Nation's Building News Online: February 25, 2008Print All Articles Text Version |
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Effort to Spur Home Sales Needed to Shore Up EconomyWith reports from crucial markets around the country that the traffic of prospective home buyers has been picking up even as tighter mortgage financing conditions remain a hurdle for many, the NAHB Board of Directors at its Feb. 15 meeting in Orlando announced that the association will be making a major drive to pass individual pieces of legislation that will stimulate housing sales and help builders work down their unsold inventories. 2007 NAHB President Brian Catalde reported to the board that the association had seen “important results” in response to its “relentless” efforts to ease the credit crunch, which began choking off home sales at the end of the last summer with the revelation of problems in the subprime mortgage market. At the top of the list of favorable developments have been Federal Reserve Board decisions that have slashed interest rates by more than two percentage points since September. And only the week before the NAHB board meeting, the $168 billion economic stimulus bill passed by Congress contained several items that will help the ailing housing industry to at least some extent, Catalde said. High-priced housing markets that have been among those hit the hardest by the credit crunch are expected to benefit from provisions allowing the Federal Housing Administration to insure loans for up to $729,750 through the end of this year and allowing Fannie Mae and Freddie Mac to purchase loans up to that amount. Businesses also received a boost from the stimulus package, he reported, with a 50% bonus depreciation in 2008 and more generous expensing rules. However, “we didn’t get everything we wanted,” he said, with the Congress quickly approving a narrower House bill that omitted significant provisions aimed at “stabilizing housing and averting a full-fledged economic recession.” Those provisions, and others, were outlined in the centerpiece resolution passed by the NAHB directors. Stimulus Arriving by Mail Participating on a panel of economists at the International Builders’ Show (IBS) discussing the housing outlook, NAHB Chief Economist David Seiders said that the $117 billion worth of stimulus bill rebates that will be mailed out to tax payers should give the economy enough strength to avoid recession, but “the economy is in a really weak condition at the moment” and the one-time checks to consumers won’t produce much growth after the end of the year, when it will be up to housing to keep the upward momentum going. In his Feb. 20 Eye on the Economy report, Seiders noted that falling mortgage interest rates in the prime market, falling house prices in some markets and growing income in most parts of the country have combined to boost housing affordability in recent months. Consumer surveys have been showing that a growing number of households believe that home buying conditions have improved recently, he added, providing “a glimmer of hope” for the housing industry. However, he noted, “the dramatic housing contraction still has substantial downward momentum and the housing market still poses major downside risks to the economic outlook. “The situation cries out for a second stage of temporary economic stimulus, directed squarely at the sector that’s at the root of the daunting problems facing the U.S. economy and the financial system. “It must be recognized, first of all, that a substantial tightening of lending standards is occurring in all components of the home mortgage market, as recently documented by the Fed, and the tightening may make it impossible for prospective home buyers to obtain financing they can afford. “Secondly, a record volume of vacant homes on the for-sale market inevitably will put persistent downward pressure on home prices, further sapping the quality of outstanding mortgage credit and making it even more difficult to refinance or restructure adjustable-rate mortgages facing payment resets. This problem, in turn, will bolster the alarming upsurge in mortgage foreclosures and dump even more inventory onto the for-sale market, stretching out the contraction in new housing production. “House prices and inventories are central to the outlook for the economy and the financial markets. Policies that simulate home purchases in the meantime can pay huge dividends.” Starts to Lose More Ground in 2008 “The vast bulk of the housing decline is now behind us,” Seiders told convention-goers in Orlando. However, starts this year are projected by NAHB to slip another 22%, following a 26% drop in 2007. The decline is expected to be even more pronounced in single-family home production, which declined 30% in 2007 and is forecast to erode 27% further this year, he said. The foundation for the long-awaited housing recovery should begin with a stabilized sales volume in the second quarter of this year, followed by improvements in sales later in the year and in 2009, he said. “The inventory overhang will delay the starts upturn to some degree,” he said, and the rebound, once it arrives, will be “muted” compared to some previous recoveries. (One of the points emphasized by a panel of builders at the IBS discussing what they are doing to steer their businesses through stormy times is that working actively to adapt to current adverse conditions is paramount to surviving and that to succeed once the recovery does arrive builders will need to be prepared to respond to a significantly different marketplace than the one leading into the downturn. A story on their presentation will appear in next week’s issue of Nation’s Building News.) Frank Nothaft, the chief economist for Freddie Mac, said that the one piece of good news is that “for prime borrowers looking for a conforming loan and a full-document loan and who can make the downpayment, this will be a very good year.” He added that prime borrowers would find ample liquidity. Nothaft said that conforming fixed-rate 30-year loans should average 5.5% this year, with jumbo loans “a lot more challenging” and averaging a full percentage point higher. David Berson, chief economist for The PMI Group, told convention-goers that he believes the economy has already lapsed into a recession, and although it will be “short and mild,” this will exert more downward pressure on housing and the mortgage market. Home sales should “flatten out” in the second half of the year, Berson forecast, maybe close to the end of the year, and starts won’t stabilize until the first half of 2009. Based largely on a conversation overheard at the San Francisco airport, Berson said that home owners could start deciding to default on their loans because the value of their houses has fallen below the loan amount, not because they can’t make the monthly payment. However, unless there is a behavioral change, “historically, the vast majority of home owners continue to make their payments when they owe more than the house is worth, he said. Congress, Administration, Fed Need to Do More In its resolution on addressing the housing downturn and the mortgage credit crunch, the NAHB Board of Directors said that “while interest rate cuts by the Federal Reserve Board, efforts by the Administration to limit foreclosures and the recently enacted economic stimulus package are steps in the right direction, more needs to be done to stabilize the housing market and keep the economy moving forward.” The directors called on Congress and the Administration to:
Fannie, Freddie Ramping Up to Buy Jumbo MortgagesNAHB leaders in Orlando earlier this month during the International Builders’ Show were told that Fannie Mae and Freddie Mac will begin purchasing home loans above the current $417,000 conforming loan limit within weeks of receiving clearance from federal regulators. On Feb. 13, the same day that President Bush signed a $168 billion economic stimulus package allowing the two housing government sponsored enterprises (GSEs) to purchase loans up to $729,750 through the end of this year, Freddie Mac CEO Richard Syron and Fannie Mae CEO Dan Mudd pledged to work with NAHB to stabilize the housing sector. “Our fates are clearly intertwined, during every market cycle, but particularly so at this moment,” Syron said. “When the GSEs are most successful — providing liquidity, stability and affordability to the housing finance market — home builders are more successful as well. So whatever comes our way in 2008, let’s continue to stand together. Because in these tough times, that is what will make us both strong.” “Your priorities are our priorities,” Mudd said minutes after Syron addressed a meeting of the NAHB Joint Executive Board, Budget and Resolutions Committees. With the short time frame they have been given to help shore up the jumbo loan market, Fannie Mae and Freddie Mac need to move as rapidly as possible to help buyers seeking homes in high-priced markets such as California and the Northeast, and both Syron and Mudd vowed to do their part. “We have to go through a review with our regulator to make sure we are handling operational risk properly,” said Syron. “We don’t know how long this process will take. Our objective is that we will be able to get into the market within a month” after receiving approval from the Office of Federal Housing Enterprise Oversight (OFHEO). “We are ramping up to implement the temporary increase in GSE loan limits,” added Mudd. “We’ve already begun reaching out to our lenders to begin financing these jumbo-conforming loans as soon as possible.” Syron said that the sooner the GSEs can start purchasing jumbo loans, “the better off we all are. The higher limits should allow the GSEs to inject liquidity and thus help enable reduced rates within the jumbo market, which in total includes some half a million families — including hundreds of thousands of middle-class families in high-cost markets.” Stemming Foreclosures The two GSE leaders also said that they are taking aggressive action to help struggling home owners to avoid foreclosure. Fannie Mae's HomeStay initiative has helped 68,000 home owners refinance subprime ARMs into safer 30-year fixed-rate prime mortgages, said Mudd. The Home Saver Advance program, designed to aid delinquent borrowers who are at least three payments behind on their mortgages, has helped 43,000 people to stay in their homes. And Fannie Mae has vastly beefed up its own foreclosure operations in Dallas. “We are doing everything we can to help home owners avoid foreclosure, which is a loser for everybody,” said Mudd. Freddie Mac has introduced SafeStep Mortgages, which are designed to give subprime borrowers more sustainable mortgage options. “We’ve also consistently been at the forefront of efforts to help borrowers avoid foreclosure,” said Syron. “Last year, Freddie Mac and its servicers helped nearly 47,000 borrowers avoid foreclosure and keep their homes.” On a related note, Richard Dorfman, president of the Federal Home Loan Bank of Atlanta, told the NAHB meeting that the Federal Home Loan Banks are well capitalized and doing everything in their power to inject capital into the mortgage finance system. “The 12 Federal Home Loan Banks have never been healthier or more highly robust,” said Dorfman. “Our credit flows into thousands and thousands of communities across America. We have the mandate to make liquidity and we do so.” For more information, e-mail Michelle Hamecs at NAHB, or call her at 800-368-5242 x8425. Photos by Oscar Einzig
Want to Know the Housing Forecast for the Top 100 Metros? Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables. To learn more, visit www.HousingEconomics.com.
