Nation's Building News Online: December 20, 2004

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Next Generation Home Demonstrates Wind- and Fire-Resistant Structural Specifications

In addition to the New American Home, attendees at the upcoming International Builders’ Show in Orlando will want to visit the 2005 NextGen Demonstration Home.

Manufactured by Indiana-based All American Homes, the 2,000-square-foot home will feature the latest in building technologies and materials, smart home automation, safety and energy efficiency. In the wake of an unusually destructive hurricane season, the home will also contain many features designed to help safeguard home owners against hurricanes and wildfires.

With “Safe and Sound” as its theme, the home is being built to the specifications of Tampa’s Institute of Business and Home Safety's “Fortified for safer living” program, which is a set of structural specifications that exceed the building code in most regions. Disaster-resistant features include:

• Simonton’s StormBreaker Plus windows, which are made of laminated glass and steel-reinforced frames that can withstand flying debris up to 134 mph and extreme negative and positive wind pressures
• Metal strapping that ties the roof, walls and foundations together securely so that if wind does enter the home it won’t blow off the roof
• Norbord Windstorm OSB sheathing, which provides additional wall bracing and extends from the very top to the very bottom of the wall
• Decra strone-covered metal roof shingles that don’t burn and are warranted to stay in place in 120 mph winds

The home also features a unique “Storm Room” that functions as a shelter in severe weather. The room has Kevlar-reinforced wall panels, impact-resistant windows and fiber-cement siding.

Other safety features in the home include:

• Secure door and window locks and an electronic home security system that can be monitored by a third-party monitoring service or checked and controlled by the home owner from anywhere in the world
• A whole-house surge protector and a back-up electrical power generator
• An automatic water shutoff valve to protect the home against flooding from burst pipes
• A whole water purification system and a state-of-the-art air cleaner
• An innovative weather radio that provides automatic alerts

The home's amenities include environmentally friendly Icynene foam insulation, a Tonight’s Menu Intelligent Oven combination refrigerator and oven that cooks or cools food and a UNICO high-velocity air heating and cooling system that distributes air through 1.5-inch tubes.

“Systems-built construction allows us the flexibility to build custom homes with an assortment of special features, such as those that will go into the NextGen Home,” said Steve Kerr, president of All American Homes. “Because we build a high quality home that’s also strong and safe, we provide home owners with tremendous security on their investment.”

The home is located in the parking lot of the Orange County Convention Center next to the west entrance.

Building News Coast To Coast

Report Gives Communities a Tool to Match Development to Growth

A Brookings Institution report estimates that close to 60 million additional housing units will be needed to accommodate the 94 million new residents that will join the U.S. population between 2000 and 2030. According to Urban Land Institute Senior Housing Fellow John McIlwain, states and municipalities have the opportunity to maintain quality of life by controlling the pace, type and location of future development. With household size shrinking due to age and delayed marriage and parenting, Arthur Nelson of the Brookings Institution says that spacious single-family homes in the suburbs may lose their popularity. He adds that building mixed-use communities in close proximity to public transportation on brownfields or other vacant parcels is one solution. Officials in Austin, TX, and metropolitan Washington, D.C., are among those revamping zoning codes and collaborating with developers and environmentalists to direct development toward urban centers.
USA Today (12/13/04) P. 4A; El Nasser, Haya: www.usatoday.com

Realty, Marketing Note Changing Face of U.S. Households

The U.S. Census Bureau reports that the average household size slipped to 2.57 people last year, down from 3.14 in 1970. According to "America's Families and Living Arrangements: 2003," a third of households have only two members. Experts attribute the drop in household size to changes in divorce and mortality rates, the aging population, a decline in fertility and delayed marriage plans. The survey also found that 4.6% of households in 2003 were comprised of unmarried heterosexual couples, rising from 2.9% in 1996. Urban Land Institute Senior Housing Fellow John McIlwain says these trends have spurred the development of small homes, condominiums and townhouses — which typically are marketed to empty-nesters and young professionals. He adds that the growing number of friends choosing to live together also has made homes with two master bedrooms more popular.
CBS MarketWatch (12/13/04) Soga, Samantha: cbs.marketwatch.com

