildren are only a short walk away from each other. One of the SEASONS at Miraflores’ first residents was a widower who wanted to be closer to his grown child who was living in a Miraflores single-family detached home. Another resident came from Palm Springs at the urging of her daughter, who wanted her mother to live closer to her in La Quinta. It’s these folks for whom SEASONS at Miraflores was built. Hunter L. Johnson is president and chief executive officer of Long Beach, Calif.-based LINC Housing, a 501(c)(3) non-profit affordable housing development corporation. LINC grew out of the Corporate Fund for Housing (CFH), a non-profit organization formed by the Southern California Association of Governments, and has developed more than 4,200 units in 29 communities with half of its properties rented to residents at or below 60% of their area’s median income. Johnson, an active member of the NAHB Seniors Housing Council, is a frequent speaker at organizations such as the Urban Land Institute and NAHB. He and his company have won numerous awards, including a silver award for small active adult community in the 2004 Best of Seniors Housing Design Awards. For more information, e-mail Johnson, or call him at 562-684-1101. This article was reprinted from the Summer 2003 edition of Seniors' Housing News, published quarterly by NAHB's Seniors Housing Council. For publication information, e-mail Jeff Jenkins, or call him at 800-368-5242 x8292. Photos courtesy of LINC Housing.
Attend the 2005 Seniors Housing Symposium in Metro Washington, D.C. Area Learn more about the fastest-growing segment of the housing market. Plan to attend Building for Boomers & Beyond: Seniors Housing Symposium 2005, the premier educational and networking event for industry professionals serving the burgeoning 50+ market. For more information, click here. Enter the 2005 Best of Seniors Housing Awards — Entries Due Nov. 5 Enter your community design, clubhouse, models or marketing and merchandising in the 2005 Best of Seniors Housing Awards competition. The competition has more than 100 categories to choose from, including active adult, assisted living, continuing care retirement community, congregate care community, renovated seniors housing, special needs housing, seniors multifamily and more. For details, visit Call for Entries, or call 800-368-5242 x8220. Learn More About Seniors Housing Through the Seniors Housing Council To learn more about seniors housing, join the NAHB Seniors Housing Council. The council provides information, education, networking and recognition opportunities for its members and represents NAHB on seniors housing issues. For more details, e-mail Jeff Jenkins or call him at 800-368-5242 x8292. National 'Aging in Place Week' Events Slated in 20 CitiesThe National Reverse Mortgage Lender’s Association (NRMLA) and the Aging In Place Council — which includes the NAHB Remodelors™ Council, NAHB Seniors Housing Council and NAHB Research Center — have coordinated activities in more then 20 cities nationwide to commemorate National Aging In Place Week from Nov. 7-13. The week is being organized to:
National Aging In Place satellite events will also demonstrate the collaboration at work among senior service providers. Cities with National Aging In Place events include:
In addition, the governors of Vermont and South Dakota have issued proclamations commemorating Aging In Place Week in their states. To learn more, e-mail Darryl Hicks, Aging In Place Council, or call him at 202-939-1784. New England to Host Fall 50+ Housing Symposium Nov. 3-4Builders, developers, architects and other seniors housing professionals will examine New England’s burgeoning active adult and age-targeted housing market as well as national trends at the first-ever "Northeast Regional Fall Symposium: Keys to Success in the 50+ Market." The symposium will be held on Nov. 3-4 at the Gillette Stadium Conference Center in Foxboro, MA. Sponsored by the 50-Plus New England Housing Council, one of the NAHB Seniors Housing Council’s local councils, the symposium will feature regional speakers from the six-state area as well as nationally recognized industry professionals who will discuss how to attract today’s mature consumers to New England, one of the country’s fastest-growing active adult markets. The Northeast Regional Fall Symposium will show builders how to meet this demand with marketing, merchandising, community design and community amenities. The two-day conference will include eight sessions covering topics including planning issues, branding and marketing, marketing technology and effective merchandising techniques. The cost of the symposium is $195 for members of the 50-Plus New England Housing Council and $295 for all other attendees. Register online at www.bagb.org/50plushousing.htm or e-mail Catie Ruggiero, Builders Association of Greater Boston, or call her at 617-773-1300. The Northeast Regional Fall Symposium is modeled after Building for Boomers & Beyond: Seniors Housing Symposium, NAHB’s popular education and networking conference held each spring.