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Why Housing Prices Are Nearing Bottom“Overall, the shape of the U.S. housing market is not nearly as bad as some analysts would have you believe,” according to Motley Fool contributor Marko Djuranovic. “This, in turn, means that the entire home building industry is worth a closer look.” Djuranovic disputes a recent BusinessWeek finding that today’s homes are overvalued based on a series of home values going as far back as 1890 and showing that prices have historically risen annually from 0.2% to 0.8% above inflation. First, he says, “today’s homes are not the same homes that were built three decades ago,” with the median size increasing 47% from 1,525 square feet in 1973 to 2,248 square feet in 2006. Second, “today’s homes feature sturdier construction materials, more expensive siding, outdoor additions like in-ground pools, more complex wiring to support an increasing number of electronic devices, sophisticated heating and cooling systems and larger kitchens (which translate to increased carpentry.) Simply, these are better homes — and ‘better’ means more expensive to build.” Third, relative construction costs are higher than they used to be. “Taking these factors into account implies that housing prices should have grown at least 2% above inflation in the past 30 years, putting the current median home price about where it should be,” he writes. “Once the financial institutions rediscover how to effectively assess default risk in borrowers, the supply of existing homes will be reduced fairly quickly. And the moment that the supply of existing homes begins to shrink, potential first-time home buyers will wake up to the fact that between low interest rates and homes that sell at (or below) replacement cost, they can grab the deal of a lifetime.” (www.fool.com)
Bargain Prices This Spring May Buoy the U.S. Housing MarketThe distressed U.S. housing market should get a lift this spring as bargain prices lure prospective buyers out of hibernation, but tighter lending standards will be an obstacle for all but the most credit-worthy borrowers. Even in Arizona and Florida, among the hardest-hit states, a few rays of light are starting to shine through. Signed contracts that have yet to close were more numerous in January than in any of the previous six months, according to Floyd Scott, president of Century 21 Arizona Foothills in Phoenix, though they remained 30% below a year earlier. “We’ve seen quite a bit of increase in traffic,” he said. “A lot of people are shopping for deals right now.” According to Russell Shaw, in his 30th year with John Hall & Associates, a real estate business in Phoenix, “this is the best buyer’s market that has existed in a decade, maybe longer. There are tons of inventory, great interest rates and the prices are back in line to where houses are decently priced again. If people have a good track record of paying their bills, the loans are there.” In Boston, a sense of urgency is also returning to the market, said John Murray of Realty Executives Prestige Properties. A buyer he represents was the winning bidder at the listed selling price for a condo in the upscale neighborhood of Back Bay. At least three competing bids surfaced. Until recently, the vast majority of would-be sellers have had to reduce their asking prices to lure buyers. (www.iht.com)
Best Cities for Bargain Housing: Salt Lake, RaleighProspective buyers looking to take advantage of local housing slumps should consider markets where job growth is strong, foreclosures are relatively low and inventory is high. Good places to look include Salt Lake City; Raleigh, N.C.; Orlando; Charlotte, N.C.; and Jacksonville, Fla. — where the damage from risky lending isn’t as drastic as in other parts of the country, and where employment growth suggests inventory can burn off at a healthy rate. “These markets “are where you have high inventories but pliable borrowers, with lenders willing to deal,” says Anthony Sanders, a professor of finance at Arizona State University. That is what is happening in Houston, where real estate has always been a bargain, which is one of the reasons the population has expanded so much since 2000. Jobs are being added at the sixth fastest rate of any city in the country, and while there have been a few foreclosures, it hasn’t taken a hit. Based on inventory levels and construction projects in the works, buyers still have good standing to negotiate price. (www.usatoday.com)
The Eleventh-Hour UpgradeSome experts warn that home sellers are unlikely to get their money back from extensive renovations, but owners often feel they have no choice if they want to sell, especially when builders of newly constructed homes are throwing in hardwood floors, finished basements and other free upgrades. “There’s so much competition, you need to stand out,” says Brian Goe, a waterproofing company owner. He spent $28,000 to upgrade a house in Bedminster, N.J. that he bought in 1987 for $187,000. Before it hit the market a couple of weeks ago, he had contractors add pickled oak flooring to the dining room and new carpet. They installed skylights in the living room, new stainless-steel kitchen appliances and separate sinks in the master bath and painted the interior walls in faux finishes. An online poll of 445 contractors conducted recently for the Wall Street Journal by ServiceMagic, a national contractor-referral service, indicated that last-minute renovating is propping up a sizable chunk of the remodeling industry. According to the poll, 26% of contractors said they had been contacted in the past year by prospective home sellers looking to do substantial work. Of those contractors, 48% said such work had boosted their business by 20% or more. (www.startribune.com)
Earth Movers: Pitching Boomers Housing That is Green as Their Hair Goes GrayHousing developments that target baby boomers may be the next big push for the green housing market and statistics indicate this could be a good marriage. “There is no doubt that the green trend is going to accelerate more and more,” said Rick Andreen, president of Shea Homes’ Active Lifestyle Communities division. This month, Shea announced the opening of Victoria Gardens, an “active lifestyle,” or retirement, development in Florida sandwiched between Orlando and Daytona Beach. The homes were advertised as having a carbon footprint that is 20% to 30% less than that of a “typical household.” Victoria Gardens marks Shea’s debut in the Florida retirement market, though the company is building similar homes in northern and southern California, Arizona and Washington. Solar attic fans, green-fiber recycled insulation, motion-sensor triggered lighting, energy-efficient windows and appliances and garages outfitted with electric-vehicle changing stations are considered standard in these homes. Baby boomers, born between 1946 and 1964, grew up alongside the environmental movement of the 1960s and ’70s. “These guys were at Woodstock,” said Matthew Kahn, a professor at UCLA’s Institute of the Environment. “This is the birth cohort that was at the environmental movement’s summer of love.” (www.marketwatch.com)
After Housing Bust, Hard Times in ArizonaThe state of Arizona and all its cities and towns are confronting huge revenue shortages this year, mainly because sales-tax revenues are far below projected levels. Along with California, Nevada and Florida, the state is leading the country in the current economic slide. “These four states are where the housing bubble was the biggest, where investors and speculators had a significant presence,” says Marshall Vest, an economist at the University of Arizona’s Eller College of Management in Tucson. “Those states saw a higher use of subprime mortgages. These are the states that have been in recession for several months already.” Arizona is a little different from other states in that property tax isn’t the main source of revenue for state and city governments. They rely more on sales and income taxes. So when earnings and spending are curtailed, so are the monies that local governments collect. “For the past decade, there’s been a much stronger connection between housing values and consumer spending than was previously thought,” says Chris Hoene, director of policy and research at the National League of Cities. He says that’s because people used the values of their homes for second mortgages to make other large purchases. And those large purchases — usually cars, appliances and assorted luxury items — led to the collection of more sales taxes. When those purchases fell off, so did the sales-tax collections. (www.csmonitor.com)