The Future Is Now for 'Smart' Homes

High-tech products that perform a variety of household tasks and allow users to access information about their homes when they are away are becoming more affordable and readily available in the United States. Appliance manufacturers like Electrolux already have begun developing enhanced technological features on refrigerators, washing machines, dishwashers and other products. In addition to it and the over 5,000 companies listed online that offer "smart-home" products and services, home builders and developers are also getting in the game, constructing housing that is equipped to handle home-theater rooms and advanced wiring systems. As they become more commonplace, these high-tech options also are becoming more affordable. Home builders additionally are using new materials, such as polyvinyl products and cement fiber planks, to render surfaces virtually maintenance-free. In the coming years, home owners can expect to see new product built with more efficient window coatings; tankless water heating systems; remote-control access to heat, lighting, security and audio-video systems; sturdier building materials, such as aerated concrete slabs; and "smart" appliances with links to the Internet that can record everyday information, such as how much milk is left in the refrigerator.
Washington Times (12/10/04) P. F18; Ross, Audrey: www.washtimes.com

Stressing the Tax Revenue Generated by New Homes

Builders in Maryland are having a tough time getting the land they need for residential projects — mainly because local governments believe new residents put a strain on public services. Many jurisdictions are limiting how many homes can be built on each acre of land, which builders say has dramatically boosted property prices because the supply of available homes has failed to keep pace with demand. In the Baltimore area, the Meyers Group reports that the average price of new single-family dwellings and townhomes shot up 36.2% and 23.5%, respectively, from the second quarter of 2003 to the same period this year. In an effort to show that development generates a substantial amount of tax revenue and creates dozens of jobs, the Home Builders Association of Maryland studied the economic impact of 1,735 new homes in Anne Arundel, Baltimore, Carroll, Cecil and Howard Counties. The study reveals that tax revenue tied to new-home construction exceeded the cost of public services for new residents.
Baltimore Sun (12/12/04) P. 1L; Erle, Bob: www.baltimoresun.com

Powder Room Plus

Powder rooms are following basement laundry facilities and stand-alone kitchens into obscurity. Powder rooms once were designed as extra bathrooms for guests, but today's home owners are using them to make their lives more convenient. They can be positioned near the mudroom, garage or back door so children can clean up before entering the home. Some home owners are locating them near their home gyms or close to the main bathroom in the master suite. Others are putting powder rooms in their home offices to serve clients and completely separate the office from the rest of the house. Powder rooms that are used frequently should have durable wall coverings, plenty of shelf space, a floor drain to facilitate cleaning and a permanent rod to hang wet clothes.
This Old House (12/04) Vol. 9, No. 10, P. 52; Dickinson, Duo: www.pbs.org/wgbh/thisoldhouse

Hurricane-Proof

Home Front's hurricane-resistant homes have gained popularity in Florida and other vulnerable areas since this year's devastating hurricane season. The homes are comprised of aluminum roofs, structural insulated panels made of foam and fiber cement, and a steel frame. The three that were put up in Port Charlotte, FL, prior to Hurricane Charley were able to withstand 145 mph winds. The dwellings also are highly energy-efficient and will not rot or suffer from termite infestations. Though they are priced similarly to traditional stick-built homes, they can be assembled in just three days.
This Old House (12/04) Vol. 9, No. 10, P. 26; Wardell, Charlie: www.pbs.org/wgbh/thisoldhouse

Slow But Steady Growth in 2005

Experts who spoke recently at the North American Forecast in Washington, D.C., stated that the North American construction industry should see measured but steady growth in 2005. Speakers ranged from Greenway Group Inc. President and CEO Jim Cramer to Legg Mason Inc. real estate investment strategist Glenn Mueller to NAHB Chief Economist David Seiders. Forbes magazine Publisher Rich Karlgaard focused on the residential real estate market, stating that the gap of property costs between urban areas and the heartland is the widest he has ever seen it. Mueller, meanwhile, said he expects the commercial side of construction to noticeably pick up. He stated: "We bottomed out in 1990, then peaked in 2000. But it only took three years to go back to the bottom. We'll now start climbing back up." Among the challenges ahead for the overall construction industry are finding skilled workers and dealing with price increases that have put a significant strain on inventories in some areas.
Industrial Distribution (12/04) P. 15; Kickham, Victoria Fraza: www.manufacturing.net

