Nation's Building News Online: March 8, 2010

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Lumber, Materials Prices to Rise as Housing Recovers

Barely beginning to emerge from the most devastating housing downturn since the Great Depression, home builders in the early months of this year have been confronted by a significant run-up in lumber prices.

For the week ending on Feb. 19, the Random Lengths composite index stood at $317 per 1,000 board feet, its highest level since the first half of July 2006. That price was up more than 26% from the start of this year, when framing lumber was averaging $251.

During the first half of 2009, the index fluctuated around the $200 mark, before moving into the $250 range in late November.

(Random Lengths' composite index is a weighted average of 15 softwood lumber product prices.)

With the index registering declines in the past two weeks, NAHB Senior Economist Bernard Markstein said that home builders may have seen the worst of climbing lumber prices, at least for the short term.

Residential construction is the chief driver of demand for softwood lumber, Markstein said. With residential construction activity remaining at historically low post-World War II levels, mostly supply-side factors were responsible for the dramatic surge in lumber prices in January and February:

• Under the Softwood Lumber Agreement (SLA) between the U.S. and Canada that went into effect in the fall of 2006, Canada is subject to a complex set of export fees and quotas whenever the Random Lengths composite index price falls below $355 per 1,000 board feet. At prices below $315, the most stringent fees and quotas are imposed. Recent rulings against some Canadian provinces have added an extra 10% to their cost of exported lumber. These export fees have been exacerbated by the strengthening of the Canadian dollar against the U.S. dollar. “Although the SLA and the stronger Canadian dollar have not put new pressure on the price of lumber, they have limited the ability of the market to respond quickly to sharp price increases and temporary shortages,” Markstein said.
  
  
• With the Random Lengths cost of lumber remaining low — below $300 — for about two-and-a-half years, companies shut down many of their mills and cut back on logging operations by the second half of 2009, with significant layoffs of workers. This led to severe lumber supply constraints by the end of last year, which were probably worsened by normal mill shutdowns for the holidays in December and January.
  
  
• Unusually cold and wet weather in much of the southern U.S. and parts of Canada limited logging operations even further, helping to drive up prices.
  
  
• Demand has increased from paper and pulp mills.
  
  
• Given the cost and time involved in restarting shuttered mills, mill operators have been reluctant to ramp up production until they can be confident that higher lumber prices will prevail for an extended period and not just a few weeks. Once a decision is made to reopen a mill, it can still take several weeks to check out and service idled equipment and to rehire workers.
  
  
• Some segments of the market — notably dealers — also temporarily nudged up demand as they moved to rebuild their depleted inventories of lumber. Working inventories had thinned in response to weak demand but also because of difficulties in obtaining adequate financing for them.

“As the need to rebuild inventories abates and weather-supply constraints slacken, presumably lumber prices will decline in coming weeks,” Markstein said.

Overall, Markstein said, low levels of residential construction have been exerting downward pressure on building materials prices. This has been offset in some industries, he said, by suppliers reducing output in the face of soft demand and prices.

Unwelcome News From Suppliers

Home builders also have been receiving unwelcome news from their suppliers of late, according to Markstein. An index produced by the Bureau of Labor Statistics that tracks building material prices for builders of single-family homes and multifamily structures has now risen three months in a row. In January, both measures jumped 1% from December.

Chief contributors to the recent rise are lumber, fuel products (gasoline and diesel), plumbing fixtures and copper prices.

On a year-over-year basis, the single-family index is up only 0.3% and the multifamily index is up a slight 0.2%. Nonetheless, with a number of countries around the world on the expansion path, buildering material prices are likely to continue to rise in coming months, he said.

Among recent price trends in other building materials, as of January, he reported:

• Gypsum prices, which rebounded somewhat last fall as producers reduced capacity by taking less efficient plants offline, have generally been falling since February 2009 and are at their lowest levels since June 2004. However, both U.S. Gypsum and National Gypsum announced price increases in early January.
  
  
• Insulation prices hit a low in July 2008, when they were at their lowest levels since June 2004. Although up a bit in recent months, they were only up 1.4% from their July low point and were below their levels in March through July of last year.
  
  
• Despite some fluctuations, cement prices generally fell throughout 2009 and at the start of this year were down 4.5% from a year earlier. Following a similar path, concrete prices were down 3.2% from a year earlier.
  