Plan to Attend the 2008 NAHB Legislative ConferenceThe 2008 NAHB Legislative Conference provides a unique opportunity for builders to speak directly with their members of Congress and let them know that housing must remain a national priority. The conference is on Wednesday, April 30 and is a day-long event that coincides with the NAHB spring board meeting in Washington, D.C. Attending the 2008 legislative conference will give NAHB members an unparalleled opportunity to lobby members of Congress to protect their business and industry, establish lasting relationships with their elected federal officials, do their part to ensure that NAHB’s issues are heard by Washington policymakers and galvanize a united front on Capitol Hill A strong builder turnout on April 30 will send a powerful message to members of Congress. For more information, visit www.nahb.org/legcon, e-mail Molly Murray at NAHB, or call her 800-368-5242 x8282. Housing Starts Just About Flat in JanuaryTotal housing starts remained virtually unchanged in January, with single-family builders continuing to rein in new-home production, according to a Feb. 20 report from the Commerce Department. Starts last month rose 0.8% to a seasonally adjusted annual rate of 1.01 million units. Single-family production sagged 5.2% to a yearly rate of 743,000 units. Multifamily starts, which tend to shown significant volatility from month to month, surged 22.3% to 269,000 units but remained well below their average for the final quarter of 2007. "Builders continue to do what they need to do to reduce the inventory of units on the market, both by limiting new production and pulling fewer permits for new homes," said NAHB President Sandy Dunn. "We're doing our part and Congress needs to do its part as well so that housing can once again be a major engine of economic growth." "Single-family builders in our latest surveys have indicated that improving affordability factors and the large selection of homes on the market have been helping draw more potential buyers to model homes in recent weeks," said NAHB Chief Economist David Seiders. "However, until that increased traffic of prospective buyers translates into higher home sales and significantly lower inventories, builders are doing the responsible thing to bring supply and demand back into alignment by keeping the brakes on new construction." Declining for the 10th consecutive month, single-family housing starts reached a yearly pace of 743,000 units, while permits were down 4.1% to 673,000. Both were at their slowest rates since January 1991. Overall permits, which can be an indicator of future building activity, fell 3% in January to a seasonally adjusted annual rate of 1.05 million, their weakest since November 1991. Multifamily permits were virtually unchanged for the month at a 375,000-unit annual rate. Regionally, housing starts were mixed in January. They fell 6.2% in the West and 2.9% in the South, the two largest regional housing markets. Some positive offset was provided by an 18.9% gain in the Northeast and 12% growth in the Midwest. Want to Know the Housing Forecast for the Top 100 Metros? Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables. To learn more, visit www.HousingEconomics.com. Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Improved Traffic Raises Builders’ Hopes in FebruaryConsiderably improved traffic of prospective buyers through model homes nudged builder confidence in the market for new single-family homes marginally higher this month, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), which was released on Feb. 19. The HMI for February rose a single point to 20, remaining close to its recent reading of 18, a historic low for the series since its start in January 1985. "While builders remain very cautious about the outlook for new-home sales given today's economic environment, the fact that more consumers appear to be checking out their options is a good sign," said NAHB President Sandy Dunn. "Housing has always been a major engine of economic growth, and despite the ongoing market correction, it will once again be that engine in the future,” Dunn said. “But in order for that to happen, Congress must follow up on its recently enacted economic stimulus program by passing legislation that will jump-start the housing market and keep the economy moving forward." "Some potential buyers who have been sitting on the sidelines are starting to at least research a new home purchase, given improving affordability factors and the large selection of units on the market," said NAHB Chief Economist David Seiders. "That said, builders know there's a difference between people looking and people buying, and their current outlook remains quite subdued. Additional stimulative measures on the legislative and policy side are definitely needed to bolster consumer confidence and help bring about a housing and economic recovery." Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and the traffic of prospective buyers. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor. In February, the index gauging current sales conditions for single-family homes rose one point to 20, while the index on sales expectations for the next six months declined one point to 27. The index on traffic of prospective buyers rose five points to 19, its highest level since last July. The February HMI gained ground in three out of four regions, climbing three points to 24 in the Northeast, two points to 24 in the South and two points to 15 in the West. The index registered 16 in the Midwest, unchanged from the previous month. Want to Know the Housing Forecast for the Top 100 Metros? Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables. To learn more, visit www.HousingEconomics.com.
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Low Mortgage Rates Boost Affordability at Year's EndIndianapolis remained the most affordable major U.S. housing market for the 10th consecutive quarter in the fourth quarter of 2007, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI), released on Feb. 19. Nationwide, housing affordability increased during the quarter and on a year-over-year basis, rising to the highest level since the first quarter of 2005. The latest HOI indicated that 46.6% of all new and existing homes sold during the fourth quarter were affordable to families earning the national median income of $59,000. "With mortgage rates returning to near the record low levels of a few years ago, more potential home buyers across the country are finding that they now can buy the home of their dreams," said NAHB President Sandy Dunn. The national weighted interest rate on fixed- and adjustable-rate mortgages — a key component in calculating the HOI — was 6.42% in the fourth quarter, down from 6.73% in the third quarter. In Indianapolis, 89.5% of homes sold in the fourth quarter were affordable to families earning the area's median household income of $63,800. Also near the top of the list for affordable major metros were: Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Toledo, Ohio; and Grand Rapids-Wyoming, Mich., in that order. Among smaller metro markets with populations below 500,000, Kokomo, Ind. was the most affordable in the fourth quarter, with 92.9% of all homes sold there affordable to families earning the area's median household income of $59,700. Los Angeles-Long Beach-Glendale, Calif. remained the least-affordable major housing market for the 13th consecutive quarter during the final three months of 2007, with only 6.2% of new and existing homes sold there affordable to those earning a median family income of $61,700. Other major metros at the bottom of the housing affordability chart included: San Francisco-San Mateo-Redwood City, Calif.; Santa Ana-Anaheim-Irvine, Calif.; New York-White Plains-Wayne, N.Y.-N.J.; and Oxnard-Thousand Oaks-Ventura, Calif.; in that order. Among metro areas with less than 500,000 people, the least affordable were all located in California: Napa, Salinas, Merced, San Luis Obispo-Paso Robles and Santa Barbara-Santa Maria-Goleta, respectively. Want to Know the Housing Forecast for the Top 100 Metros? Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables. To learn more, visit www.HousingEconomics.com.