Front and Center

A home's entryway should create an inviting atmosphere and complement the architecture of the entire house. Owners of older dwellings might want to add a porch, portico, gable or columns to jazz up the exterior. Experts say the landing should be no less than six feet wide and four feet deep to allow guests to stand side-by-side and protect them from outswinging storm doors. As for lighting, home owners need to consider aesthetics as well as safety and security. Most homes feature wall sconces on either side of the door and a recessed fixture in the overhang. Dimmer switches, meanwhile, can guard against overlighting. Finally, home owners should choose a detailed front door that incorporates the home's architectural features. They would be wise to select cedar, redwood or mahogany doors because they are the most weather-resistant.
This Old House (12/04) Vol. 9, No. 10, P. 108; Alexander, Max: www.pbs.org/wgbh/thisoldhouse

New Rule Enables Land Owners to Preserve Habitat for Endangered Species

A final rule published on Dec. 10 by the U.S. Fish and Wildlife Service (FWS) encourages home builders, developers and other property owners to identify and preserve habitat for threatened or endangered species by providing needed regulatory certainty to builders and developers who establish Habitat Conservation Plans.

“NAHB applauds the U.S. Fish and Wildlife Service for striking a fair balance between two important priorities: protecting endangered species and building adequate, affordable housing,” said NAHB President Bobby Rayburn. “The rule provides vital assurances that permits issued in conjunction with Habitat Conservation Plans can only be revoked under limited circumstances, and that policy will encourage more builders to plan and develop long-term projects that preserve habitats for threatened or endangered species.”

Established under the Endangered Species Act, the program allows property owners — builders, developers, municipal governments and others — to develop Habitat Conservation Plans (HCPs) in conjunction with FWS biologists and environmental organizations. Once the HCP is approved — a process that takes an average of nearly two years — the property owner can secure permits to build on the land.

An HCP may provide for preservation of existing habitat, restoration of degraded or former habitat, creation of new habitat, the establishment of buffers around existing habitat or restrictions on land use or access. An NAHB analysis of the Service’s HCP database shows that these plans cover more than 33 million acres of land across the United States, more than 90% of it in fast-growing states in the West, Southwest and Southeast .

A critical incentive for property owners to set up HCPs is the “No Surprises” policy, which ensures that once the plan is approved, the federal government cannot impose additional conservation and mitigation measures except under limited circumstances that the parties could have foreseen when they struck their agreement. This policy, which is protected and clarified in the new rule, preserves property owners’ substantial investments of time, money and effort in implementing HCPs.

“The ‘No Surprises’ policy is essential to the success of the Habitat Conservation Plan program, and the U.S. Fish & Wildlife Service should be commended for recognizing that private property owners play an important role in protecting endangered species, just like environmental groups,” said Rayburn. “We can only hope that Fish & Wildlife can move forward with HCPs and other productive conservation efforts without the delays and financial drain of additional litigation.”

For more information, e-mail Duane Desiderio at NAHB or call him at 800-368-5242 x8146, or contact Christopher Galik, x8663.

Housing Snapshot

Mortgage interest rates declined slightly again last week and remained comfortably under the 6% threshold, raising expectations that housing starts will show an increase this month, according to Frank Nothaft, chief economist for Freddie Mac. "There is no doubt now that 2004 will be a record year for single-family construction," he said. "That said, because of low mortgage rates, we feel confident that 2005 will not be very far behind this year." The Bush Administration is forecasting 3.9% growth in the Gross Domestic Product this year, with modest declines to 3.5% in 2005 and 3.4% in 2006, and 1.4 million new jobs in 2004 and 2.1 million more in 2005. General economic news was largely favorable last week. The Labor Department reported a 0.2% increase in the Consumer Price Index in November, a marked improvement over the 0.6% increase during the prior month. Fueled largely by energy prices, inflation was at a rate of 3.7% for the first 11 months of this year, compared with a rate of 1.9% for all of 2003. On Monday, the Conference Board reported that its Index of Leading Economic Indicators was up in November, following five months of decline. Not much was happening on the lumber price front. Framing lumber dropped slightly to $374 per 1,000 board feet from $379 in the prior week, according to Random Lengths; it was $319 one year earlier. Random Lengths' structural panel composite price, which includes oriented strand board, rose one dollar to $386, compared to $322 a year earlier.

