Pulte Pulls Plug on Prefab Virginia Plant
Battered by the slowest housing market in years, Pulte Homes announced that it is shutting down a three-year-old manufacturing plant in Manassas, Va. where it once hoped to build many of its Washington, D.C. area homes and possibly revolutionize home building methods. Pulte produced the basic shells of houses — foundations, walls and floor decks — at the 109,000-square-foot plant. The parts were trucked to sites within a 125-mile radius and assembled there. Shortly after the plant opened, company officials said they expected it to churn out 1,800 homes a year, using a technique that would make building them quicker and cheaper while improving their structural quality. But the plant never ran at full capacity, and at the time of its closing was only at 25% of capacity. “With 20-20 hindsight, Pulte should have started their factory three or four years earlier because the market turned down just as they were trying to ramp up,” said analyst Lawrence Horan. Pulte’s highly automated plant could produce larger, higher-end prefabricated homes with a variety of floor plans that could be built in three to five days. The company used more steel and less wood to reduce warping, bowing and bending, and the climate-controlled surroundings allowed more precision, less waste and fewer weather-related defects and delays. (www.washingtonpost.com)
Washington Post (1/27/07); Dina ElBoghdady
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The Draw of the Flaw — Railroad Tracks, Power Lines Can Be the Beginning of a Bargain
People in the Washington, D.C. housing market are buying real estate with such incurable defects as no yards or proximity to busy roads, power lines, factories or busy nightclubs. Long & Foster real estate agent Robyn Porter says that she sees an example every day of someone purchasing a home with a defect so that they can move into a neighborhood that they otherwise couldn’t afford. When the buyer decides to sell, however, it could take longer if the house is under a power line and they will need to price the home lower. While there is no guarantee that any home will appreciate at the same rate as its neighbors, she says that houses with incurable defects do not necessarily lag behind the rest of the market. Valerie Huffman, regional vice president with Weichert Realtors, cites examples of people who see a benefit in what most perceive as a defect. She has sold houses that sit along busy roads to buyers who thought it would be safer in a busier area where there would be less crime than in a more secluded neighborhood or who liked the idea of getting onto the main road quickly for an easier commute. (www.washingtonpost.com) Washington Post (1/27/07); Dan Rafter
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The Chill at Luxury’s Low End — In $1 Million-House Sector, Sales Tumble, Prices Are Flat
The million-dollar market is slowing down, according to an exclusive report for The Wall Street Journal prepared by Gopal Ahluwalia, NAHB’s vice president of research, based on data from First American Real Estate Solutions. Looking at sales of new and existing single-family homes costing between $750,000 and $1.25 million in the nation’s top metro markets, only 32 metro markets had 100 or more sales in that price range during the fourth quarter of 2006, down from 65 during the same period of 2005. In nearly half of those 32 markets, prices flattened or declined from a year earlier, in some areas by as much as 7.2%. Overall, the median price of the “starter luxury” homes in the 32 markets rose 1.4%, to $890,000. But the million-dollar market is doing better than the overall market because it wasn’t quite as overrun with investors during the boom. “There were more buyers trying to move up rather than make a killing,” Ahluwalia said. Because investors make their money by reselling properties quickly, they’re more likely to cut their losses, and their prices, as soon as they detect a market slowdown. A million dollars today doesn’t go as far as it did even a few years ago, before residential real estate in many cities experienced double-digit price increases during the boom. And the cash-rich buyers who were mostly immune to fluctuations in mortgage interest rates when they bought million-dollar homes five or six years ago have been replaced by middle-income buyers. Hoping to cash in on the boom, some of those buyers stretched to trade up using creative financing like option adjustable rate mortgages — which allow borrowers to decide how much they’re going to pay each month — and interest-only loans. Now, many are “stuck” with homes whose prices are flat or declining, according to University of Maryland business professor Peter Morici. (www.wsj.com)
Street Journal (1/26/07); June Fletcher
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Stricter Standards Sought for Lenders, Brokers
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said in an interview that one of his top priorities this year will be enacting a nationwide lending-standards law to protect consumers from deceptive, unfair and predatory mortgage practices. A recent study by the Center for Responsible Lending predicted that as many as one of every five subprime borrowers who took out reduced-payment low-documentation mortgages from 1998 to mid-2006 could ultimately lose their homes because of steep payment increases and penalties they can’t handle. Proponents of a suitability standard would require loan officers to make certain that applicants are financially capable of handling a particular loan before and after payment increases, and also that the applicants fully understand the pros and cons of the mortgage they select. A standard might also prohibit brokers and others from steering less-sophisticated borrowers to higher-cost mortgages than those for which they could otherwise qualify. (www.washingtonpost)
Washington Post (1/27/07); Kenneth R. Harney
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Smart Elevators: A Faster Way Up and Down
Looking for elevators that would be easier to use in its showcase 46-story tower on West 57th Street in Manhattan, the Hearst Corp. chose the Miconic 10 made by the Schindler Corp. Instead of pushing an up or down button to summon the elevator, the rider enters the floor number on a keypad in a single square column and is then directed by the keypad to a particular elevator. The elevator closes almost noiselessly and speeds to its floor. By stopping at fewer floors, the elevator cars can return to pick up people more often, and because smart elevators make fewer stops, they use less energy. Building owners like them because they mean fewer large crowds forming in lobbies waiting for the next car. The elevators can also calculate the weight of their passengers to prevent too many people from getting on, and they can also slow down if a disabled person is boarding. Similar elevators are available from other manufacturers, including Otis Elevator and ThyssenKrupp Elevator. (www.npr.org)
National Public Radio, Morning Edition (1/11/07); Jim Zarroli
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On the Level; Single-Story Living Growing in Popularity Among Over-55 Home Buyers
This year, buyers who are 55 and older are expected to account for 370,000 housing starts, according to the NAHB 55-Plus Council, and they will place 24% of the orders for new custom homes. And because the average home buyer is getting older, builders are adding a choice of traditional ranch floor plans, ranch homes with an optional second floor, all-on-one floor duplexes and ranch-style townhouses, according to Steve Hovany, president of Strategy Planning Associates in Schaumburg, Ill. One reason the traditional ranch house has not been more popular is cost, say builders. Single-family homes dominate lower-square-footage housing, noted Glen Barnard, senior vice president of KBnxt Group, a division of KB Home. But as buyers trade up to bigger houses, demand for ranch plans drops off sharply. Hovany said the price of land, the foundation and roof is about 20% more when figured for one floor rather than two. One solution to higher costs is offering ranch plans in attached housing, though a number of those all-on-one level units currently available resemble walk-up apartments or condos and require climbing some stairs. Leigh Nevers, vice president of marketing for Lennar’s Chicago region, said that many downsizing boomers “may think they want a single-family ranch, but when they factor in the price and maintenance that’s attached to it, they often realize a ranch town home or duplex that requires less upkeep and is more in line with their budget better fits their lifestyle.” (www.chicagotribune.com)
Chicago Tribune (1/26/07); Sharon Stangenes
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