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Builders Support Project Lifeline for Strapped BorrowersProject Lifeline, a new program unveiled on Feb. 12 by the Bush Administration to help strapped home owners avoid foreclosure, received the support of the nation's home builders. "We appreciate the continuing efforts of the Administration to address the mortgage credit crisis and believe that the action that banks and mortgage lenders are pledging to take can make an important difference," said 2007 NAHB President Brian Catalde. In addition, Catalde urged Congress to follow up on its recently enacted economic stimulus program by passing legislation to jump-start the housing market and keep the economy moving forward. More specifically, he called on Congress to modernize the Federal Housing Administration and reform the housing government sponsored enterprises Fannie Mae and Freddie Mac. Project Lifeline will allow overdue home owners to avoid foreclosures for 30 days while lenders and borrowers try to work out more affordable terms. The plan will involve several large mortgage lenders — Bank of America, Citigroup, Countrywide Financial, JP Morgan Chase & Co. and Washington Mutual. It is geared toward delinquent home owners whose mortgages are 90 days or more past due. Eye on the Economy: The Economy Is Skating Close to RecessionEconomic growth slowed to a crawl (0.6%) in the final quarter of 2007, according to the “advance” GDP report released by the Commerce Department on Jan. 30, and data received since then do not point toward upward revisions. The “preliminary” fourth-quarter estimate will be released on Feb. 28. Available information for the early part of 2008 point toward further weakness in GDP growth for the first quarter of this year ― we’re currently estimating 0.3% ― and negative growth is a distinct possibility for this period. NAHB’s baseline (most probable) forecast still says that the U.S. economy will avoid recession in 2008, although there’s a nearly even chance of slipping into the red zone during the first half of the year. If so, the setback should be brief and shallow, due largely to the double-barreled dose of monetary and fiscal stimulus being applied to the economy. Housing Remains a Heavy Drag on the Economy The housing contraction continues to exact a heavy toll on the U.S. economy. Residential Fixed Investment contracted at a 24% annual rate in the final quarter of 2007, knocking off more than a percentage point from the GDP growth rate. Also, associated setbacks in related parts of the economy, such as mortgage lending, have compounded housing’s negative economic impacts. Downward momentum in home sales and housing starts through the end of 2007 strongly suggest another heavy hit to the economy from housing in the first quarter of 2008. Furthermore, data on housing starts and building permits for January released last week show further substantial declines in these measures, particularly in the single-family sector. These patterns virtually guarantee another large deduction from GDP growth in the first quarter as the relentless housing contraction pushes the U.S. economy to the brink of recession. Inflation Concerns Flare Up at Exactly the Wrong Time By all rights, a pronounced slowdown in economic growth should relieve inflationary pressures in the economy, allowing long-term interest rates to recede as the Federal Reserve drops the short end of the yield structure. Unfortunately, inflationary impulses are coming from commodity markets (primarily food and energy), and “core” inflation measures also have moved up recently. The Consumer Price Index for January, also released last week, displayed such patterns and caused a good deal of heartburn in bond and mortgage markets. Upward pressure on long rates is the last thing that housing and the economy need at this time, and our central bank can’t just ignore documented upward pressures on inflation. We, and the Fed, expect the slow pace of economic activity to relieve inflation during the months ahead, although this outcome no longer feels like a slam-dunk. Financial Market Turmoil Persists The widespread stampede to credit quality that was triggered by the meltdown of the U.S. subprime mortgage market still is a pervasive force in U.S. and global financial markets. Indeed, a financial system that for decades had evolved into a complex fabric of securitized vehicles now is unraveling — shutting down normal credit channels, raising credit costs for many private-sector borrowers and shifting credit demands back to depository institutions that used to carry the load. In the home mortgage area, the securities markets for subprime, Alt-A and jumbo loans are essentially gone and yield requirements at portfolio investors are extremely wide. Only the markets with explicit or strongly implied federal government backing are functioning well, although even the spreads between yields on mortgages saleable to the secondary-market government sponsored enterprises, Fannie Mae and Freddie Mac, and yields on comparable-maturity Treasuries have widened out a good bit since last summer. The Fed Is Focused on Growth and Market Stability The Federal Reserve cut short-term interest rates by 125 basis points in January, including an “emergency” cut of 75 basis points on Jan. 22 and an additional cut of 50 basis points at the regularly scheduled Federal Open Market Committee (FOMC) meeting on Jan. 30. The FOMC statement highlighted considerable stress in financial markets and downside risks to economic growth while pushing inflation concerns into the background. On Feb. 14, Fed Chairman Ben Bernanke testified on “The Economy and Financial Markets” before the Senate Banking Committee. Bernanke made it clear that the Fed has become increasingly concerned about mounting stresses in the financial system as well as increased downside risks to growth — stemming largely from ongoing deterioration in the housing market. We continue to believe that the Fed will cut the federal funds rate by an additional 50 basis points at the March 18 FOMC meeting and by another 25 basis points at the April 30 meeting — taking the nominal funds rate to 2.25% and the real (inflation-adjusted) rate well below 1%. The Economic Stimulus Package Will Help Soon The Economic Stimulus Act of 2008 was signed into law by the President on Feb. 13. The centerpiece of this short-term stimulus package is $117 billion in rebates of personal income taxes, to be distributed starting in May, along with $51 billion in business investment incentives. The bill also substantially raised loan-size limits for both the FHA mortgage insurance program and for conventional loans eligible for purchase by the secondary-market GSEs. The personal income tax rebates and the business investment incentives figure to provide a bit of support to GDP growth in the second quarter and solid support in the second half of this year, actually pushing growth above trend in the second half. These effects naturally will dissipate early next year, making the economy vulnerable to relapse into a slow growth mode. The temporary increases in loan-size limits for FHA and the GSEs — up to a maximum of about $730,000 — are bound to help the housing market in such high-priced areas as California to some degree. It will take some time for the higher limits to be operational, of course, and it remains to be seen how much additional home buying will be stimulated over the balance of the year. The expiration of the higher limits at year-end figures to be a serious problem ― in the likely event that the private secondary market for jumbo loans still is not functioning properly by then. Glimmers of Hope for Housing? Key data on home sales, housing starts, building permits and residential construction activity still paint a downbeat picture of the U.S. housing market. However, a few recent indicators show glimmers of hope with respect to the interest of prospective home buyers. Falling mortgage rates (at least in the prime market), falling house prices (at least in some places) and growing income (in most places) have combined to boost standard measures of housing affordability in recent months. Furthermore, surveys of consumer sentiment show that growing numbers of households believe that buying conditions have improved in recent times — because of lower mortgage rates and lower house prices. The buyer traffic component of NAHB’s monthly Housing Market Index (HMI) appeared to hit a cyclical low last December. The traffic component edged up in January and made a decisive move upward in February — presumably reflecting the improvements in affordability and the brightening of consumer sentiment toward home buying. The HMI components for current sales and sales expectations have yet to stage meaningful improvements, of course, but perhaps the essential first step toward a housing market recovery is underway. A Second Round of Economic Stimulus That Focuses on Housing Is Needed Despite recent glimmers of hope about the interest of prospective home buyers, the dramatic housing contraction still has substantial downward momentum and the housing market still poses major downside risks to the economic outlook. This situation cries out for a second stage of temporary economic stimulus, directed squarely at the sector that’s at the root of the daunting problems facing the U.S. economy and the financial system. It must be recognized, first of all, that a substantial tightening of lending standards is occurring in all components of the home mortgage market, as recently documented by the Fed, and this tightening may make it impossible for prospective home buyers to obtain financing they can afford. Secondly, a record volume of vacant homes on the for-sale market inevitably will put persistent downward pressure on home prices, further sapping the quality of outstanding mortgage credit and making it even more difficult to refinance or restructure adjustable-rate mortgages facing payment resets. This problem, in turn, will bolster the alarming upsurge in mortgage foreclosures and dump even more inventory onto the for-sale market, stretching out the contraction in new housing production. House prices and inventories are central to the outlook for the economy and the financial markets. Policies that stimulate home purchases in the immediate future can pay huge dividends. The biggest bang for the buck most likely would be provided by a temporary program of tax credits for home buyers. Indeed, the recent revival of interest among prospective buyers suggests that temporary credits could unleash a wave of home buying that would quickly restore balance to housing markets and halt the dangerous erosion of house prices and mortgage credit quality. NAHB Chief Economist David Seiders analyzes the economy from the point of view of the housing market every other week in the free e-newsletter, “Eye on the Economy.” The preceding is a reissue of his Feb. 20 edition. To subscribe to “Eye on the Economy,” click here. Want to Know the Housing Forecast for the Top 100 Metros? Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables. To learn more, visit www.HousingEconomics.com. Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Useful Links to Monitor Economic and Housing TrendsThe following are links to useful information from government agencies and NAHB that will enable you to monitor the housing market. To access the latest information available, simply click the links.