Mortgage Interest Rates

30 Year Fixed Rate: 5.68\%
15 Year Fixed Rate: 5.11\%
1 Year ARM: 4.18\%

Housing Starts: Nov. 2004

Total: 1.77 million\%
Single Family: 1.448 million\%
Multi Family: 323,000\%

New Home Sales: Oct. 2004 *

1.226 million

Existing Home Sales: Oct. 2004 *

6.75 million

* Seasonally Adjusted Annual Rate

Building a Foundation for Workforce Housing

When I took over the reins of the 215,000-member National Association of Home Builders almost one year ago, I promised that I would dedicate my efforts and the resources of our organization to finding a solution for the growing shortage of affordably priced housing for the heroes in our workforce who make a vital contribution to our communities. Generation after generation, we have come a long way in America, steadily expanding housing opportunity for our families. There have always been challenges standing in the way of that progress, and we have always worked hard and succeeded in overcoming them, building a stronger, more efficient housing delivery system in the process. There is no reason that we cannot overcome the obstacles that are increasingly preventing the workers we value the most from living in the same neighborhoods they serve, and I am confident that we are well on our way to implementing strategies that will make this happen.

Housing affordability has always been a challenge for our industry. In fact, affordability has always been a primary goal of our housing finance system. The creation of the low-downpayment, 30-year mortgage opened the door for housing opportunity for typical working households across this country. When our soldiers returned from World War II, we saw production builders move into high gear. By building an affordable, entry-level product that could be financed with an affordable mortgage, our industry provided millions of Americans with access to the American dream. In the years that followed, as those families moved forward in their careers, we saw them trading up to bigger, more expensive houses. We called it the housing ladder, and most of the time — when mortgage rates were at affordable levels — it worked well as a conduit for the accumulation of family wealth.

I started in the building business in the 1970s, so I was around for the devastatingly high interest rates of the early 1980s. It was obvious even before then that passbook savings accounts were not enough to provide our industry with the capital it needed. So we hitched our wagon to the secondary mortgage market, and we solved the problem. In more recent times, we have seen incredible innovation in housing finance that has further expanded housing opportunity in this country. On top of that, for the past few years American home buyers have enjoyed the lowest mortgage interest rates since the 1960s. You’ve seen the results in the headlines. Our national homeownership rate has risen to an all-time high. People have been buying homes at a record pace. And home builders have been building as fast as they can to keep up with the demand.

From reading those headlines, you might not know that America today has a serious housing problem. It is a sobering fact that working families — the teachers, firefighters, nurses and other workers who are the heart and soul of any community — cannot find affordably priced housing in the communities they serve. Many of those communities have failed in their commitment to provide affordable housing. Many of those communities are actually responsible for sky-high land prices and housing prices because they have embraced zoning and other regulations that are designed to stop residential growth. There are many causes of today’s workforce housing problem, but the bottom line is that in recent years, the disparity between housing prices and the incomes of these workers has only grown worse.

I am a home builder, and that means that I share in the optimism that is almost a prerequisite for success in an industry where we face challenges at every turn and must always keep a steady focus on our mission to build the housing that our growing population needs. NAHB’s Workforce Housing Symposium has increased my confidence that we will turn the tide in communities across this country. We have delineated the problem and its root causes and we have identified initiatives that are beginning to answer the need for workforce housing. We have heard from the Secretary of Housing and Urban Development his assurance that a top priority for the President is pursuing policies that will address this problem, and rightfully so because it also a top concern of the American people. We have heard from the CEO of Freddie Mac about new programs in the secondary market to further its mission to expand housing for our workers. And we have heard from home builders, employers and representatives from the public sector, who have shared their experiences and expertise about how we are going to get the job done.

We have built a solid foundation from which we can address our workforce housing needs. It’s time for housing to give a hero’s welcome to the dedicated men and women who work on our behalf, and there is no better way of showing our appreciation for their vast contribution than to bring them the housing that will ensure they remain an essential and enduring force in our communities.

U.S. Lowers Canadian Lumber Duties as Appeal of NAFTA Ruling Moves Forward

In an administrative review, the Commerce Department announced on Dec. 14 that it will lower duties on imports of Canadian softwood lumber from an average of 27.2% to 21.2%.