  
• The copper market has remained characteristically volatile, with labor disputes in Chile and expectations for rising industrial demand globally pushing prices higher recently. Copper prices, which had been running close to $4 a pound in April and May of 2008, fell below $1.50 a pound by the end of that year and into January and February of 2009. They were trading in the $3.10 to $3.20 range by the end of last year, and early this year moved up to around $3.40 a pound. They were up 63.5% from January 2009 to January 2010.
  
  
• Steel prices fell from September 2008 through May 2009 and have been rising since, by 11.8% as of November 2009. Markstein said that steel prices were likely to remain weak for the next few months, but “general global recovery is likely to produce higher steel prices in the latter half of this year and into 2011. All eyes will be on China. Chinese steel output is expected to rise rapidly in 2010, but Chinese demand for steel is forecast to rise even more rapidly, putting upward pressure on steel prices.” After falling in November and December, steelprices rose 2% in January and now are only down 3.7% from January 2009.

“Given expected growth in world industrial demand over the next several years, particularly China, building materials prices will tend to rise faster than general inflation,” he said.

Builders Go Head to Head With Foreclosures and Win

From Las Vegas, one of the epicenters of the housing meltdown, John McLaury, senior director of sales for KB Home Nevada, reported that his company has scored measured sales success by zeroing in on the foreclosed properties flooding the local housing market and pursuing strategies to compete with them.

“First-time buyers are focused on the monthly payment,” added Jackson. “With REOs, that’s not in the conversation and there are all those extra costs for retrofits and fix-up.”

Setting New Homes Apart

In Dallas, Houston and San Antonio — where foreclosures are not so profuse — Jackson said that LGI Homes has assembled “a sales and marketing machine” on which it is spending 10% to 15% of its revenues to bring prospective first-time buyers out of their rental apartments. “Their focus is on the monthly payment,” she said, “and they are not even going out and looking at REOs.”

There are so many markets where it is now cheaper to buy than to rent, Jackson said. Even if mortgage rates go up to 6%, which would be low by historical standards, “affordability is ridiculous right now. That’s a message that needs to be out there.”

In the current market, especially where builders are going head to head with foreclosures, “marketing takes a step up in importance. There are bidding wars over foreclosures in Santa Barbara, but nobody is marketing to the people losing out on these,” Ruiz said.

Kerrin West, president of Studio 81 International in Folsom, Calif., stressed the importance of builders differentiating their new homes from the product that was being offered during the boom years.

“In design, before you took what you could get,” West said. “Now we are providing options." Floor plans are becoming more open to meet the needs of a simpler, more casual lifestyle and “formal spaces have gone away. This is a wake-up call that we are on a more conservative path."

West said that at least one single-story home should be included in the lineup to appeal to today’s strong and growing seniors market. Homes should come with specialty space — as small as eight feet square and located near the entrance — that can function as a tech center, reading alcove, wine room or whatever else the owner may have in mind, she said.

Today’s prospects “also want to buy a home that has future potential,” West said. “Our lives are constantly changing” and buyers will be asking themselves if this is a home they want to stay in for a prolonged period of time. “Keep things logical, practical, down-to-earth — not something cute,” she added.

NAHB Finds Construction Costs Are Three-Fifths of Home Price

Built-for-sale or “spec” homes have been particularly hard hit by the housing downturn, according to a new NAHB survey on the various components that go into the price of a typical single-family home.

Based on responses from 54 builders in 2009, “Breaking Down House Price and Construction Costs” found a relatively high proportion of custom homes — homes built on a lot owned by the customer, who hires a general contractor to perform the construction work — rather than spec homes.

These findings are supported by Census data showing a recent decline in the ratio of spec to contractor-built homes from more than six-to-one in 2004 through 2006 to below four-to-one in the latter part of 2008 and in 2009, according to the study’s author, Paul Emrath, NAHB’s vice president for survey and housing policy research.

The 2009 construction cost survey found that the costs of construction accounted for nearly three-fifths of the final sales price of the average home, and the cost of the finished lot accounted for just over one-fifth.

These shares of the home price represent a noticeable shift since NAHB’s previous construction cost survey in 2007, Emrath said, but that is largely because of a change in survey methodology to provide a better, more representative sample of single-family construction across the country.