Want to Know the Housing Forecast for the Top 100 Metros? Find out in HousingEconomic.com’s 2008 to 2009 Metro Forecast (free preview). Get the metro forecast with in-depth analysis, overviews and downloadable Excel tables. To learn more, visit www.HousingEconomics.com.
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Builders Cited for Cutting-Edge Approach to Energy EfficiencyWinners of this year’s EnergyValue Housing Awards (EVHA) demonstrate how builders are using advanced energy-efficiency technologies to tap into the exploding market demand for green building. Presented on Feb. 13 in Orlando by the NAHB Research Center, the awards recognize builders who successfully demonstrate innovative approaches to energy-efficient construction and voluntarily integrate energy efficiency into the design, construction and marketing of their new homes. Now in its 13th year, the EVHA program was also created to educate the housing industry and the public about emerging and advanced technologies that can be used and marketed by mainstream builders. EVHA winners select framing methods, insulation and appliances that result in high efficiency — paying careful attention to air sealing, ductwork, resource efficiency and ventilation as well. Energy-saving practices employed by the winners’ homes include high R-value insulation in ceilings and walls, photovoltaic solar power systems, creative uses of passive solar design, geothermal heating and ENERGY STAR appliance packages. Winners in affordable, custom, production and multifamily markets for hot, moderate and cold climate regions were selected for showcasing best practices that put them at the forefront of energy-efficient construction. Gold Award-winning Aspen Homes of Colorado, of Loveland, Colo. was named the Builder of the Year. EVHA judges noted the company’s 100% ENERGY STAR and Built Green participation, impressive mix of innovative techniques, guaranteed energy bill and use of wind energy as standouts among the entries. Aspen Homes has demonstrated its commitment to improving housing performance by adopting exceptional standards of energy-efficient and environmentally-responsible construction and voluntarily participating in local green programs. In addition to Aspen Homes, the 2008 EnergyValue Housing Award winners are: Gold
Bob Jones, NAHB’s vice president/treasurer, and John Mizroch, principal deputy assistant secretary for energy efficiency and renewable energy for the U.S. Department of Energy, were co-keynoters for the ceremony. EVHA judging was completed by a panel of energy-efficiency experts in the fields of engineering, residential energy, construction, design and marketing. Winners were selected based on their homes’ energy value; design; construction methods and processes; marketing and customer relations efforts; and their ability to demonstrate an understanding of a whole-house, systems-design approach. “EVHA winners are pioneers in their fields and the level of innovation and home design this year is outstanding,” said Michael Luzier, president of the NAHB Research Center. “Clearly, the home building industry’s efforts to expand energy efficiency and green building have taken hold and will continue to make a positive difference for future generations.” The EVHA program is managed by the NAHB Research Center, and operated in partnership with NAHB and the U.S. Department of Energy through the National Renewable Energy Laboratory. Award sponsors include Broan-NuTone, LLC, BuildingGreen, Inc., SEISCO International, The Vinyl Institute and Whirlpool Corporation. Older Buyers Less Affected by Mortgage Credit CrunchEven during the current housing downturn, mature home buyers constitute a significant niche market, generating demand for housing that caters to their unique needs and interests, according to a new study from NAHB that was published in conjunction with the recent International Builders’ Show in Orlando. According to the data compiled by NAHB's 50+ Housing Council, more than a quarter of a million people this year will decide to buy new housing in communities specifically built for those ages 55 or better, and more than 100,000 units constructed in 2008 will be targeted to this growing niche market. The report, “Profile of the 50+ Housing Market,” suggests that new home buyers in this niche market are not as adversely affected by the current troubles in the mortgage market. Fewer than half of the customers who bought a new home in an age-qualified active adult community needed to take out a mortgage. Of those who did, the study found, the loan-to-value ratio was under 50%. Nearly all home buyers in these communities who made a downpayment reported that the money came from the sale of a previous home. "These consumers have substantial equity in their existing homes and greater accumulated wealth," said Mark Stemen, senior vice president with K. Hovnanian's active adult division in the mid-Atlantic and a member of NAHB's 50+ Housing Council. "They are discretionary buyers and their purchases are very much driven by a desire for the lifestyle these types of communities offer," Stemens said, noting that they are also buyers who are more likely than other groups to buy a new or custom home. How they might be affected by the slower housing market, he said, is in the selling of their existing homes. Despite that, however, Stemen remains bullish on the active adult segment of the housing industry. "Given the strong demographics of the baby boom generation, the active adult buyer will continue to be a very important housing consumer for a long time to come," he said. The 55-plus population is expected to exceed 85 million by 2014. Downsizing, Maybe, But Not by Much The report also dispels some common misperceptions about the older home buyer. "Our data shows that 55+ home buyers may be 'downsizing,' but not by much," said Paul Emrath, NAHB's lead researcher on the study. "The average home in an active adult community still includes more than two bedrooms and more than 2,000 square feet of living space." The report found that homes in age-restricted active adult communities were only slightly smaller than other homes purchased by 55+ home buyers in both square footage and the total number of rooms, including bedrooms and bathrooms, but were less likely to have a specialty room such as a den or library. In addition, the majority of age-restricted housing buyers (59%) indicated that they felt they were moving into a better home than their previous one, although fewer than half (41%) said their new home cost more than the old one. "These boomer buyers may be scaling back in their home size, but they aren't willing to sacrifice quality," said Robert Tippets, immediate past chairman of the NAHB 50+ Housing Council and an active adult builder from Utah. "They're still looking for new homes that are well-designed and have many of the latest bells and whistles," he said. "What they are 'downsizing' is the maintenance that comes with owning the typical home with the big yard." According to the American Housing Survey data that NAHB's researchers analyzed, most buyers (77%) chose a new home in a particular age-restricted community because they liked the home's look and overall design, while the top reasons they chose the community were the design (49%) and to be close to friends and relatives (28%). More than half of all new buyers in 55+ communities move within the same county where they currently live. The complete "Profile of the 50+ Housing Market" report is available free to members of the NAHB 50+ Housing Council and can be purchased by non-members in a downloadable format at www.nahb.org/50plusresearch. For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350. Best of 50+ Housing Awards Entries Due by Feb. 29
Enter the 2008 Best of 50+ Housing Awards, the premier design and marketing competition for the 50+ housing industry. Entries are due by Feb. 29. Sponsored by the 50+ Housing Council, the award program honors the best in more than 50 categories covering all aspects of the 50+ housing industry, including community design, model merchandising and advertising and marketing efforts. Active Adult Some of the active adult categories include overall community, clubhouse design, condominium unit design, model home merchandising and more. Design Several of the design categories include aging-in-place, assisted living, congregate-living community, continuing care retirement communities, mixed-use, multifamily housing, renovated housing and special-needs housing. Marketing Marketing categories include logo, community brochure, direct mail piece/campaign, Web site, black-and-white and color print advertisement, radio and television commercial, sales center and special promotion. Awards Gala in New Orleans Winners will be announced at the Best of 50+ Housing Awards gala on May 20 during the Building for Boomers & Beyond: 50+ Housing Symposium 2008 in New Orleans from May 19-21. The call for entries, contest rules, entry application and list of categories are available online at www.nahb.org/50plusawards, or by calling 800-368-5242 x8220.