'The Best of Seniors Housing News' Available at BuilderBooks.com "The Best of Seniors Housing News," available at BuilderBooks.com, is a compilation of up-to-date, informative articles gleaned from Seniors Housing News. From design ideas to customer service, you’ll learn the unique vantage points that will keep you ahead and give you an edge in the seniors housing market. To view or purchase this publication online, click here, or call 800-223-2665 to order. Attend the 2005 Seniors Housing Symposium in Metro Washington, D.C. Area Do you want to learn more about the fastest-growing segment of the housing market? Make your plans to attend Building for Boomers & Beyond: Seniors Housing Symposium 2005, the premier educational and networking event for industry professionals who serve the burgeoning 50+ market. For more information, click here. Learn More About Seniors Housing Through the Seniors Housing Council To learn more about seniors housing, join the NAHB Seniors Housing Council. The council provides information, education, networking and recognition opportunities for its members and represents NAHB on seniors housing issues. For more details, e-mail Jeff Jenkins or call him at 800-368-5242 x8292. Forum Provides Information on Disposition of Low Income Tax Credit PropertiesA one-day conference held last month in Columbus, OH, in conjunction with NAHB’s fall board of directors meeting helped identify options for the first wave of multifamily properties built under the Low Income Housing Tax Credit (LIHTC) program that are approaching the end of their 15-year affordability requirement. The issues forum — presented by NAHB’s Housing Credit Group and sponsored by Freddie Mac — was attended by multifamily builders, lenders, syndicators, accountants and other industry experts. Katie Alitz, of Boston Capital, said that her company considers five ways of handling an LIHTC property disposition after the initial 15-year affordability mandate expires: through a sale (to unrelated third parties), transfer (to general partners), refinancing, resyndication and limited equity transfers. Beth Mullen, a partner with the accounting firm Reznick, Fedder & Silverman, provided information aimed at tax credit developers whose multifamily properties contain both market-rate and affordable housing. The transaction she described — a qualified contract — can be daunting, but she walked attendees through the complexities involved in the process, providing an example of how to price one of these contracts. For more information from the forum presentations, click here.
Mark Your Calendar for NAHB's 2005 Pillars Conference The 2005 Multifamily Pillars of the Industry Conference and Awards Gala is scheduled for April 4-6 at the Doral Golf Resort & Spa in Miami. For more information, click here. The NAHB University of Housing Offers HCCP Designation The NAHB University of Housing offers the Housing Credit Certified Professional (HCCP) designation, a specialized designation for developers, property managers, asset managers and others working in the affordable housing industry. Click here for more information. Application Deadline Extended for Pillars of the Industry AwardsThe deadline for applying for NAHB’s 2005 Pillars of the Industry Awards — which honor excellence in multifamily design, development, marketing and management — has been extended to Nov. 8, and the deadline for completing entry portfolios has been extended to Nov. 17. NAHB created the Pillars Awards in 1990 to honor superior achievement and leadership in the multifamily industry and to promote the benefits of apartment living. Pillars is today recognized as the most prestigious national awards competition in the industry and is considered a showcase of innovation and future trends. “Each year the Pillars program proves that today’s rental apartments and for-sale condos are better than ever and offer great design and lifestyle choices to residents,” said Sharon Dworkin Bell, NAHB’s senior staff vice president for multifamily. “It’s always a thrill to be able to honor the companies and multifamily professionals involved in the year’s best work.” Pillars Award finalists will be announced in January. The winners will be honored at a gala ceremony held in conjunction with NAHB’s Pillars of the Industry Conference, April 4-6, at the Doral Resort in Miami, FL. For