Included in the revamped survey design were more houses in non-metropolitan areas, where land prices tend to be lower and lot sizes larger. Census figures for new residential construction in 2008 show that the average lot size was .36 of an acre for new homes sold in metro areas compared to .65 for homes sold outside those areas.

The average size of the surveyed homes was just over 2,700 square feet, and the average lot size was one-half acre.

The average price of the new single-family homes in the 2009 construction cost survey was $377,624. The cost of the finished lot accounted for a little over one-fifth of that price, the cost of construction accounted for nearly three-fifths and the balance came from the costs of construction financing, selling the home and overhead and profit.

Overall, the survey found that the shares of most construction costs remained relatively stable between 2007 and 2009 even with the new survey sample design.

When significant trends were found, said Emrath, they tended to occur along with changes in materials prices. “For example,” he writes, “although framing and trusses remain the largest individual component of construction costs, the share has declined from over 20% to under 16% of total construction costs. This trend was evident before 2009, however, and coincides with a period of generally declining prices for framing lumber.”

At 15.6%, framing and trusses accounted for the largest share of construction costs, followed by excavation, foundation and backfill work (7.1%). Siding, plumbing, drywall, cabinets and countertops, and tiles and carpet accounted for between 5% and 6% each.

NAHB’s research has identified framing/trusses and windows as the two components of a single-family home that have been on the decline fairly steadily since 1988.

Siding and roofing shingles are two components that have been on the rise as a share of total construction costs.

The rising share of costs for roof shingles may be due largely to changes in the price of asphalt, which, according to the NAHB Research Center's annual Builder Practices Survey, commands a dominant share of roughly 80% of the market for single-family detached roofing materials. The Producer Price Indexes produced by the U.S. Bureau of Economic Analysis show prices for asphalt shingles and coating materials increasing by more than 10% annually in 2005 and 2006, and by more than 18% a year in 2008 and 2009.

The Builder Practices Survey suggests that the rising cost-share of siding may be the result of a shift toward more expensive materials. That survey indicates that, since 2002, brick has steadily increased its market share and replaced vinyl as the siding material most commonly used on single-family detached homes.

The survey also found that landscaping and building permit fees have been increasing as a share of construction costs that are not related to the actual physical structure.

Profits amounted to 8.9% of the house price last year, the survey found.

To read the entire report, click here.

For further information, e-mail Paul Emrath, or call him at 800-368-5242 x8449.

As Loans Dry Up, Builders Work for Banks

Home builders in some of the nation’s hardest-hit housing markets are going to work directly for banks, in a little-used arrangement that is helping to ameliorate conditions in some battered local economies. The builders traditionally got loans from banks to build homes, but that credit has largely dried up. The contract work builders are getting is welcome as many of them struggle to stay afloat. Randy Schaefer, who has been building homes in Las Vegas since 1981, recently began working for a bank for the first time. In September, construction lender Housing Capital Co. hired him to help finish a subdivision of 170 homes in the desert outskirts here. While he is only being paid a flat fee instead of any profit on the three to four homes a month he has agreed to build, it enables him to keep his eight workers employed. Like Schaefer, builders from California to Florida are starting to contract their services to lenders, many of whom have been left holding unfinished homes after the original builder went belly up. While there are no data on the trend, many builders are taking this work for the first time, particularly in markets like Nevada, Arizona and California, says Stephen Melman, NAHB’s director of economic services. The trend helps preserve relationships between builders and lenders in a strained time for the two. In some of these situations, home builders are working for the same institutions that won’t lend money to them. While banks have hired builders before for fees, the trend is more prevalent now as more financial institutions own foreclosed properties, experts said. The pattern wasn’t as widespread in past downturns, when builders more commonly responded by taking cost-cutting steps such as reducing the number of homes they built and trimming their staffs, industry officials said. “There was always some credit [for] them before, but now there’s practically none,” said Irene Porter, executive director of the Southern Nevada Home Builders Association. “That’s the big difference.” (www.wsj.com)
Wall Street Journal (3/1/10); Jim Carlton

Builders Get Back in the Game; Construction of Multifamily Units Expected to Soar in 2010