The countervailing duty will be lowered marginally from 18.8% to 17.2%, while the anti-dumping duty rate will fall from 8.4% to 4.0%.

The new rates are expected to go into effect by the end of this year.

A preliminary U.S. decision in June would have slashed the rates by more than half — by 13.2% — for the softwood lumber products used for home building.

In response to the ruling, the Canadian government said that it would appeal the Commerce Department decision through the North American Free Trade Agreement (NAFTA) and World Trade Organization, where it has already won several legal victories in its bid to abolish the tariffs.

The most significant of those victories occurred in September, when a NAFTA panel unanimously ruled that there is no evidence that Canadian lumber shipments threaten the domestic industry, which is the legal justification for imposing the duties under both U.S. and international trade laws.

In a last-ditch attempt to keep the case alive and the duties in place, the Commerce Department, at the behest of the U.S. lumber lobby, filed an “extraordinary challenge” late last month to overturn the NAFTA ruling.

No nation filing an extraordinary challenge of a NAFTA ruling has ever won.

The levies will remain in place while the appeals process moves forward. A decision is expected in March.

If the U.S. loses the case, the duties will be rescinded.

For further information, e-mail Michael Strauss at NAHB or call him at 800-368-5242 x8252.

Bush Economic Agenda Takes Shape at Two-Day Conference

In a two-day conference last week, President Bush included in his broad agenda for the economy several recommendations that are supported by the nation’s home builders.

The meeting touched on several major themes:

• Updating the tax code to make it simpler and easier to understand
• Overhauling Social Security to give younger workers the opportunity to take some of their own payroll taxes and set up a personal savings account, while leaving the system unchanged for retirees or those nearing retirement
• Allowing the health care system to be more flexible and market-oriented in its application
• Reforming the legal system to help ease the number of frivolous lawsuits that limit the ability of American businesses to compete on a global basis

Death to the Death Tax

Specifically, the President said that his tax cuts — several of which are due to expire in the coming years — have pulled the nation out of recession and moved the economy forward.

To continue promoting “pro-growth policies,” he called on the Congress to make the tax relief permanent and called for the abolition of the “death tax,” which is due to expire for one year in 2010 but resurface in 2011.

“It’s going to make estate planning awfully interesting in the year 2010,” Bush said. “I want you to know that the death tax takes up more than 300 pages of laws and regulations in the current tax code. By getting rid of the death tax forever, we have simplified the code by 300 pages. And not only that, it’s good public policy.”

To spur economic growth, the White House also called for enacting regulatory reform to streamline regulations and reduce paperwork to alleviate the burdens that handicap small businesses and entrepreneurs.

Association Health Plans

To make health care more accessible and affordable for small businesses and their employees, Bush called for the adoption of association health plans.

“Health care premiums have risen by 83% per employee over the last decade. Fast-rising medical costs are a drag on this economy, and so there’s some things we need to do together. One is expand health savings accounts; two, promote association health plans. I believe small businesses should be allowed to join together to pool risk so they can negotiate for health care contracts just like big companies are able to do,” he said.

Tort Reform

NAHB has been a long-time proponent of class-action tort reform and the President said that this would be one of his priorities in the coming year.

“Congress must know that excess litigation is not only a drag on our economy, but creates fear and uncertainty for people in the business community. To keep the economy growing strong in the future, we have got to lift the burden and reform our legal systems. This nation needs class-action lawsuit reform. The nation needs to have asbestos legal reform. And this nation needs medical liability reform. I’m looking forward to working with Congress to get legal reform done quickly in the upcoming legislative session.”

Remarking on how the economy continues to grow and remain on the right track, Bush cited the important role of the housing sector, stating that “housing ownership and housing starts are still very robust and strong.”

Housing Starts Off in November, But Permit Inventories Suggest December Rebound Possible

In the face of unusually wet weather across much of the country and further monetary tightening by the Federal Reserve, housing starts dropped 13.1% in November to a seasonally adjusted annual rate of 1.771 million units, the Commerce Department reported last week.