more information about the awards and the conference, click here. Career of Award-Winning Tax Credit Professional Starts With Luck, But Blossoms With EducationJose Aponte — named in last spring’s Pillars of the Industry Awards as the Housing Credit Certified Professional (HCCP) of the year — has exhibited exceptional skill and enthusiasm in his management of Low Income Housing Tax Credit (LIHTC) properties, and he could not have started his career in that business without a healthy dose of good luck. In the early 1990s, he and his wife and children moved from Spain, and were looking for an apartment in Orlando. He was also looking for a job. “I was dressed in a suit, for job hunting,” he said, “and went to ask about leasing an apartment. The leasing consultant suggested that I apply for a vacant leasing consultant job in their office. I did, and they hired me on the spot.” Sleeping in Their Car But they didn’t have an apartment for the family. He and his family had to sleep in their car for four days — there was a soccer tournament in town and there wasn’t an empty hotel room for miles — but at least Aponte had a job. Ron Hurd, who was an asset manager for AmerUs and conducting an annual audit of the LIHTC property where Aponte was working, told the new hire that he could help him get into tax-credit compliance work, if that was something he wanted to do. After about a year, Aponte felt ready for the job, and Hurd circulated his resume within the industry. Among those he contacted on Aponte’s behalf was Pedro Vermales, of Reliance Management Services, who was looking for someone who’d worked in LIHTC compliance to build a department. He hired Aponte. “I got wonderful experience pulling the compliance department together,” says Aponte. “He sent me to school for the HCCP, and I took the test and passed — all under Pedro.” Education the Key to Success Aponte says that industry education is vital. “I would tell any young person considering a job in multifamily management or tax credit compliance that they should take advantage of every educational opportunity that’s out there. NAHB’s education and certification programs — I have the Housing Credit Certified Professional designation — has been key to my success.” Aponte says that when he hires people, he looks for the HCCP designation, and if he wants to hire someone who doesn’t have it, his company helps them get it. He also points out that the National Affordable Housing Management Association (NAHMA) and its local chapters offer lots of educational opportunities. “Don’t stop with one certification or designation,” he says. “Every one you have makes you that much more credible and employable. I find that the more education a staff has, the better they do. The ones that are hired who don’t have much education tend to burn out quickly.” Learning the Tax Credit Program Well He advises leasing and management professionals to learn what they can from the people they work with, and to pipe up and ask for training when they need it. Eagerness to learn is never a mistake, “and never pretend you know something if you don’t,” he adds. Aponte says that the tax credit industry is very young, and that it offers considerable career potential in both asset management and compliance for those who learn the program and learn it well. A few years after earning his HCCP, Aponte joined Cameo Management to help that company build a compliance department. “The systems that I built at Reliance and Cameo for their portfolios have been recognized by the state agency as among the best,” he says. “Our procedures, policies and standards are models. Other companies flatter us by attempting to imitate our model.” Aponte worked with Cameo’s Steve Jankowski to form Preferred Compliance Solutions. “Working with Steve helped me fine-tune my management skills and helped me grow in the job," he says. Preferred Compliance remained a division of Cameo until last May, when the company decided it no longer wanted an investor interest in consulting and decided to spin it off, transferring the entire operation to Aponte, its principal. So, in about 15 years Aponte has gone from sleeping in the car to running a successful compliance consulting service. “Call it lucky, call it blessed,” he says, “but I’m so glad I worked with people who valued education. That has opened the doors for me.”