In St. Petersburg, Fla., close by Tropicana Field, an unusual structure is emerging from a construction site: a rental apartment building. The work in progress on the Fusion 1560, a 325-unit upscale project in one of the states hit hardest by the housing crisis, is a sign that developers of multifamily housing are tiptoeing back into the business. This year, real-estate investment trusts, or REITs, are expected to start close to $1 billion in new multifamily projects, according to real-estate research firm Green Street Advisors. While that is still less than average, it is a significant increase over the $100 million of development starts in 2009. Analysts caution that the increase in construction doesn’t mean there has been an improvement in the business. Apartment vacancy is at a record and unemployment, essential to the sector’s health, remains elevated. But operators are betting that limited new supply, combined with an improving economy, will lead to ideal market conditions nationwide starting in 2011 or 2012. From then until 2015, “apartment REITs may generate the best property net operating income growth they’ve seen in a very long time, maybe ever,” said Haendel St. Juste, a REIT analyst with Keefe, Bruyette & Woods Inc. (www.wsj.com)
Wall Street Journal (3/3/10); Dawn Wotapka

Apartment Sector Stirs From Slumber

Despite an economy still in the earliest stages of recovery, some apartment construction projects are securing hard-to-get loans and moving forward as developers count on apartment living coming back into favor. After a decade that emphasized homeownership and for many ended in foreclosure, many housing experts predict that renting will rebound. In the Baltimore area, several apartment projects are moving ahead. Construction had come to a near-standstill on most multifamily housing projects, a slowdown that began in 2008 and worsened last year as conventional financing dried up. Developers who build and sell their projects have been especially hobbled. When they can’t sell or refinance projects to repay a bank loan, it clogs the financing stream for other projects. And as rental rates drop, developers can’t afford to build. So while some apartment projects are under way in the region, hundreds of units are likely to stay on the drawing board until the economy rebounds. But those who are moving ahead with rental projects see a bright future, with pent-up demand and other factors behind the trend. Because new apartment construction starts have fallen to post-World War II lows, apartments could be in short supply in the next couple of years. Meanwhile, a declining homeownership rate combined with a growing number of 18- to 24-year-olds is expected to raise the number of new renters. (www.baltimoresun.com)
Baltimore Sun (1/31/10); Lorraine Mirabella

Staying Grounded; For Many Buyers, a Master Suite on the First Floor Feels Like a Retreat

Folks weary of the ups and downs of two-story living are getting in on the ground floor of a trend. They’re demanding first-floor master bedroom suites. The first-floor suite’s popularity is borne out by a recent survey of the 55-plus home buyer by NAHB. It reported the first-floor master bedroom was among the 10 most important design features for that age bracket, said Stephen Melman, NAHB’s director of economic services. More than 70% of 55-and-older respondents said a master suite on the first floor was a priority, he added. However, it’s not always an older home buyer with achy bones who specifies a first-floor master suite, said Patrick Curran, president of Hinsdale, Ill.’s West Point Builders, which has first-floor master plans in its models. “Our original intention was to sell to older people,” Curran said. “But it’s proven popular with younger buyers who have older relatives coming to live with them, and want them to live on the ground floor.” (www.chicagotribune.com)
Chicago Tribune (3/5/10); Jeffrey Steele

Spurned by Banks, Builders Look Elsewhere

Private-equity firms are stepping into the vacuum left by banks’ flight from lending to small and midsize home builders. “The banks just are not doing construction loans,” says Robert Mecay, a real estate developer who is trying to build a luxury condominium complex on the south shore of Lake Tahoe in Zephyr Cove, Nev. So Mecay and his partners in the Tahoe Beach Club project are seeking $150 million of equity or debt financing from private-equity firms. The money isn’t cheap. For loans, some private-equity firms were offering interest rates of roughly 15% to 20%. But Mecay, whose previous projects have relied on bank loans, wants to start the project soon, while construction costs are low as subcontractors and suppliers scrap for scarce business. “We need to get moving,” he says. Developer’s Financial Solutions Inc., a financial advisory firm in Rancho Santa Fe, Calif., is trying to line up financing for Mecay’s project from wealthy individuals or private-equity funds. (www.wsj.com)
Wall Street Journal (2/3/10); James R. Hagerty