The issuance of new permits for the month was down a slight 1.5% to a seasonably adjusted rate of 1.988 million units, increasing the backlog of unused permits to 204,000 units, a sign that housing starts will probably bounce back in December.

“Builders are trying to stay in sync with housing demand,” said NAHB President Bobby Rayburn. “There still is plenty of traffic in the sales offices, but they are also keeping an eye on what Federal Reserve Chairman Alan Greenspan is doing with short-term interest rates.”

In addition to inclement weather, “it also appears that builders are looking ahead with a little bit of caution,” said NAHB Chief Economist David Seiders. “They are having a record sales year, but the number of unsold units in inventory has been on the rise. With the Fed on the move, it makes sense for builders to control inventory at this stage of the cycle.”

“There is little doubt we will have another record year for single-family home building in 2004 — up about 6% to 1.6 million units,” Seiders said. “Home building overall, which includes construction of new homes and apartments, will increase about 5% to 1.95 million units for the year as a whole.”

Single-family starts declined 11.7% to a seasonally adjusted annual rate of 1.448 million units in November and multifamily production was off 19%, dipping to an annual rate of 323,000 units.

Construction of new homes and apartments in December slumped 10.4% in the South, 13.2% in the West, 14.2% in the Northeast and 19.4% in the Midwest.

Index Finds Builders in Good Holiday Spirits in December, Especially Out West

The nation’s home builders are in good holiday spirits this December, maintaining the same high level of confidence they voiced during the preceding two months, according to the NAHB/Wells Fargo National Housing Market Index (HMI). A new regional breakout of the HMI data also reveals that builders in the West tend to be the most optimistic of all.

The December HMI edged up slightly to a reading of 71 this month, indicating that builders’ positive assessment of the housing market has held firm for the last three months.

“Builders have every reason for good cheer this holiday season,” said NAHB President Bobby Rayburn. “The bottom line is that buyer demand continues to keep builders busy and, like most business owners, builders are happiest when we’re busy.”

“On a nationwide basis, the final quarter of 2004 has been a good one for home builders,” agreed NAHB Chief Economist David Seiders. “Indeed, the average HMI was up several points for the quarter, reflecting excellent financing conditions, rising home prices and an improving economy.”

Derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years, the index reports ratings on current sales of single-family homes, prospects for sales in the next six months and traffic of prospective buyers. A new addition to the HMI this month is a seasonally adjusted regional component measuring builder confidence in each of the four Census regions.

In December, the HMI component gauging current single-family sales remained unchanged at 77; expectations for sales in the next six months were up one point to 81; and buyer traffic rose three points to 52.

Regional scores were 80.1 in the West, 76.1 in the South, 71.9 in the Northeast and 56.7 in the Midwest.

Any number over 50 indicates that more builders view sales conditions as good than poor.

“The Midwest’s relatively weak showing presumably reflects builder perceptions of the area’s relatively weak job market, which has lost one million jobs since mid-2000 and only started picking up again in the last two quarters,” said NAHB’s Seiders. “However, the impact of job losses on the housing market has been softened by historically low mortgage rates.”

Eye on the Economy

By David F. Seiders, NAHB Chief Economist
The U.S. economy continues to move ahead at a good pace despite considerable complications …

Growth of U.S. economic output (real Gross Domestic Product) averaged 3.9% for the first three quarters of 2004, strong enough to generate systematic improvements in the labor market. NAHB’s forecast shows further above-trend growth (3.7%) in the final quarter of the year.

Good GDP growth has been maintained despite waning stimulus from the 2003 tax-cut legislation and despite the turnaround in monetary policy since mid-2004. The economy also has endured tepid readings on consumer confidence/sentiment, a situation provoked partly by world-class spikes in global oil prices as well as in home heating oil costs and gasoline prices at the pump.

The resilience of the U.S. economy in the face of formidable problems in energy markets relates partly to reduced dependence of our economy on petroleum, compared with earlier times. The resilience also suggests that many businesses and consumers expect elevated oil and gasoline prices to be temporary and have not adjusted their behavior to the higher prices. Fortunately, energy costs recently have come off their record highs, and NAHB’s forecast assumes further declines in 2005.

