Slower Housing Market Spells Project Delays
A slowing residential market, fast-rising construction costs, higher impact fees, soaring insurance costs and more stringent local and state regulations are among the reasons why some projects in Central Florida are getting delayed, others are being reduced in size and still others are not going forward at all, according to builders, developers, bankers and commercial real estate experts. One of the biggest challenges is the cost of construction materials. According to the Associated General Contractors of America, a sampling of price increases for major building materials in the last year includes: copper and brass mill shapes, up 88%; wallboard and other gypsum products, up 23%; plastic construction products, 20%; steel mill products, 18%; aluminum mill shapes, 15%; and concrete products, 11%. Ken Simonson, chief economist for the contractors group, also notes that steel prices are seeing an inflationary revival and asphalt prices are rising along with fuel costs. At the same time, developers and building owners in the region say they face rising insurance premiums that have added up to 60 cents a square foot to their costs. (www.atlanta.bizjournals.com)
Atlanta Business Chronicle (8/28/06); Jill Krueger
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Spike in Housing Is No Bubble, Fed Says
A study by two economists at the Chicago Federal Reserve Bank finds that gains in wealth and the introduction of innovative mortgages are primarily responsible for the surge in the U.S. housing market since 2001, and that speculative fever has had relatively little to do with it. Americans became wealthier as the economy benefited from investments in computers and software, according to the study, and new mortgages giving risky borrowers access to credit or requiring no downpayment also boosted demand for housing. “The recent high rates of residential investment appear to have been driven mostly by fundamentals and not unusually loose monetary policy or speculative building,” according to the study, which appeared in the third-quarter edition of the bank’s journal Economic Perspectives. An aging population also means that record-high homeownership rates are here to stay, the researchers said. “The risk to the economy from some kind of rapid deterioration in the housing market is lower than some people may think,” Jonas Fisher, one of the economists, said in an interview. “No doubt housing will be having a slowing effect on the economy, but it shouldn’t be a dramatic falloff. It’s likely to stay at a very high level.” (www.philly.com)
Philadelphia Inquirer (8/22/06); Carlos Torres, Bloomberg News
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Hurricane-Proof Homes Too Costly, U.S. Experts Say
Even in the most vulnerable U.S. coastal areas, virtually no one builds homes or buildings to survive a Category 5 hurricane with winds higher than 155 miles per hour because the cost of solid concrete walls and roofs and laminated glass windows protected by storm shutters is prohibitively expensive. The code in Miami-Dade County, Fla., one of the nation’s most hurricane-prone locations, demands resistance to 146-mph winds, below the threshold for the worst storm, because “it’s economically unfeasible” to go higher, said Charles Danger, the area’s building director. “We are very comfortable that the structures that are built now…will resist a mid-Category 4 hurricane.” Danger estimates that only 4% to 6% of the buildings in the Miami metropolitan area of 2.3 million people were built recently enough to meet the current code, which resulted from the destructiveness of Hurricane Andrew in 1992. Some builders say it could cost 10% to 20% more to build for the worst hurricanes, or $25,000 to $50,000 for a median-priced home in Florida. However, only three Category 5s have hit the U.S. in recorded history — Andrew was one of them, preceded by Camille in 1969 and an unnamed hurricane that struck the Florida Keys in 1935. A handful of home owners have built hurricane-proof houses in southern states, using such techniques as poured, steel-reinforced concrete walls in place of hollow concrete blocks; laminated windows bolstered by layers of plastic and reinforced garage doors to help keep the house “envelope” intact; and rounded shapes to reduce wind resistance. But even a handful of screws used to secure the corners and other fragile areas of roofs can reduce damage significantly, engineers say. (www.reuters.com)
Reuters (8/24/06); Jim Loney
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The Housing Crisis Goes Suburban
The scarcity of affordable housing is a deepening national crisis, and not just for inner-city families on welfare. The problem has climbed the income ladder and moved to the suburbs, where service workers cram their families into overcrowded apartments; college graduates have to crash with their parents; and firefighters, police officers and teachers can’t afford to live in the communities they serve. In the past five years, housing prices in Fairfax County, Va. have grown 12 times as fast as household incomes. Today, the county’s median family would have to spend 54% of its income to afford the county’s median home; in 2000, the figure was 26%. The situation is so dire that the county recently began offering housing subsidies to families earning $90,000 a year, and that figure may soon go as high as $110,000. The current crunch falls hardest on renters in Democratic-leaning cities and metro areas, but Democrats have ignored the issue as resolutely as Republicans, neither of whom proposed affordable housing plans in the 2004 presidential campaign. “Even 10 years ago, that would have been unimaginable,” says Ron Utt of the conservative Heritage Foundation. “But now the problems are so much worse, and nobody cares….I find myself on panels where I’m the token conservative, and I’m the one asking: Doesn’t anyone care about affordable housing.” (www.washingtonpost.com)
Washington Post (8/27/06); Michael Grunwald
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Home Depot Makes Hiring Hispanics a Top Priority
A partnership launched in 2004 between Home Depot and the Hispanic Association of Corporate Responsibility, a Washington, D.C.-based coalition of 14 national organizations working to improve the lives of Hispanics, led to an unprecedented national hiring and recruitment partnership with four of the association’s coalition members. For the past three years, Home Depot has hosted a Hispanic summit at its Atlanta headquarters, inviting association member organizations to join the retailer’s corporate leadership to discuss strategies to increase its diversity. Although Home Depot will not release specific figures on how many of its employees are Hispanic or from other minorities, 9.1% of its board members are Hispanic, according to a company report. Home Depot has a comprehensive supplier diversity program, targeting minority business owners; it has bilingual signage and, in some areas, “Do It Yourself” workshops in Spanish. “From our perspective as a global company competing in a very competitive global economy, we understand that in order to attract the marketplace, we must be the marketplace,” said Gloria Johnson-Goins, vice president of diversity for Home Depot. Hispanics represent 14% of the U.S. population, according to the Hispanic Association, and by 2008 will have an estimated annual purchasing power of $1 trillion, or 9.6% of the U.S. gross domestic product. (www.atlanta.bizjournals.com)
Atlanta Business Chronicle (8/29/06); Anya Martin
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Changing Tides: The End of Concessions
With an increasing number of apartment renters in the market and a stable to declining supply of available units, it is prime time to begin increasing unit pricing and cutting back on concessions, according to Mark Fogelman, of the Fogelman Management Group, which operates more than 16,000 units across the Southeast and Midwest. “Over the past year, most market participants in these formerly struggling markets began experimenting with higher pricing on specific floor plans and then moved to across-the-board pricing improvements after their initial success,” he writes. “Now that the recovery is well underway, it is important that apartment operators are focused on achieving a meaningful positive net spread on new move-ins versus move-outs, which simply means that you need to ensure that all new residents moving into your property are paying a higher rate than previous residents who occupied a specific unit.” The price increases can range from 1% to 2% in markets just beginning to recover to 6% to 10% in markets that are in a full recovery mode, he says. “Unit pricing improvements also need to be extended to your current resident base during the lease renewal process, although it’s always prudent to continue to offer your longer-term customers some pricing break versus the levels being paid by new residents coming off the street.” (www.multi-housingnews.com)
Multi-Housing News (8/1/06); Mark Fogelman
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