Mark Your Calendar for NAHB's 2005 Pillars Conference The 2005 Multifamily Pillars of the Industry Conference and Awards Gala is scheduled for April 4-6 at the Doral Golf Resort & Spa in Miami. For more information, click here. The NAHB University of Housing Offers HCCP Designation The NAHB University of Housing offers the Housing Credit Certified Professional (HCCP) designation, a specialized designation for developers, property managers, asset managers and others working in the affordable housing industry. Click here for more information. Run Your Business Like a Business — Before It Runs YouFor those who want to run their remodeling businesses more effectively — rather than have their businesses run them — one of the first orders of business is to plan and go on an extended vacation. Another order of business is to stop making evening and weekend appointments — immediately. If a client insists on an evening or weekend appointment, send them to the competition. Don’t worry about losing them, said Vince Butler, CGR, GMB, CAPS, president of Butler Brothers Corporation, a Northern Virginia-based design-build and remodeling firm, during the seminar, “Ten Keys to Success: Take Control of Your Business,” at the Remodeling Show in Chicago earlier this month. “They are not the kinds of clients you want,” he said. “Your time is valuable,” Butler said. “You need to establish a professional-client relationship from the start. If you don’t value your time, your clients will sense that and that can create difficulties throughout the job,” he said. If you don’t plan evening or weekend appointments, Butler said, clients will “open their calendars and find a way to meet with you.” As for vacations, Butler exhorted his audience to set a date and begin to make plans. “If you plan it, you will go. Don’t wait for things to slow down or you’ll never go,” he said. As part of the seminar, Butler offered eight additional steps to follow that would help remodelers become more professional about running their businesses. They include: Pay Yourself First (and Enough) Butler said owners should establish a salary for themselves and then make sure they pay themselves. “Don’t do for free what you would have to pay someone to do,” he said. “And don’t settle for what’s left over at the end of the week. We all know what that could be — zip.” Speaking about his own experience when he had difficulty keeping his business afloat in the mid-1980s, Butler said he made a point to “cut a check for every owner, even while we were in debt. Some of those checks we could not cash, but we made sure we issued them.” An owner’s salary was important for financial reasons, as well. “A bank does not care how much money your business makes,” he said. “A bank is interested in knowing that your business is at least successful enough to pay your salary.” As for establishing a salary, Butler suggested that the owner should pay himself “no less than 10% more than the lead carpenter in your market." Calculate True Overhead and Adjust Your Markup Butler pointed out that a majority of businesses that go bankrupt have had record growth the year before. “Cash flow kills them,” he explained. The problem, he said, is profitability. And the solution is to calculate true overhead and then adjust markup accordingly. “You can’t price properly if you don’t know your true costs,” Butler said. He said business owners should calculate their true overhead — those indirect costs that the company would continue to have even if there were no jobs, usually everything except labor, subcontractors and materials. Once that is established, he said owners should aim to achieve profitability that includes 10% owner’s compensation and 10% net profit. Butler provided several target formulas to calculate profitability:
Butler said remodelers should not worry about pricing themselves out of the market with that high a markup. Instead, he told the audience to work toward achieving that markup by starting at a lower rate and gradually building up to it. Establish a Retirement Fund Butler said remodelers should establish and fully fund a retirement fund because remodelers should have the same retirement expectations as an employee in a career position in any other company. Obtain Disability Insurance Butler said owners should obtain disability insurance and take care of themselves and their family because they are “hanging it all on the line. You’re at risk every day,” he reminded the audience. He said disability insurance was readily available and generally inexpensive — especially for owners who weren’t on the job site every day. Write a Business Plan to Achieve Your Goals Butler said remodelers didn’t remodel homes without plans — and there was no reason to run their businesses without plans either. When creating a business plan, he said owners should include their personal goals. If, for example, an owner wanted to climb Mount Everest, he said, the plan would have to include the time off needed to climb the mountain as well as the time off needed for training until the assault. “Set your personal and business goals for one, three and five years,” he said, “and review and enforce it regularly. “Don’t let your business dictate your lifestyle,” he added. Job Cost and Review Part of establishing a business plan requires accurate job costing and review. “Without job costing and review, there’s no point in a business plan,” Butler said. The first step in job costing, Butler said, is to examine the types of projects performed — kitchens, bathrooms, basements, additions, etc. — and then determine which are the most profitable. “Many of us build what we want to work on,” Butler said. That isn’t necessarily the most profitable. If that is the case, a company may have to work on enough of the more profitable jobs each year in order to allow the owner to do a sufficient number of those projects he enjoys doing. Track Your Leads Butler suggested that remodelers track leads so they can learn the sources of their most profitable customers and then concentrate there marketing efforts on those sources. “Keep your lead tracking simple. Track the source, location, project value and final contract amount with change orders,” Butler said. “Begin to qualify your leads based on this data. Don’t waste time on less than perfect customers.” He said that prior customers are probably a remodeler’s best lead source. “They have already been sold on your company, so stay in touch,” Butler said. Join and Participate in a Trade Association Butler said joining trade associations such as a local NAHB Remodelors™ Council, NAHB and business networking groups such as a Remodelor™ 20 Club provides remodelers networking, education and referral opportunities as well as resources and moral support. “It helps to know there are other people crazy enough to make a living this way,” Butler said.