Mixed signals on November employment mask positive trends in the job market …

The employment report for November, released by the Labor Department on Dec. 3, revised payroll job growth downward for September and October and contained a weaker-than-expected gain for November (112,000). Furthermore, the length of the average workweek slipped a bit (unexpectedly) and the index of aggregate hours worked in the nonfarm business sector declined by 0.2 % — a significant amount. The weaker-than-expected signals were rounded out by a meager 0.1 % increase in aggregate hourly earnings, the smallest monthly gain this year.

Despite these downbeat signals, the payroll survey for November really wasn’t all that bad — at least in terms of longer-term trends. More than 2 million jobs have been created so far this year, a monthly average gain of 170,000, and the average for the October-November period stands at 207,000. Furthermore, other labor market indicators point toward ongoing improvements in the labor market, and we expect payroll job growth to average 200,000 per month during the coming year.

The portion of the November labor market report that’s based on a survey of households (rather than business establishments) actually was quite good. The unemployment rate declined by one-tenth to 5.4 %, reflecting a robust gain in civilian employment (483,000) that outpaced a healthy increase in the civilian labor force (439,000). Everything considered, the labor market still appears to be moving ahead at a decent pace.

Inflation pressures continue to build, but recent ‘core’ readings are not alarming …

Inflation pressures have been building since late last year, driven in recent months by large increases in prices of food and energy. Core inflation (excluding food and energy) also has gravitated upward, catching the attention of financial markets as well as our central bank (the Federal Reserve).

Key measures of core inflation were running in the 1.5%-2.0% range in October, measured on a year-over-year basis, and the Fed’s favorite measure (the core price index for Personal Consumption Expenditures) was at the lower end of that range. November's movements in the core PPI reinforce the evolving story of upward pressures on wholesale prices that eventually will feed into the core consumer prices that the Fed cares about most.

The12-month change in the core PPI for finished goods edged up to 1.9% in November, still low by historical standards but up from only 0.5% a year earlier. U.S. producers apparently are regaining some pricing power, presumably aided by the downward trend in the exchange value of the dollar and improving economic conditions abroad.

The Fed hikes short-term rates again, and there’s more to come …

As expected, the Fed enacted another quarter-point increase in its federal funds rate target at the Dec. 14 meeting of the Federal Open Market Committee (FOMC). This was the fifth consecutive increase since June 30, taking the funds rate to 2.25 % and the bank prime rate to 5.25 %.

The Dec. 14 FOMC statement contained assessments of risks to the short-term economic outlook that were identical to the assessments made at the Nov. 10 meeting, and the statement continued to talk about a “measured” pace of future rate hikes — as the Fed continues to remove monetary policy “accommodation” from the financial system. The Fed’s reading of current economic conditions continued to show positive assessments of economic growth and labor market conditions as well as limited concerns about inflation and longer-term inflation expectations.

The real (inflation adjusted) federal funds rate now is positive, but monetary policy still is highly accommodative. Thus, there’s a significant probability of another quarter-point hike in the federal funds rate at the next FOMC meeting on Feb. 2, and NAHB’s forecast incorporates that adjustment. We’re still projecting a funds rate of 3.5% by the end of next year and a peak of 4% by mid 2006.

Mortgage rates remain historically low despite the Fed rate hikes …

Long-term interest rates, including rates on fixed-rate home mortgages (FRMs), remain quite low despite the systematic tightening of monetary policy since mid-year. Indeed, the FRM rate now is around 5.7%, more than half a percentage point below its mid-year level.

Adjustable-rate mortgage (ARM) yields also have remained historically low despite the hikes in short-term rates by the Fed. The one-year Treasury indexed ARM now averages 4.1%, the same as at the middle of the year.

The housing sector cruises toward new records in 2004 …

Excellent financing conditions continue to buoy the housing markets. Home sales, housing starts and issuance of building permits were all quite positive in October. NAHB’s monthly surveys of single-family builders showed maintenance of high levels of market activity in both November and December. The Mortgage Bankers Association’s weekly surveys of home mortgage lenders also show maintenance of historically high levels of lending for home purchase (through Dec. 10).

The strong forward momentum in late 2004 ensures record levels for home sales and single-family starts for the year as a whole. Furthermore, both the condo component of the multifamily market and remodeling of owner-occupied homes are bound to post new records in 2004. Everything considered, residential fixed investment promises to make another sizeable contribution to GDP growth in the fourth quarter, rounding out robust growth of nearly 10% for the year as a whole.