Mortgage Reform Key to Recovery

“In 2008, Washington took control of Fannie Mae and Freddie Mac, which along with Ginnie Mae, have provided a lifeline to the nation’s mortgage markets — some $300 billion in subsidies,” writes Pratt Center for Community Development consultant Alyssa Katz, in an article for Politico on the importance of mortgage market reform. “The Administration has been quiet for so long on Fannie Mae and Freddie Mac — and not just because the two mortgage giants have become politically radioactive. Rather, the White House appears to understand that this battle has the most at stake: nothing less than homeownership as Americans have known it since the 1930s. Do secondary market reform right, and generations to come can look forward to purchasing a home as a path to financial security. Screw it up, and buying a home remains what it has become in recent years: a gladiator ring of dangers, in which a home owner’s equity is the price — assuming borrowers have access to long-term, fixed-rate mortgages at all. For months, reformers and many congressional Democrats have focused on a new CFPA (Consumer Financial Protection Agency) as the key to reform. But the fate of the secondary mortgage markets and mortgage securitization matters far more to consumers — and to the institution of homeownership.” After reviewing the recent downward spiral in housing’s government-sponsored enterprises, she continues: “Without Fannie Mae’s relatively modest subsidies and policy support to encourage widespread use of long-term mortgages, millions of responsible citizens, whose parents and grandparents had owned their homes, would not have access to affordable, reliable credit. If anything, the shortcomings of the government-sponsored enterprises was that they were risk-averse. Now, no one is suggesting reviving the Frankenstein that was the old Fannie Mae and Freddie Mac, grasping for shareholder returns with the help of a public subsidy. Indeed, last month, House Financial Services Committee Chairman Barney Frank (D-Mass.) ruled it out. But for the American dream of homeownership to survive, it needs mission-driven agencies and federal market overseers to nurture it.” (www.politico.com)
Politico (3/4/10); Alyssa Katz

Letter to the Editor: Builders Are Not the Economy's Enemy

The following is a letter to the editor from NAHB Chairman Bob Jones in response to a column by Jim Cramer in The Street.com RealMoney on Feb. 14.

In his short article, Cramer said home builders helped finance and over-stimulate the housing market, often worked with banks hand-in-hand to offer easy credit or provided it themselves, and allowed people to buy multiple houses. And unlike in previous recessions, he said, they didn’t go under, but were bailed out by “the huge new-home-buyer credit” and “the outrageous tax rebate for these companies.”

Looking at a small increase in housing starts in January, Cramer wrote, “One can only hope that this time they [builders] are gauging demand successfully and aren’t overbuilding again. But don’t count on it. Not only do these guys get away with financial murder, they don’t even know their own businesses. They are their own — and our own — worst economic enemy.”

Readers can click here to access the entire column by signing up for a free trial subscription to TheStreet.com RealMoney.

Dear Mr. Cramer:

Your Feb. 17th diatribe in RealMoney against home builders is perhaps the most irresponsible and misleading piece of economic journalism I have ever read. In some of your fairly recent public discussions on housing you have cited the importance of stabilizing the housing market in order to restore the health of the U.S. economy and you have warned about the possibility of housing shortages as the result of the current housing downturn. But now you are fuming over a less than 3% increase in the pace of housing construction in January and suggesting it may be an indication that the industry is overbuilding again. Surely you do know that we are coming off the worst housing production levels since the 1940s and at this current rate of improvement the industry has a long road ahead before it regains its health.

The situation would be far worse without the home builder tax credit — something you have strongly advocated in your column in the past! What you now suggest is an undeserved reward for builders is actually the one thing that has sparked modest momentum in the housing marketplace, and provided some hope that housing will be able to move forward as the economy finds a surer footing. High levels of unemployment and the uncertain American consumer remain significant obstacles to a resurgence in housing demand, and by pointing a finger at all home builders I am not sure you are doing much to rally the confidence we need to get this country moving back in the right direction. If anything, you are undermining it.

While I am baffled about the point of your short article, I can say that you are totally erroneous about how builders have been affected by this housing downturn. I am not going to speak for the large publicly traded production builders who figure predominantly in the investment community it is your job to advise. I do feel, however, that I am qualified to speak on behalf of the small home builders who comprise the majority of the housing industry. Make no mistake, it would be difficult to imagine a worse period for home builders than the last couple of years. Many of us have lost our businesses entirely. Many more have been hanging on, hoping to see the market return. We have been forced to lay off workers who have been with us for years and who have helped establish our companies as mainstays in our communities. We have been doing whatever we can to sell off our inventories, even lowering the asking price to below the cost of building the home. We have been struggling with our lenders to keep lines of credit open so that we can finish projects that we started, and we are looking wherever we can to line up the new financing we will need to meet housing demand as it returns to more normal levels.