The NAHB University of Housing Offers Designation Programs and Other Courses The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here. Looking for Space in All the Right PlacesNo matter how big or small a home actually is, people always want more “space.” Whether it is a place for the kids to play without messing up the rest of the house, a place for Dad to watch sports on the 52-inch high-definition television without blasting out the rest of the family because he wants to hear tackles in surround sound or Mom just looking for a quiet nook to read, paint, sew, escape — everybody needs their own place. For a long time now, we have focused on kitchen and bathroom spaces. In the bathrooms, we have created the ultimate spa experience by tearing down walls, adding super-sized showers with multiple heads and even adding furniture. And we have enlarged the kitchen, adding islands and breakfast bars for entertaining and to create the perfect “hosting space.” Now, it is time to look elsewhere in the house to create the ultimate “homey, uncluttered” feel for everyone in the family. The Laundry Room Joins the Family One of the most important, but often ignored, rooms in the house is the laundry "room." According to Whirlpool, home owners spend from seven to nine hours a week on laundry. So it's no surprise that an NAHB consumer preference survey found that 95% of the home owners who were polled said they wanted a separate laundry room in their home, preferably one that is near all the dirty clothes. That desire is being met in new and remodeled homes, where the laundry room has moved into the living quarters — often off the kitchen, bedrooms or bathroom — and is now spacious, with plenty of storage and finishes. Granite or Formica countertops are providing more counter space to fold, iron and sew clothes; cabinets with wood finishes normally found in the kitchen provide storage for laundry detergent and other products; and appliances are high-end and capable of doing things that washers and dryers have never done before. My company is just finishing up a 1,300-square-foot condominium for a couple and young daugher who want their home to be able to meet the needs of an empty nester household when that day comes. So in planning the remodel, we needed to take into consideration not just how things worked out now but how they would function at that point down the road. We took the small area in their laundry room and created as much “space” as possible by adding cabinetry above the washer and dryer and installing a hanging table that drops down when it's needed for folding clothes. The family has enough space to work in the room without creating clutter. The Garage: Not Just a Parking Space Anymore The garage is another place in the home to find potentially prime unused space. According to NAHB, 82% of homes have two or more garage bays, but only about 15% of them are fully being used. This is a great opportunity for creating some "getaway" space for play, entertainment, exercise or even a second kitchen. Home owners are choosing vinyl flooring and carpeting over grease-stained concrete; tearing down metal racks and putting up cherry or oak wood storage cabinets; and replacing cars and lawn mowers with La-Z-Boys, exercise equipment and wet bars. With master suites, basements and rec rooms already remodeled, garages are the last corner of the home ripe for rediscovery. This is exactly where our condo clients decided to focus their quest for livable space. Their decision to abandon it as a space for parking cars was facilitated by its single door that required cars to be parked one behind the other instead of side by side. Carpeting gave it a more luxurious feel and the addition of exercise equipment and a ping-pong table helped reshape its identity. We ended up installing vinyl slat walls along most of the room's perimeter, providing the family a place to hang their bikes and shelving for storage boxes and creating the flexibility to meet a wide range of needs. In the hallway from the house, on both sides, we created storage for coats, shoes and books. Shelving extending from the floor almost to the ceiling can accommodate a small library, across from which is a custom-built closet to hang coats and stash away other personal items to maintain a look that is neat and tidy. To keep the room warm, we replaced the existing metal single-skin garage door with one that's insulated with foam under a metal skin on both sides. The owners do not expect to open the door very often, but