Tour Top 50+ Communities in New Orleans Sign up for the active adult housing tour at the 2008 Boomers and Beyond: 50+ Housing Symposium in New Orleans, May 19-21. The symposium will also feature the most innovative new community designs during the Best of 50+ Housing Awards gala. Click here to register, or for more information.
Help Rebuild New Orleans at 50+ Housing Symposium Building for Boomers & Beyond: 50+ Housing Symposium is partnering with Rebuilding Together New Orleans on a special two-day community service project in which symposium attendees can help rehabilitate homes in New Orleans that were severely damaged by Hurricane Katrina. Two pre-conference days have been reserved for this event. Attendees are encouraged to volunteer for this special rebuilding project.
Earn CAASH Credits at Building for Boomers & Beyond The three required courses for the Certified Active Adult Specialist in Housing (CAASH) designation will be held Saturday, May 17 and Sunday, May 18 at the 2008 Building for Boomers & Beyond: 50+ Housing Symposium in New Orleans. The CAASH designation gives housing professionals serving this rapidly burgeoning market the essential knowledge, tools and skills that will help them succeed. To learn more about CAASH, visit www.nahb.org/CAASHinfo.
Find Out What the 45+ Housing Market Wants “Right House, Right Place, Right Time: Community and Lifestyle Preferences of the 45+ Housing Market,” available through BuilderBooks.com, will help 50+ housing professionals determine the right design, home features and amenities to attract boomer home buyers in their market. Margaret Wylde guides readers through the latest survey results on this important consumer group and explains what their responses mean for today’s and tomorrow’s home building industry. To view or purchase this publication online, click here, or call 800-223-2665. Help Rebuild New Orleans at 50+ Housing SymposiumBuilding for Boomers & Beyond: 50+ Housing Symposium is partnering with Rebuilding Together New Orleans and the NAHB National Green Building Conference on a special two-day community service project in which symposium attendees can help rehabilitate homes in New Orleans that were severely damaged by Hurricane Katrina. The 50+ Housing Symposium will be held in New Orleans May 19-21. Two pre-conference days, Saturday and Sunday, May 17-18, have been reserved for the rebuilding project and symposium attendees are encouraged to volunteer. Attendees participating in the rebuilding project will work on the NAHB house begun on May 10 by volunteers attending the Green Building Conference, also in New Orleans. The Green Building Conference will be held May 11-13. Since Hurricane Katrina struck New Orleans in August 2005, more than 1,700 volunteers have worked with Rebuilding Together New Orleans to help more than 50 low-income, elderly and disabled residents return to their homes. The volunteers have provided more than 40,000 hours of labor worth nearly $1.3 million. Symposium attendees, as well as others interested in participating, are encouraged to volunteer on one or both days. All skill levels are welcome. Participants must be 18 or older. Transportation from the symposium at the Sheraton New Orleans Hotel to the building sites and all tools and building materials, lunch, water and T-shirts will be provided. There is no cost to participate, but participants must register in advance. For more information about the symposium or how to volunteer or make a donation to Rebuilding Together New Orleans, visit www.nahb.org/build4boomers, e-mail Janice Coyle at NAHB, or call her at 800-368-5242 x8386. To be a corporate sponsor for the project, e-mail Harris Floyd at NAHB, or call her at 800-368-5242 x8208. Tour Top 50+ Communities in New Orleans Sign up for the active adult housing tour at the 2008 Boomers and Beyond: 50+ Housing Symposium in New Orleans, May 19-21. The symposium will also feature the most innovative new community designs during the Best of 50+ Housing Awards gala. Click here to register, or for more information. Earn CAASH Credits at Building for Boomers & Beyond The three required courses for the Certified Active Adult Specialist in Housing (CAASH) designation will be held Saturday, May 17 and Sunday, May 18 at the 2008 Building for Boomers & Beyond: 50+ Housing Symposium in New Orleans. The CAASH designation gives housing professionals serving this rapidly burgeoning market the essential knowledge, tools and skills that will help them succeed. To learn more about CAASH, visit www.nahb.org/CAASHinfo. Find Out What the 45+ Housing Market Wants “Right House, Right Place, Right Time: Community and Lifestyle Preferences of the 45+ Housing Market,” available through BuilderBooks.com, will help 50+ housing professionals determine the right design, home features and amenities to attract boomer home buyers in their market. Margaret Wylde guides readers through the latest survey results on this important consumer group and explains what their responses mean for today’s and tomorrow’s home building industry. To view or purchase this publication online, click here, or call 800-223-2665. Condo Market Seeing Some Signs of New LifeThe condo market is showing initial signs of a revival in some markets across the country and that uptick is also benefiting the rental apartment market, according to multifamily housing developers speaking earlier this month at the International Builders’ Show in Orlando. "We are definitely emerging from a difficult time and seeing some light in the condo market," said Bill Donges, CEO of the Atlanta-based Lane Company, which has condominium developments in several cities, including Hollywood, Fla. "The condo lifestyle — especially in urban areas — is very attractive, and with the interest rates low and the selection good, we are seeing buyers come back into the market," Donges said. “Since the holidays, traffic has picked up and we’re seeing more buyers in our sales offices,” Donges said. For those who qualify and can put 3% to 10% down, “you can get a great deal; the supply is high and demand is low.” Donges noted that condominiums have become a permanent fixture of the housing market, including such cities as Atlanta where they were not viewed as “a reputable thing to buy” until fairly recently. “The places where condos are available are the places where people want to live and where the jobs are,” he said, adding that they are providing an attractive alternative to older as well as younger home buyers. “The fundamentals for condominiums are solid,” he said, which will become increasingly evident as the existing supply is sold off during the next one to two years. Burning Off Excess Inventory The slow but steady sale of condo units recently in selected markets is also helping the rental apartment market, according to Steve Patterson, vice chairman of NAHB's Multifamily Leadership Board and CEO of ZOM USA, which builds and manages apartments throughout the Southeast. "We've had fairly strong rental demand for quite some time now, but the unsold condos and single-family homes coming back into the market as rentals were hampering the rental apartment sector," Patterson said. "With many of those units now selling, the so-called shadow market is starting to dissipate and the multifamily market overall is getting healthier." At the height of the housing boom, condo starts accounted for an unprecedented 45% of all multifamily starts annually. When the market rebounds, NAHB expects that percentage to hover between a more normal 20% to 30% share. "The real difference we're seeing now is that all our buyers want to live in the condos," said Donges. "The speculators are gone, which is a good thing, so we are optimistic that, except for the most overbuilt markets, the worst is behind us." Patterson also pointed out that multifamily housing developers on both the for-rent and the for-sale side have been slowing down their construction activities in order to give the market time to "burn off" excess inventory. Preliminary estimates from the Census Bureau indicate that 2007 saw a total of 275,700 starts of buildings with five or more units, down about 6% from the previous year and the lowest number of starts in this sector since 1996. NAHB has also ratcheted down its forecast for multifamily starts in 2008 — although not drastically — to approximately 250,000 five-plus starts, with that number rising to just above 260,000 in 2009. Slow economic conditions will dampen household formations for the next 12 months, Patterson said. But looking not too far down the road, the market will receive a demographic boost from a 10% increase over the next decade in the 25 to 29-year-old population, the segment most likely to rent. Struggling to Make Affordable Housing Numbers Work Despite the slower housing market, multifamily developers are still struggling to "make the numbers" work on rental apartments affordable to working families, including teachers, police and other essential service workers, according to Larry Swank, head of the Sterling Group, Mishawaka, Ind. In addition, Swank said that owners and developers of apartments that are subsidized by state and federal