Educational Sessions Focus on Excavations, Scaffolding and Other 'Top 10' OSHA Violations

Many of the most frequently violated standards of the Occupational Safety and Health Administration (OSHA) are covered in educational sessions at the upcoming International Builders' Show in Orlando.

The focus of a Jan. 14 session, excavations accounted for the most frequently cited willful violation this year, according to OSHA. Willful violations are defined as those that are "committed with an intentional disregard of, or plain indifference to, the requirements of the Occupational Safety and Health Act and regulations," and penalties for them are severe.

The following are on OSHA's Top 10 list for willful violations this year:

1. 1926.652 Protection Systems — Excavations
2. 1926.451 Scaffolding
3. 1926.501 Fall Protection
4. 1910.147 Lockout/Tagout
5. 1910.146 Permit Required Confined Spaces
6. 1926.760 Fall Protection — Steel Erection
7. 1910.95 Noise Exposure
8. 1926.651 Excavation and 1926.1101 Asbestos
9. 1910.134 Respiratory Protection; 1910.212 Machine Guarding; 1910.217 Power Presses
10. 1910.1200 Hazard Communication

For more information, e-mail Rob Matuga at NAHB, or call him at 800-368-5242 x8507.

OSHA, Construction Safety Education Sessions at IBS

(All seminars at the Orange County Convention Center, OCCC)

Thurs., 1/13	Event	Location
8:30-10:00 a.m.	Safety, Spanish, & Your Company’s Bottom Line	OCCC
1:30-2:30 p.m.	Managing Subcontractors Safety	OCCC
Fri., 1/14
9:00-10:00 a.m.	Trenching & Excavation Safety: Best Field Management Practices in Residential Construction	OCCC
11:00 a.m.-12:30 p.m.	Big Four Construction Safety Hazards: What You Need To Know	OCCC

Make Your IBS Plans by Dec. 24 — and Save

The new extended deadline for final advance registration for the 2005 International Builders’ Show  is Friday, Dec. 24. Register by Dec. 24 and save $25.

Follow these links to:

Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB.

Log in today to register for educational seminars, meetings and networking events; find important economic and housing data; and learn the latest developments in NAHB’s efforts to promote housing. It’s all available to you 24 hours a day at www.nahb.org. Just click the "Member Log In" button to get started.

Awards Programs Deadlines

Awards Program	Entries Due
National Green Building Awards	Dec. 22
National Wetlands Awards	Jan. 15

Calendar of Events

Jan. 12	Best in American Living Awards	Orlando, FL
Jan. 13-16	The International Builders' Show	Orlando, FL
Jan. 13	2004 Council & Individual Leadership Awards	Orlando, FL
Jan. 13	techHomExpo	Orlando, FL
Jan. 13	2005 Best of Seniors Housing Design and Marketing Awards	Orlando, FL
Jan. 13	EnergyValue Housing Awards	Orlando, FL
Jan. 13	Innovation in Workforce Housing Awards	N/A
Jan. 13	National Housing Endowment/Home Builders Care Project of the Year Award	Orlando, FL
Jan. 13	The Nationals — National Sales & Marketing Awards	Orlando, FL
March 13-15	National Green Building Conference	Atlanta, GA
March 13	National Green Building Awards	Atlanta, GA
April 3-6	Multifamily Pillars of the Industry Conference & Awards Gala	Miami, FL
April 13-17	NAHB Spring Board of Directors Meeting	Washington, DC
May 16-18	Building for Boomers & Beyond: Seniors Housing Symposium 2005	Chantilly, VA
June 13-15	NAHB/BALA Design Institute for Builders	Denver, CO
Aug. 9-13	2005 EOC Seminar	Big Sky, MT
Nov. 17-19	2005 State and Local Government Affairs Conference	Phoenix, AZ

To view more meetings & events information on the NAHB Web site, click here.

Make Your Connection With www.nahb.org

Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB.

Log in today to register for educational seminars, meetings and networking events; find important economic and housing data; and learn the latest developments in NAHB’s efforts to promote housing. It’s all available to you 24 hours a day at www.nahb.org. Just click the "Member Log In" button to get started.