space has been provided nearby so they can use it to take out garbage and recycling containers. The hot water tank is also in the garage, and it is now behind a wall and a door. Access is handy, but the tank is hidden and away from any wild ping-pong balls! Creating More Closet Space Closets provide another opportunity for creating new space. According to NAHB surveying, at least 50% of new home owners are happy with the storage they find in master bedroom closets, the garage, master bathrooms, kitchen cabinets, the attic and secondary bedroom closets. But in existing structures built in the 1960s and 1970s, remodelers need to use a little creativity to come up with something comparable. Getting on the organization bandwagon can start with products from retailers like The Container Store and checking out HGTV and its show, “Mission: Organization,” which is devoted to organization and making the best use of space. To make the best use of space in our client’s home, we redesigned all the bedroom closets to accommodate custom shelving. The master bedroom closet door was removed so an antique family heirloom cedar chest could be seen when walking down the hall toward the bedroom. To help create the illusion of “space” we hung a beautiful painting above the cedar chest, providing visual depth to the closet and hallway. By adding the custom shelving and other pieces to maximize storage space and showcasing a great piece of furniture in the closet, we made the master bedroom look and feel bigger and less cluttered. No matter how small the space, with a master plan you can create the illusion of more room. Whether you use wall colors or furniture placement to make a space bigger or convert unused space into a den, exercise room or bedroom, you can find “space” in every part of the home. Donna Bade Shirey, CGR, CAPS, is president of Shirey Contracting Incorporated of Issaquah, WA. For more information, visit the company Web site or e-mail Shirey, or call her at 425-427-1300.
'Creating the Not So Big House' Available at BuilderBooks.com "Creating the Not So Big House," available at BuilderBooks.com, focuses on key design strategies such as visual weight, layering and framed openings as it takes an up-close look at 25 houses designed according to Not So Big principles — creating houses that value quality over quantity with an emphasis on comfort, beauty and details. The houses are from all over the country in a rich varity of styles. To view or purchase "Creating the Not So Big House" online, click here, or call 800-223-2665 or order. The NAHB University of Housing Offers Designation Programs and Other Courses
The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here. Are You the Next Remodelor of the Month?The Remodelor™ of the Month award program is underway. Don't miss your opportunity to be named the Remodelor™ of the Month. The program groups local councils from different states into designated months. There are two “wild card” months that will allow the Council’s members-at-large to participate in the program. A winner is chosen each month and that winner will then be automatically included in the nominations for the Remodelor™ of the Year award. This is a great opportunity for local councils and members to get involved and submit their “best of the best” members to compete with other councils. The national Remodelors™ Council will send out press releases and highlight each winner in ReNews, the Remodelors™ Council e-newsletter. Check out the Remodelor™ of the Month program schedule and mark your calendars. 2004-2005 Calendar For 2005 Remodelor of the Year
Click here for a Remodelor™ of the Month application. For more information, contact the Remodelors™ Council, 800-368-5242 x8216.
The NAHB University of Housing Offers Designation Programs and Other Courses The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here. Nominate Officials, Associations for 2004 SLGA Recognition AwardsNAHB's State & Local Government Affairs Department is accepting applications for the 14th annual SLGA Recognition Awards Program. The program honors elected or public officials who have gone to bat for the home building industry. It also honors state and local home builders associations that have undertaken a particularly innovative or successful government affairs initiative. Entries will be accepted until Nov. 12 Nominations can be made in several categories, including:
Nominations will be judged by a panel made up of SLGA Committee members, executive officers and government aff |