Profits Harder to Come by With Intense Competition
The average profit margin on a new house dropped to 9.8% last year from 12% in 2002, according to an NAHB survey of the 10 largest builders in the country’s 50 leading metropolitan markets, largely because of an increase in the price of land and construction and materials costs as a percentage of the price of a home. “The share made up by the lot price is increasing over time,” said Rose Quint, the association’s director of survey analysis. “We know that because land prices are going up all across the country.” In 1949, land accounted for just 11% of a home’s selling price; last year, it was 26%, up from 23.5% in 2005. Construction costs have also been on the rise, although not quite as swiftly, climbing from 50.7% in 2002 to 51.7% last year. “There’s only so much they can raise prices,” said Randy Sands, executive vice president and managing director for Los Angeles-based ING Realty Partners, an investor in new condo complexes, condo conversions and single-family housing. “Builders are looking for that land, and they’re having to pay more to get it.” (www.dailynews.com)
Los Angeles Daily News (11/13/05); Andrew Blazier
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Deduction Eruption; Tax Proposal May Not Float, But It Sure Is Making Waves
Treasury Secretary John W. Snow has yet to say when he will respond to the recommendations made at the start of this month by the presidential panel charged with proposing reform of the federal income tax system, and any initiatives to replace current deductions of mortgage interest and state and local taxes may face slow going in the Congress. However, some believe that the seeds of change have now been sown. “The fact of the matter is, I don’t think anyone intended for action to be taken on it this year,” said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. “There’s no time to consider anything this voluminous. I’m thinking not much will happen until 2007…But it does put all this stuff into play. And people will be able to say…some of the greatest minds in the country came up with this idea.” (www.washingtonpost.com)
Washington Post (11/12/05); Sandra Fleishman
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Bluewood Shields Homes From Spores
Bluewood — a lumber coated with chemicals that repel mold, termites and fungus — is starting to appear on construction sites across the Myrtle Beach, S.C. area where mold is a major problem because of high humidity and proximity to the ocean. Although Perfect Barrier System’s Bluewood, manufactured by Enviroguard of the Southeast in Conway and Andrews, adds $1-$2 to the per-square-foot cost of a new home, some builders are convinced it is worth the extra expense to protect themselves against costly lawsuits. Other mold-repelling products, such as Foster 42-42, are sprayed on after the framing is complete. Home Depot is selling Dens Armor Plus paperless drywall, a new product by Georgia Pacific that leaves nothing for the mold to grow on. Cleaning up mold could cost the owners of an average-size home $50,000-$100,000, according to Richard Bennett, a certified industrial hygienist and chief science officer with Risk Tech, an environmental-health services company in Charleston, but many home owner insurance policies won’t cover mold damage. (www.myrtlebeachonline.com)
Myrtle Beach Sun News (10/17/05); Jenny Burns
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Residents Can Relax at Home When Properties Offer Resort-Style Services On-Site
Dedicated massage rooms with soft lighting and flickering candles are slowly emerging as an amenity in luxury apartment buildings in New York, California and Washington, D.C. According to Karen Kossow, assistant vice president of sales and marketing for KSI Management, the company has already installed massage rooms in two buildings in Northern Virginia and will include massages and other spa services at the eight other Washington-area high-rises it plans to build over the next dozen years. “We definitely know it’s a growing trend that will build up over the next three to five years,” says Chris Thomas, owner of Washington, D.C.-based Dirty Boots Adventures, which is under contract to provide massages in five area apartment buildings. “Putting a spa service in a building is just priceless in separating themselves from the norm,” he says. Jason Golec, who works for a company that arranges for salon services and tanning beds in high-end apartment buildings in California, says that generally 10%-15% of the residents will use the facility. They pay the therapist directly — ranging from $40 for a seated head, neck and shoulder rub to upwards of $130 for a 90-minute session. (www.multifamilyexecutive.com)
Multifamily Executive Online (10/15/05); Sharon O’Malley
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Chelsea Condos Think Green
Highlighting an emerging green trend for residential development, the developers of a 225-unit Forbes Park condominium project in Chelsea, Mass. will be stocking its parking lot with a fleet of two-seat, fuel-efficient cars that are just 8 feet long and will be available to residents on demand. In Dallas, an electric moped comes with each of the 49 loft units being developed near city hall by a sculptor-turned-remodeler who dislikes traditional amenities. The Davis Square Lofts in Somerville, built by the Forbes Park developers, capture and re-use storm water, rely on extensive ventilation to make air conditioning unnecessary and include “sky walk” hallways to eliminate the need for interior lighting. Last year, more than 14,000 green homes were built, compared to 61,000 in the prior 14 years combined, according to NAHB. Although green building remains a small fraction of the market, that may change, according to John Loyer, of NAHB, who points out that the nation’s largest home builders are beginning to recognize the benefits of the new approach to housing. (www.3metrowestdailynews)
Metro West Daily News (11/14/05); Ken Maguire, Associated Press
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Policy May Slow Pace of Condo Projects
Deciding that the net loss of rental housing and the displacement of renters is an environmental impact under California’s state law, the city attorney for San Diego has said that apartment projects there being converted to condominiums must undergo a time-consuming environmental review. Seeing things a bit differently, the city’s Development Services Department has insisted that condo conversions are exempted from review under the California Environmental Quality Act. If the attorney’s opinion prevails, 251 projects totaling 8,612 units now being processed could be affected, and the price of the one form of local housing that remains relatively affordable for first-time home buyers could be driven up. The average price of a converted condo in San Diego County is $335,229, up 20% from $278,644 last year, according to MarketPointe Realty Advisors. (www.signonsandiego.com)
San Diego Union-Tribune (11/11/05); Lori Wesiberg
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