Builders Scale Back House Sizes as Buyers Commit to Energy Efficiency
The roughly 420,000 recession-chastened households NAHB expects to buy new homes this year are looking for different things than the boom-era buyers who snapped up homes that grew bigger, fancier and pricier by the month. Because they aren’t held back by the need to sell an old home, first-time buyers now make up a greater share of the market. They’re trying to stretch their dollars at every turn, and many are concerned about the cost of heating and cooling, especially after having experienced the surge in fuel costs last summer. Builders say buyers are judging a home in terms of how comfortable it will be as a living space for the long term, rather than as an investment they can flip for a profit after a couple of years. Until recently, builders have focused mostly on grand houses larded with upgraded countertops, flooring, cabinets and bath fixtures. Heading into the peak home buying season this spring, many builders are calling attention to the ways their homes save money and energy. Smaller size is one way they’re trimming the cost. For example, Atlanta-based Beazer Homes recently started to shrink its designs. Its high-end houses, which used to be about 3,600 to 3,700 square feet, now average about 3,000 square feet. Entry-level homes, at least in some locations, are getting a trim as well. Some of Beazer’s houses in the Greenfield development in Hagerstown, Md. are now about 1,900 square feet, compared with the old standard of 2,500 square feet. The company is also paying more attention to energy-conserving and environmentally friendly features such as efficient appliances, programmable thermostats, compact fluorescent lights and paints that emit less toxic fumes, all of which are now standard features. (www.washingtonpost.com)
Washington Post (1/24/09); Elizabeth Razzi
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No Bubble Burst Here: Cedar Valley Housing Market Hanging Tough
Local experts say a solid economy in Cedar Falls, Iowa kept home purchases stable last year. Residential sales totaled 2,300 in Cedar Valley, down from 2,392 in 2007. Median sale prices also declined — going from $115,000 to $113,588 — but those small reductions don’t concern Robert Reisinger, executive officer of the Waterloo-Cedar Falls Board of Realtors®. “The market is just as strong as it’s always been in recent years,” he said. “We might be in a little bit of a lull here as people take a wait-and-see approach, but we’ve really got a good market here.” Sales were slightly down due to the summer’s tornado touchdowns and floods. Another possible sales deterrent is the grim news about the national housing scene from other states, although that crisis hasn’t affected the area. Reisinger notes that low-interest rate loans make 2009 a smart year to buy. “We have to convince people that it’s actually a good time to sell in this market or buy in this market. You’re going to do OK.” That’s the message local developers have spread to clients, and their efforts appear to be paying off, said Craig Fairbanks, a member of the Northeast Iowa Home Builders Association. “Surprisingly enough, there’s a lot of inquiry about home building,” he said. “People here are pretty astute. It’s really a good time to build because pricing is down severely, especially on lumber products.” Like Reisinger, Fairbanks believes the Cedar Valley’s healthy local economy has insulated the market from challenges faced elsewhere in the nation. (www.wcfcourier.com)
Waterloo-Cedar Falls Courier (2/1/09); Mary Stegmeir
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Toll Bros Offers 3.99 Percent Financing to Sell Homes
Looking to jolt paralyzed home builders into action, Toll Brothers, a builder of luxury homes, recently began offering some buyers of new homes a 3.99% 30-year fixed-rate mortgage. That is more than a percentage point less than the average rate on such mortgages, currently 5.26%, according to HSH Associates in Pompton Plains, N.J. It isn’t unusual for builders with their own mortgage units to offer below-market rates as an incentive to sell homes. They can do this by making an upfront cash payment to the investor who buys the mortgage in a process known as a “buy down.” Home owners often make similar payments, known as points, to obtain a lower interest rate. The buy down is treated as a cost of sale for the builder. What’s eye-catching about Toll’s offer is that the company is offering the low rate for the life of the loan rather than for a few years, as some builders have done. “One of the things we’ve heard from consumers is that they want to wait until rates come down,” says Don Salmon, chief executive of TBI Mortgage Co., Toll’s mortgage subsidiary. “We’re trying to figure out a catalyst to bring buyers off the sidelines.” (www.wsj.com)
Wall Street Journal (1/12/09); Ruth Simon, Dawn Wotapka and Michael Corkery
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Proposal: Year With No City Impact Fee
Residential and commercial impact fees could be waived for the next 12 months as a way to spur building and create jobs, under a proposal released by Tucson, Ariz. City Councilman Rodney Glassman. Glassman said the one-year waiver of all impact fees — except those for public safety — is an immediate action that would help generate jobs for Tucson. Glassman said this may actually help the city’s $80 budget deficit for both this fiscal year, which ends on June 30, and next fiscal year, which begins on July 1, “if it spurs construction and retail development…that might otherwise not occur in this market.” That development would bring in more sales taxes to the general fund. The Southern Arizona Home Builders Association has written a letter expressing formal support for the proposal, noting that only 220 new-home permits were issued during the last six months of 2008, and it predicts only 110 will be produced in the first half of this year. The letter says the waiver would have several benefits, including: signaling that the city is serious about an economic stimulus to create jobs; providing concrete action that is not just a proposal; and finally showing “a great act of understanding how this local economy functions.” (www.azstarnet.com)
Arizona Daily Star (2/2/09); Rob O’Dell
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Snohomish County Sets New Rules for Home Builders
When housing developments go in, neighbors often gripe about builders clear-cutting trees before breaking ground. That was a big factor in shaping the urban design rules the Snohomish Council in Washington approved last week. Among other changes, residential builders now will have to leave trees alone or plant replacement trees for any they cut down. Mike Pattison, government affairs manager with the Master Builders Association of King and Snohomish Counties, agreed that many builders will welcome the rules. But they aren’t sure how many more restrictions they can take, because regulations add to the price of homes and cut down on the number of buildable lots. “We’re getting to the point where we’re maxed out,” Pattison said. “This is the last additional cost measure the industry can tolerate.” Leaving more trees is likely to be popular with people living next to new developments, but that likely will be the most expensive change in the updated standards, he said. Just how much the new rules will cost is hard to say. It could be as much as $5,000 per home when new rules to save trees, preserve open space and vary the building designs are added up, Pattison said. “We won’t really know the answer until we start building again,” he said. (www.heraldnet.com)
Everett Herald (2/2/09); Noah Haglund
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Missouri Program Aids First-Time Home Buyers
A new loan program is available to first-time home buyers in Missouri to turn the $7,500 federal tax credit approved last year into a downpayment on a home. Under a program announced last month, the Missouri Housing Development Commission will loan a first-time buyer $6,750 to use as a downpayment at closing and be paid back interest-free when the home buyer receives the credit at tax time. “The problem was nobody could figure out how to turn the $7,500 into cash at the closing table,” said Brad Goss, a St. Louis developer and a real estate lawyer. “No other state has figured out how to do it, except Missouri.” Experts hope that encouraging new home buyers will stimulate growth throughout the housing market, as current home owners would in turn purchase new homes. “Once you get the first-time home buyers buying at the front end of the market, then it ripples through the system,” said Goss, who was a member of a legislative task force that was established last year to examine problems in the housing market. (www.kansascity.com)
Kansas City Star (1/26/09); Jason Noble
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