Cancelled Home Orders: Latest Bubble Prick?
A recent member survey by NAHB found one in five reporting more cancellations of new home orders than six months earlier, with 4% saying that the increase in cancellations was significant. “When you start to see cancellations, you really get worried,” said the association’s chief economist, David Seiders. Of those who said they experienced an increase in cancellations, 45% said it was due to a buyer’s inability to sell their existing home and a third cited buyers not being able to qualify for financing at a time of rising mortgage rates. But the concern of Seiders and others is that cancellations are being driven by real estate investors who were ordering homes with the intention of selling them quickly in a hot real estate market. “If you’ve overbuilt the market and sales get cancelled, you have to do something with the homes,” Seiders said. “The incentives we’re seeing builders offering are clearly designed to support prices and stop cancellations.” (www.cnnmoney.com)
CNNMoney.com (2/24/06); Chris Isidore
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What We Own Vs. What We Owe
While it is true that a surprisingly large percentage of recent home buyers have minimal or even negative equity levels, on the other hand most home owners have substantial net equity holdings out of a total of $11 trillion, which is almost double what they had five years ago, according to a study by First American Corp. Based on appraisal or valuation information on 26 million homes in 36 states and the District of Columbia, the study found that among mortgage borrowers in 2004-2005, nearly one in 10 had zero or negative equity and 5% owed more than their house was worth by more than 10%. Nearly 30% had equity of less than 20% and 44% less than 30%. However, according to research from the Federal Reserve, home owners have equity of 57% on average, compared to 58% five years earlier. Not surprisingly, households with the oldest mortgages had the best equity positions. For example, eight in 10 people who took out their mortgages in 1985 had equity of 75%-80%. (www.washingtonpost.com)
Washington Post (2/25/06); Kenneth R. Harney
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The Anti-Development Boom
A phone survey of 1,000 adults across the country commissioned by P. Michael Saint, CEO of Saint Consulting Group in Hingham, Mass., found that Americans are twice as likely to oppose new real estate development projects as to support them. One out of five American families have actively opposed development in their communities, according to the poll, including mounting a letter-writing campaign and organizing community groups to ensure that elected officials hear their protest. The survey also found that 93% of Americans care about a candidate’s position on new development. “For senior citizens,” said Saint, “66% said it was very important, and they vote in much greater numbers than the rest of the populace. So candidates are starting to realize that regardless of the tax-base implications, a strong stance against new development in the community is going to be politically advantageous.” As the anti-sprawl debate intensifies, smart developers are “spending time going door to door, talking to neighbors and trying to find ways to get people to show up in favor of the project,” said Saint. (www.globest.com)
GlobeSt.com (1/25/06)
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Thomas Jefferson: The Founding Father of Sprawl?
Jefferson hated cities and as a writer, philosopher and leader was able to hard-wire an anti-urban bias into the culture of the United States, according to Leonardo Vazquez, an instructor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers. The U.S. Constitution gave power to the states, not cities and towns, he says. States increase their power through representatives by increasing their population, which they prefer to do by discouraging compact development that risks giving more electoral power to urban areas. After becoming president, Jefferson encouraged movement away from cities through the Louisiana Purchase, which provided Americans with plenty of extra land. Before the Constitution, Vazquez says, Jefferson pushed his anti-urban policy in the Land Ordinance of 1785, a policy that divided land in today’s Midwest into six square mile townships, divided into 640 acre sections. Each section would be used for farming, except for one section that would be reserved for public education. “I view great cities as pestilential to the morals, the health and the liberties of man,” Jefferson said. “True, they nourish some of the elegant arts; but the useful ones can thrive elsewhere; and less perfection in the others, with more health, virtue and freedom, would be my choice.” (www.planetizen.com)
Planetizen (2/20/06); Leonardo Vazquez
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Bringing Down the House
Modular home building saw growth of about 20% between 1994 and 2004, according to Eric Fulton, communications manager for the Building Systems Councils of NAHB, and teardowns represent the next step in the evolution of the industry. “Scattered sites are still the majority of modular housing, but teardowns are a growing market in general,” he said. Experiencing a shortage of land in southeastern Massachusetts, his primary market, builder Don Shulman has been looking for teardowns as an alternative to scattered, vacant sites for new construction. The teardown market now represents 60% of his company’s total revenue, which was about $8 million last year. Shulman says teardowns can shave off nearly half of the total cost of building a modular home at a new site. While the cost of a modular house itself can run from $225,000-$250,000 on the low end, the entire price tag can soar to between $475,000 and $500,000 when land and site improvements are factored in. “It didn’t take long to realize that in most of these situations, the value wasn’t in the house at all; it was in the land,” he said. (www.bizjournals.com)
Boston Business Journal (2/17/06); Sean McFadden
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Taylor to Bring New Focus to Commerce
Joe E. Taylor Jr., the retired chief executive and founder of Southland Log Homes in Irmo, S.C., was recently named by South Carolina Governor Mark Sanford to become the head of the state’s Commerce Department because of his success in growing and running his business. Along with his father, Taylor built Southland into the largest producer of pre-cut log home packages in the country, and his success was partially based on the strength of exporting, with Japan his first overseas market. “We want to see more of those things: business growing from within and more headquarters in South Carolina,” the governor said. (www.thestate.com)
TheState.com (2/10/06); C. Grant Jackson
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