Housing Market Worst May Be Over: Greenspan
Sounding more optimistic than current Federal Reserve chairman Ben Bernanke, former Fed chairman Alan Greenspan told a meeting in Calgary, Canada sponsored by BMO Financial Group that the worst may be over for the U.S. housing market. “I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out,” Greenspan said. “There is a good chance of coming out of this in good shape, but average housing prices are likely to be down this year relative to 2005. I don’t know, but I think the worst of this may well be over.” Greenspan said that the fall of communism, not sharp interest rate cuts by the Fed, was behind the housing boom in the early part of the decade. Cheap labor flooding into the West after the fall of the Berlin Wall had a disinflationary effect, causing bond yields to fall and house values to rise, he said. Applications for home mortgages jumped in the latest week as both refinancing and new home purchases increased as long-term interest rates declined, according to data from the Mortgage Bond Association. (www.washingtonpost.com)
Washington Post (10/9/06); Reuters and Jamie McGeever
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Housing Hurts, Bernanke Says
Publicly predicting for the first time the likely economic impact of recent drops in home sales, spending on home construction and the rate of home-price appreciation, Federal Reserve Chairman Ben Bernanke told the Economic Club of Washington that the housing market slump will likely slow U.S. economic growth by about a third in the second half of this year and dampen growth early next year. Adjusted for inflation, growth in the nation’s output of goods and services is likely to be shaved by a full percentage point, he said, pushing the annual rate of growth in the Gross Domestic Product down from 3% to 2%. “As you know, a substantial correction is going on in the housing market,” Bernanke said, and this is one of the “major drags causing the economy to slow.” Bernanke said that the Fed would watch closely to see how the housing downturn affects consumer and business behavior, but he indicated that inflationary pressures are a greater risk to the economy, dousing the hopes of some Wall Street traders that the Fed might cut interest rates in coming months to prevent the housing market from dragging down the rest of the economy. (www.washingtonpost.com)
Washington Post (10/5/06); Nell Henderson
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Home Buyers Seen Slowly Gaining More Clout
A recent NAHB survey of builders found that 75% of all new construction is currently being offered with an incentive or financial concession. “Buyers are seeing concessions where there has been a frenzied addition of new inventory,” said Gopal Ahluwalia, the association’s vice president for research, and that covers a fair number of markets, but not all of them. Mark Nash, a real estate broker in Chicago and the author of “1001 Tips for Buying and Selling a Home,” said that the proliferation of builder concessions is a sign of excess inventory and not necessarily a buyer’s market across all residential real estate segments. Bonuses for buyers are less obvious in the existing-home market, he added. In Manhattan, “if a property is priced right, there are people out there ready to buy,” says Roger Erickson, senior managing director with Sotheby’s International Realty in New York. Erickson says that he continues to see multiple offers on property that is priced right, not necessarily lower than last year, but just not outrageously higher. Daniel Crosby, a real estate agent affiliated with RE/MAX Vision in Crofton, Md., says that buyers now have more to choose from, with two and three homes for sale within the same community and sometimes on the same street. And while sellers need to work a little harder — offering open houses again, printing color brochures and being more realistic when pricing and marketing — he characterizes the current market as more “normal” than when sellers were simply pounding “For Sale” signs into their lawns and writing a contract two weeks later. (www.msnbc.msn.com)
MSNBC.com (10/4/06); Gayle B. Ronan
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Home Construction Slumps: Downturn in Industry Nationally Is Being Felt More Acutely in Central Ohio
A lagging local economy and competition from an unusually large number of existing homes on the market is making the current slump in the housing market more painful in central Ohio than it is nationally. The number of permits for single-family homes this year through July was down 36% in Franklin County and 17% in Delaware County from the same period of last year, and construction in those two counties is only about half of what it was, according to Jim Hilz, executive director of the Building Industry Association of Central Ohio. “The layoffs in the industry — among builders, suppliers and subcontractors — are numerous,” Hilz said. “Our market is down considerably — about 40% to 50%,” said Robert Yoakam Jr., president of Rockford Homes, which locally was building as many as 475 homes a year during the boom. “We’ve been trimming our staff for a year. We knew this was coming,” he said. “Well, here it is.” Hilz is hoping that construction in the area rebounds faster than in some other parts of the country. “We got an early start on the slowdown,” he said. “Hopefully, we’ll come out of it sooner.” However, he added that “it’s hard for us to look at next year and be optimistic. The job market has to improve for the housing market to get better.” (www.dispatch.com)
Columbus Dispatch (10/5/06); Lee Stratton and Mike Pramik; McClatchy-Tribune Business News
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Designing America
Of the 1.716 million single-family homes built last year, 79% were production homes, up from about 60% in the early 1990s, according to NAHB, in large part because smaller, custom builders are being bought up by big builders. While architects continue to complain that the design of these homes is too “formulaic” or that too much attention is spent on such flashy features as granite countertops and not enough on critical elements like framing and mechanical systems, production design has come a long way from the suburbs of the 1950s and ’60s. “Over time, production architects began to promote the idea that people could live in exciting spaces even if they couldn’t afford their own architect,” says Berry Berkus, the Santa Barbara, Calif. designer. For example, in 1989, Washington, D.C.-born architect Chris Lessard created his breakthrough floor plan — the Grand Renoir, which dispensed with the convention that all rooms in a basic rectangular house must be boxy. Instead, he designed a Y-shaped foyer that sets the interior walls in most of the first-floor rooms at an angle and opened up two separate sight lines from the front of the house to the back. Memphis, Tenn. architect Carson Looney came to prominence in 1989 for his revival of the classic Charleston, S.C. shotgun house in his Harbor Town development. One of the earliest “new urbanist” communities, Harbor Town featured the sidewalks, front porches and shallow front yards commonplace in older neighborhoods but unusual for new developments at the time. All were designed to encourage conversation and connection among neighbors. Looney’s designs have appeared in such high-profile communities as Celebration near Orlando, Fla. “I’ve always been impressed with the attention to design detail, even when he’s doing affordable housing,” says Deb Bassert, who oversees the NAHB Design Committee. (www.wsj.com)
Wall Street Journal (10/6/06); June Fletcher
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New Sizes, Fuels Make Fireplaces a Hot Trend
Fireplace sales are white-hot, according to the Hearth, Patio and Barbecue Association, soaring to more than 3.2 million units in 2005, up 50% since 1998. Fifty-five percent of U.S. homes have at least one fireplace, according to the association, which is a member of the National Council of the Housing Industry — The Supplier 100 of NAHB. So popular are fireplaces, that NAHB has found that they are the third most-wanted feature in new-home construction, behind outdoor porches and upscale kitchens. Today’s fireplace is rarely built onsite of brick and mortar. More than 75% of all fireplaces sold last year were factory-built, with many being direct-vented, so home owners have reduced expenses for chimneys and flues. Growing in popularity, models that fit in kitchen cabinets, bedrooms and bathrooms are enabling fireplaces to show up unexpected places. (www.bostonherald.com)
Boston Herald (10/5/06); Associated Press
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