housing programs — including the Low Income Housing Tax Credit program — are currently facing sharply rising operating costs from utilities and other fixed expenses that are threatening both their existing properties and their ability to build new ones. "There is still an affordable housing crisis in this country," Swank said, "The slower housing market hasn't changed that." For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350. Get Informed, Make Connections Attend the 2008 Multifamily Pillars of the Industry Conference and Awards Gala, April 1-3 in Colorado Springs, Colo. and find out what’s next in the rapidly changing multifamily market from top economists and multifamily market experts. Network with the top professionals in the field and find out how they’re navigating the current market. Walk away with new contacts and fresh perspectives. For more information, visit www.nahb.org/PillarsConference. Apartment/Condo Conference in Colorado Coming Up SoonThe fabulous Broadmoor resort and spa, in Colorado Springs, Colo., will host NAHB Multifamily’s annual Pillars of the Industry Conference, April 1-3, and a sharply discounted room rate is available through the end of this week. A group of high-level experts will present serious outlook, marketing, finance and trend information about the apartment and condo market — information geared to helping businesses weather the downturn. The Broadmoor offers three golf courses, a tennis club and a world-class spa. During the conference, NAHB will announce the winners of its annual Pillars of the Industry Awards, highlighting the best in multifamily developments, marketing and individual and corporate achievement. There were a record number of entries in this year's Pillars of the Industry Awards competitiion, yielding a list of 118 finalists in 29 categories. For the complete list of award finalists, click here. For more information about attending Pillars, click here. More Small Jobs Needed to Sustain Remodelers in 2007With the negative impact of the housing downturn beginning to catch up with the remodeling industry around the middle of last year, big spenders on home improvements and additions have been moving to the sidelines, according to two panelists who presented the remodeling outlook at the International Builders’ Show in Orlando earlier this month. And to keep up their volume, remodelers have had to look for more small jobs among a wider base of customers. “It’s been a tough year for remodeling, but it could be worse. After all, you could be a home builder,” said Kermit Baker, director of the Remodeling Futures Program at the Harvard University Joint Center for Housing Studies. The remodeling market has “stalled” recently, Baker said, with an estimated $278 billion in total volume in 2007. As the market has softened, remodeling contractors have been scaling back, reducing their payrolls from 325,000 at mid-2006 to 306,500 in the fourth quarter of 2007. “The weakness has been greatest at the upper end of the market,” Baker said, which was the segment that had been creating growth earlier in the decade. “But there is evidence of home owner interest in mid-level jobs and a return to basics.” Home owners are now concerned about “over-improving” relative to prices in the neighborhood and making investments that they won’t be able to come close enough to recovering when they sell. Although the absolute level of cost recovery of remodeling projects varies by the job and where the home is located, nationally it was down to an average of 70% last year compared to 82.5% in 2003, according to cost vs. value reports from Remodeling magazine. “The outlook is more of the same,” Baker said, with pending existing home sales, the best indicator of remodeling demand, and overall home prices continuing to decline. “Lower prices are leaving home owners with less equity to tap to finance home improvements.” Freddie Mac reported that cashed-out equity at refinancing, a high share of which is used for home improvement projects, dropped from $320 billion in 2006 to $260 billion in 2007, roughly the same as its level in 2005. “Lenders are now less reluctant to lend that money as underwriting standards tightened in the second half of 2007,” he said. Through the third quarter of this year, Baker forecast that there would be “no reversal of current softness.” However, the slump for remodelers should be relatively mild, with things beginning to turn around by year’s end. Smaller contractors are more vulnerable to the declining health of the remodeling industry, he said, and there will be more business failures this year. With downward pressure on the demand for upper-end projects, Baker advised remodelers to expand the population they traditionally serve. At the same time, there is the risk that smaller companies desperately looking for business could be undercutting the competition. “You have to know what it takes to maintain profitability for your business,” he said. If you adjust to that and market aggressively “you’re likely to be around next year if there are problems.” Despite the current cyclical downturn, the longer range outlook for remodeling remains favorable, according to Gopal Ahluwalia, NAHB’s staff vice president for research. Total residential remodeling expenditures on improvements and maintenance climbed steadily from $49.3 billion in 1983 to $228.2 billion last year, he said, using statistics from the U.S. Census Bureau that include less activity than the calculations from Harvard. After this year, remodeling volume will begin inching up again, Ahluwalia said, growing to a projected $369.3 billion by 2016. “The share of improvements and maintenance won’t change significantly over the next 10 years,” he added.
Increase Your Professional Credibility The Certified Graduate Remodeler (CGR) designation emphasizes business management skills as the key to a professional remodeling operation. Remodelers who earn the CGR become members of an exclusive national program and gain recognition as industry leaders. To learn more about the CGR designation, visit www.nahb.org/CGRinfo or call The Professional Designation Help Line at 800-368-5242 x8154. Remodelers Report Slower Market in Fourth QuarterRemodelers have begun to feel some of the adverse effects of the housing downturn, according to results of NAHB’s Remodeling Market Index (RMI), which were released earlier this month. Current market conditions dropped to 40.9 on the index for the final three months of last year, down from 46.2 in the third quarter, and future expectations fell from 43.3 to 37.9. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions favorably. The RMI has been running slightly below 50 since the final quarter of 2005. "While the housing downturn has impacted the remodeling market to some degree, it is on a much smaller scale than the rest of the market" said NAHB Remodelers Chairman Mike Nagel, CGR, CAPS, a remodeler from Chicago. "Home owners realize the importance of maintaining their property and making necessary repairs to support the value of their homes, so we expect this type of work to start to pick up again." Nationally, the RMI components for major additions and alterations during the fourth quarter declined to 42.28, down from 46.89. Minor additions and alterations decreased from 47.07 to 41.76, with the exception of the South, where they increased from 43.68 to 49.81. Maintenance and repair remodeling registered 38.11 on the index, down from 44.31. "The decline in the remodeling market is far less than in the new home market and generally consistent with our remodeling forecast," said NAHB Chief Economist David Seiders. In the "special questions" section of the RMI survey, remodelers were asked about business conditions during 2007 and their expectations for 2008. Forty-three percent of respondents reported an increase in billing in 2007 and 25% reported billing at the same level as in 2006. For the year ahead, 51% predicted they would see an increase in dollar volume and 27% expected to maintain the same volume as last year. For more information about NAHB’s remodeling resources, click here; or e-mail Kelly Mack, or call her at 800-368-5242 x8451. Increase Your Professional Credibility The Certified Graduate Remodeler (CGR) designation emphasizes business management skills as the key to a professional remodeling operation. Remodelers who earn the CGR become members of an exclusive national program and gain recognition as industry leaders. To learn more about the CGR designation, visit www.nahb.org/CGRinfo or call The Professional Designation Help Line at 800-368-5242 x8154. New-Home Sales Designees Honored at Builders' ShowMore than 100 new-home sales professionals received Institute of Residential Marketing (IRM) designations during the 35th annual IRM commencement breakfast on Feb. 13 at the International Builders’ Show in Orlando. This year’s graduating class included:
In addition, IRM inducted several sales professionals into its Fellow program ― the highest honor that a MIRM designee can receive ― and honored building industry professionals who have advanced IRM and educational opportunities for sales professionals.
