Finding a House Gets Easier — Inventories Rise Sharply in Many Major Markets as Buyers Hang Back
The inventory of homes on the market is climbing sharply in a number of major cities. There were 2.8 million existing houses and condominiums on the market at the end of last year, according to the National Association of Realtors®, up 26% from a year earlier. Since last spring, inventories have climbed steadily in Phoenix, where the traffic is still holding up but prospective buyers are taking their time and sellers will consider lowering their price if there are no takers within 30 days. Sales in Detroit fell nearly 10% in last year’s final quarter and inventories were up amid uncertainty about auto-industry layoffs. One brokerage firm there is running a promotion in which sellers agree to provide $2,000 to $10,000 toward buyer closing costs on purchases before April 15. In Seattle, on the other hand, inventories have declined modestly over the past 12 months as a robust job market sustains demand, and the supply of homes is tight. Among big builders, the Ryland Group Inc. announced that new orders were down 4.7% for the quarter ending Dec. 31. New orders at Standard Pacific were off 20% for the same period. In the Tampa, Fla. area, Lennar has been offering discounts of $20,000 to $30,000, plus help with closing costs and bonuses to brokers, on selected homes. (www.wsj.com)
Wall Street Journal (2/8/06); Ruth Simon and James R. Hagerty
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Toll Says First-Quarter Orders Plunge 29%, Cuts Forecast
Luxury home builder, Toll Brothers Inc., whose homes cost almost three times the U.S. average, reported that its orders dropped 29% during its first fiscal quarter, which ended on Jan. 31. Orders were down to 1,544 from 2,173 a year earlier, and the Pennsylvania-based company is now forecasting that its sales will rise 4.9% this year, half its previous forecast. “The Toll Brothers data is telling us that the fairy dust of rising home prices is floating away,” said Stephen Roach, chief global economist at Morgan Stanley in New York. The company’s average home costs $709,000, compared with the U.S. average of $272,900. Toll’s selling price rose 14% from a year ago, compared with a 2.4% gain for the industry. “They’re not going to be able to replicate that now because we’re going to see prices start to level off — not collapse,” said Karl Case, an economics professor at Wellesley College in Wellesley, Mass. (www.bloomberg.com)
Bloomberg (2/7/06); Kathleen M. Howley
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Builder Blows Into Florida, Brownstone Builders Will Develop Hurricane-Resistant Luxury Homes
BrownStone, based in Landenberg, Pa., is partnering with Palm Harbor Homes to build a 52-home gated project called Porte de la Mer south of Tampa, Fla. The development will be the first to be certified by NextGen, a consortium of manufacturers of smart-home products. The homes are crafted inside Palm Harbor’s climate-controlled fabrication centers; put together at subassembly sites; and then taken apart and trucked to final construction sites in three or four sections. The units are all interconnected to withstand 150-mph winds, to meet the state’s recently toughened wind codes. “Florida has really tough standards, some of the toughest in the nation,” said James R. Brown Sr., BrownStone managing partner. “That’s what I like to see. With some states, you just pay a fee and you’re in. That’s not the way it works in Florida.” (www.orlandosentinel.com)
Orlando Sentinel (2/9/06); Jerry W. Jackson
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Long Johns for the Home: Icynene Is Pricey, But the Foam Insulation Shuts Out Cold
Icynene, a foam insulation, was a quiet star at last month’s International Builders’ Show in Orlando, Fla., appearing in the New American Home and the NextGen Home. The foam, which reduces heating and cooling costs by an average 50%, was named one of the top 100 products in 2005 by Home Builder magazine and has been approved by the National Building Code of Canada, NASA, the NAHB Research Center and Energy Star. The water-based insulation was created by chemical engineer Gabe Farkas in 1986 as an effective environmentally friendly insulation that also stops mold. The American market for the product opened up when financial adviser Graeme Kirkland was a regular on “This Old House.” “Many Americans saw Icynene and wanted it for their homes,” he said. He estimates that the company posted a 35% growth in sales last year and will likely do the same again in 2006, surpassing $100 million in sales. The price of Icynene is 2.5 times that of pink insulation. (www.canada.com/ottawacitizen)
Ottawa Citizen (2/4/06); Sheila Brady
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Home Work 10 Most Wanted
Among 10 products that are likely to be a hit among new home buyers sometime soon, according to Newsday, is a high-tech toilet seat that sprays users clean with a wand attachment. Models are available from Toto, a Japanese company, and Brondell, an American manufacturer. First on the list is Z-Wave technology one-touch control of household lights, security systems and appliances plugged into electrical outlets. Devices are controlled by a wireless remote, like those used for TVs. Information on the product can be found at www.Intermatic.com; www.Leviton,com; and www.z-wave. Another product destined for popularity is flexible plastic plumbing from Zago Flexible Moulding (www.FlexibleTrim.com) that bends and curves to complement wood and painted moldings in both interior and exterior use. Seen at www.EonOutdoor.com, eon fencing is a highly engineered polymer that has the look and feel of wood but the durability of vinyl. It resists rot, mold and insects and is lighter than most composites, which blend recycled plastic and wood fibers. (www.newsday.com)
Newsday (2/9/06); Gary Dymski
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Cap Rates Likely on the Rise in 2006
In addition to uncertainty over how much long-term interest rates will increase in 2006, the biggest question on the minds of those in the multifamily industry for the new year is just how closely cap rates will track permanent mortgage rates upward. The consensus among expert sources consulted by Apartment Finance Today magazine is that cap rates seem bound to rise somewhat as the year progresses, but probably won’t rise as much as long-term debt costs. Long-term mortgage rates have been creeping up, “and the expectation among buyers seems to be that cap rates will have to follow,” said David Baird, national director of investment brokerage Sperry Van Ness’ multifamily practice. “We haven’t really seen cap rates start moving upward in the coast markets in particular, but it seems it’s bound to happen.” (www.housingfinance.com)
Apartment Finance Today (January/February 2006); Brad Berton
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