Honestly, I cannot say that most of the builders I know are celebrating the bailout you wildly imagine they have received. And they certainly do not deserve to be treated like villains. We are driven by the philosophy that you have to work for what you get, and we have never been advocates of selling homes to families that cannot afford to stay in them. We know our businesses much better than you think, and we stake everything on our reputation.

These times have been tough enough. The last thing we need is someone like you spouting off half-cocked accusations. You can try convincing people that builders are the enemy of the economy, but I suspect you are going to have a tough time getting them, the sane ones at least, to believe you.

Bob Jones,
Chairman
National Association of Home Builders

Democrats Move Forward on Health Reform on Their Own

With President Obama’s seven-hour health care summit with congressional leaders on Feb. 25 failing to produce a bipartisan compromise, the stage is now set for Democrats to move forward on their own.

While it is still unclear how the Democrats plan to proceed, one emerging option for passage of health care reform is for the House to pass the Senate bill that was approved on Christmas Eve, without any House amendments. The House and Senate would then produce and vote on a package of changes to that legislation under a budget process known as reconciliation, which only requires 51 votes for final passage. The amendment process for reconciliation in the Senate is more complicated, however.

This option would require a majority of House Democrats to vote for the Senate bill, which many of them do not like, with the expectation that their concerns would be addressed in the reconciliation package.

While Senate reconciliation procedures allow for an expedited general debate process and a simple majority for passage, they also permit an unlimited amount of relevant amendments to be offered. Senate Republicans have stated publicly that they are prepared to offer as many amendments as it takes to kill the current health care reform package.

Although the possibility of Senate Republicans succeeding in stalling reconciliation has made it even more difficult to round up House Democratic supporters for the Senate measure, House lawmakers are continuing to lobby their colleagues to support a vote on passage of the unaltered Senate bill.

If Congress proceeds along the reconciliation path, NAHB will mobilize an intensive lobbying and grassroots push to oppose the unamended Senate bill and strip from that bill a provision by Sen. Jeff Merkley (D-Ore.) that targets small businesses in the construction industry. The Merkley language unfairly targets small construction firms by requiring them to provide health insurance or face stiff fines if they employ more than five workers. Small businesses in every other industry, on the other hand, would be exempt from providing mandatory health coverage if they employ 50 workers or less.

NAHB has already spent many months laying the groundwork for this endeavor. Led by Sen. Blanche Lincoln (D-Ark.), four Democratic senators are on record opposing the provision, along with 18 Senate Republicans. Other House and Senate Democratic and Republican leaders have also indicated to NAHB that they oppose the Merkley provision.

The situation will remain fluid until Democrats have determined their legislative strategy to push the health care overhaul across the goal line. A crowded legislative calendar and the need to further address the struggling U.S. economy won’t make that job any easier.

NAHB is monitoring events closely and will continue to lead the fight with other like-minded business groups to ensure that the Merkley language is eliminated from any final health care legislation to emerge from Congress.

For more information, contact Carlos Gutierrez at 800-368-5242 x8242.

Mark Your Calendar for the 2010 NAHB Legislative Conference

Builders looking to send a message to Congress that it needs to take action to jump start housing and the economy should mark their calendar now for the most important grassroots event of the year — the 2010 NAHB Legislative Conference — which will take place on Wednesday, April 21 in Washington, D.C. leading into the association’s spring board meeting.

The timing of this year’s legislative conference is particularly significant considering the precarious condition of the housing sector and overall economy. The home building industry still faces major challenges as the housing market begins to regain its footing. Specifically, these involve housing finance and appraisal issues that threaten to harm small businesses, slow home sales and hamper a housing recovery.

Builders are encouraged to travel to the nation’s capital and to urge their representatives and senators to support policies that will stabilize home values, mitigate foreclosures, bolster consumer confidence and get the economy moving forward.

The annual NAHB conference provides an ideal opportunity for association members to share their concerns on housing-related issues with lawmakers on Capitol Hill.

Especially in these challenging times, participation by NAHB members can make a huge difference as various interest groups compete to push their agendas in Washington.

A strong builder turnout on April 21 will send a powerful message to members of Congress that housing must remain a top national priority.

For more information and to register for the conference, click here; or contact NAHB Federal Government Affairs at 800-368-5242 x8470.