Subscribe to Sales + Marketing Ideas Magazine for Cutting-Edge Information For additional cutting-edge sales and marketing information, subscribe to NAHB’s Sales + Marketing Ideas magazine (www.smimagazine.com). Click here to learn about membership benefits of the National Sales and Marketing Council and the Institute of Residential Marketing. Reach New Heights at the Sales + Marketing Exchange Attend the first annual Sales + Marketing Exchange conference Oct. 5-7 at The Arizona Grand Resort in Phoenix. Presented by the award-winning Sales + Marketing Ideas magazine, the Sales + Marketing Exchange offers education sessions featuring nationally-acclaimed speakers, networking opportunities, pre-conference courses leading to one of the Institute of Residential Marketing designations and interactive discussions of current sales and marketing issues. For more information, visit www.nahb.org/Exchange. 'Sales and Marketing Checklists' Covers the Ins and Outs of New Home Sales “Sales and Marketing Checklists for Profit-Driven Home Builders,” available through BuilderBooks.com, covers the major steps involved in successful new home sales. Learn the ins and outs of the comprehensive contract, the move-in, warranty service, asking for referrals and a great close. This expanded second edition also includes a new chapter on utilizing technology in marketing and a more extensive chapter on multicultural sales. To view or purchase this publication online, click here, or call 800-223-2665. University of Housing Honors Five Designees of the YearThe NAHB University of Housing honored five industry professionals as the 2007 designees of the year for elevating the image of NAHB professional designations in their communities. They were honored during ceremonies at the International Builders’ Show in Orlando earlier this month.
Those named designees of the year included:
For more information about The NAHB University of Housing’s Designee of the Year, including eligibility requirements, call the Professional Designation Help Line at 800-368-5242 x8154.
Boost Business Skills During National Designation Month
The designation coursework enables members to hone their business skills and convey to their clients the superior training, practical experience and in-depth knowledge that come with earning an NAHB designation. NAHB offers more than 15 professional designations covering industry basics such as business management and marketing, as well as specialized classes including aging-in-place programs, green building, property management and more. In addition, designation holders can take advantage of valuable networking opportunities throughout their enrollment, working closely with expert instructors and other professionals both within their field and outside their specific areas of expertise. NAHB is stepping up efforts to educate the public about the value of selecting builders who earn a designation, build support for continuing education programs and increase recognition of the rigorous training required for an NAHB designation. For more information on National Designation Month in March, visit www.nahb.org/ndm, or call the Professional Designation Help Line at 800-368-5242 x8154. Education Calendar
Learn More About Upcoming Conferences and Designations Interested in attending a University of Housing conference or learning more about NAHB designation programs? Visit www.nahb.org/notifyme, and sign up to receive more information.
Free NAHB Kit Gives Builders Back-to-Basics Tips to Navigate the Slowdown What was once expected to be a relatively mild housing slump following three years of record new home construction and sales has given way to a significant downturn. To help members navigate the uncharted waters of this slowdown, NAHB has compiled a comprehensive “Back to Basics” online toolkit — the best of the basics, the tried and true and the truly new. To access the toolkit, click here. To access the “Back to Basics” toolkit, you must be an NAHB member and have a login to www.nahb.org. To create a login, go to www.nahb.org/login or click on the log-in button on the main menu bar. For assistance, call the NAHB Member Service Center at 800-368-5242. Sec. Bodman Calls for More Energy-Efficient HomesEnergy Secretary Samuel W. Bodman arrived at the International Builders’ Show in Orlando on Feb. 14 to challenge the nation’s home builders to build 220,000 new high-performance homes by 2012. “I am pleased that 38 home builders — including 22 who are represented here today — have accepted the challenge,” Bodman told show attendees. “They have volunteered to take the pledge to construct homes meeting this ambitious efficiency target.” Under the Department of Energy's Builders’ Challenge, a high-performance home is one that uses at least 30% less energy than a typical new home meeting the criteria of the latest national model building code. Bodman said that the builders who so far have signed up as partners in the energy drive are expected to build at least 6,000 homes across the country this year. As more home builders enlist, the department is hoping to spur the construction of 1.3 million high-energy performance homes by 2030. “If we reach that level, we will have helped Americans achieve cumulate savings of $1.7 billion in energy costs and have taken the carbon equivalent of 606,000 cars off the road annually,” he said. “Our builders have constructed more than 700,000 ENERGY STAR homes since that program started in 2000, so I think we’re all looking forward to seeing where this challenge will take us,” said Bob Jones, NAHB’s vice president and treasurer. “Builders, if you don’t know it, are very competitive,” said Jones. “Our members love a challenge — and as an association, we believe that voluntary programs and incentives are the best way to encourage the growth of dynamic new business practices.” The new energy-efficient homes that Bodman has asked the housing industry to deliver will have to meet the performance criteria for comfort, health and quality established in DOE’s Building America program. The energy performance of the homes will be rated according to the department’s new Energy Smart Home Scale, which will enable consumers to make informed decisions about how their home uses energy Homes currently being built typically average a rating of 100 on this scale, and Builders’ Challenge participants have agreed to construct homes that achieve a rating of 70 or lower, making them roughly 30% more energy-efficient than a typical new home. Right now, the 30% target would meet the "silver" level in the NAHB National Green Building Program if the energy efficiency were combined with similarly stringent green features in the water and resource efficiency, indoor environmental quality, global impact and home owner education categories. Bodman said that the ultimate goal is to have all new homes achieve a zero rating, making them net-zero energy homes that produce at least as much energy as they consume. Participating homes will receive an EnergySmart Home Scale or E-Scale label that is the home buyer’s equivalent of the fuel efficiency sticker that appears in the window of every new car. Affixed to the household electrical panel, the labels will provide the home’s EnergySmart score indicating how energy-efficient a particular home is expected to be. For more information, e-mail Calli Schmidt at NAHB or call her at 800-368-5242 x8132.
Take the Lead on Green Building Register now for the 2008 National Green Building Conference, held May 11-13 in New Orleans. Get contacts, tools and ideas that are good for both the environment and your bottom line. The National Green Building Conference is the only national conference targeted to green building for the mainstream residential building industry. Network with designers and suppliers, attend exceptional education sessions and develop the skills you need for profitable green building. For information and to register, visit www.nahb.org/greenbuildingconference, call 800-368-5242 x8338 or e-mail registrar@nahb.com.
‘Building Greener Neighborhoods’ Available at BuilderBooks.com “Building Greener Neighborhoods,” available through Digital Delivery at BuilderBooks.com, shows those involved in building new communities the advantages and rewards of saving, planting and transplanting more trees in their developments. The examples are drawn from decades of experience of land developers, home builders and urban foresters. To download this publication in a PDF format, click here, or call 800-223-2665. Designation for Green Building Professionals Debuts at IBSThe new Certified Green Professional (CGP) designation that teaches builders, remodelers and other industry professionals techniques for incorporating green building principles into homes without driving up the cost |