New Single-Family Home Sales Down in January

Sales of newly built, single-family homes declined 11.2% in January to a seasonally adjusted annual rate of 309,000 units, the slowest pace on record, according to figures released by the U.S. Commerce Department on Feb. 24.

"This disappointing report highlights just how fragile the economic and housing recovery is right now, and the uncertainties that continue to weigh on consumers, particularly with regard to concerns about job security," said NAHB Chairman Bob Jones. "Even with today's exceptionally favorable home buying conditions — including low interest rates, stabilizing house prices and the availability of home buyer tax credits — many consumers simply weren't confident enough to go forward with a new-home purchase in the beginning of this year."

"While the overall economic picture has brightened somewhat, these numbers indicate that the road to a housing and economic recovery remains very uncertain. Many Americans have yet to see much evidence of improvement first-hand, and are therefore reluctant to consider a home purchase," noted NAHB Chief Economist David Crowe.

"Meanwhile, competition from below-market-priced foreclosed and short-sale homes poses an additional challenge to the new-homes market right now,” Crowe said. “Although we continue to expect a boost in overall sales activity prior to the expiration of the $8,000 and $6,500 home buyer tax credits at the end of April, unseasonably poor weather across much of the country may delay the full impact of those incentives until closer to the deadline."

The Midwest was the only region of the country to register an increase in new-home sales in January, posting a 2.1% gain from an abnormally low December rate. January’s pace of new home sales declined by 35.1% in the Northeast, 11.9% in the West and 9.5% in the South.

While the overall number of new homes on the market remained virtually unchanged in January, at 234,000 units, the month's supply rose to 9.1, up from 8.0 in December, due to January’s slower sales pace.

Web Site Is One-Stop Shop for Tax Credit Info

Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit signed into law by President Obama.

Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.

Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.

Builders Concerned About FDIC Distressed Loan Sales

An agreement by the Federal Deposit Insurance Corporation (FDIC) for OneWest Bank to acquire the mortgage assets of the failed IndyMac Bank has raised concerns among NAHB builder members.

According to a controversial video by Thinkbigworksmall.com and circulated widely online, OneWest stands to profit excessively from a loss-sharing arrangement in the deal that measures losses against the face value of the purchased mortgages rather than the discounted amount for which the bank purchased the loans.

The video also contends that the loss-sharing arrangement will lead OneWest to pursue short sales and foreclosures rather than undertake loan modifications.

NAHB has heard from many builders who are concerned that arrangements such as the one portrayed in the video are resulting in distressed loan sales that are having an adverse impact on appraised values and the demand for new homes.

Builders with acquisition, development and construction (AD&C) loans at failed institutions have been reporting that it is difficult or impossible to negotiate with the FDIC on the disposition of their loan. Builders have also complained that the FDIC is accepting lower prices on these loans than they were willing to offer, and local financial institutions say that their superior bids are often ignored in the FDIC’s asset disposition process.

In a press release refuting many of the claims made in the Thinkbigworksmall.com video, the FDIC says:

• It is sharing losses on only the 7% of IndyMac loans that are actually owned by One West. Not covered in the loss-sharing arrangement are the additional IndyMac loans OneWest services for other investors.
  
  
• It has not yet made any payments to One West, which must first take $2.5 billion in losses before the government will pay loss-share claims.
  
  
• OneWest is required to adhere to a loan modification protocol for single-family loans that meets the approval of the FDIC. Under this protocol, OneWest can only initiate short sales or foreclosures after it has documented that these will recover higher amounts of money than loan modifications.

The FDIC said that it can repudiate the loss share claims on the covered loans if OneWest violates this agreement. It also said that it expects OneWest’s large first-loss position, combined with the required loan modification protocol, to minimize loss-share claims under the agreement.

NAHB is seeking further clarification from the FDIC about the deal and will also continue to urge the agency to address critical credit issues facing home builders by seeking improved regulatory treatment of new and existing AD&C loans and a more equitable process for builders with loans at failed institutions.

For more information, e-mail David Ledford at NAHB, or call him at 800-368-5242 x8265.

Web Site Is One-Stop Shop for Tax Credit Info

Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit signed into law by President Obama.

Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.

Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.

Home Buyer Tax Credit Extended for Some in the Military

Although home buyers need to sign sales contracts by the end of April to qualify for the $8,000 first-time and $6,500 repeat home buyer tax credits, qualified active military servicemen and women have an additional year to take advantage of these incentives.

Under a legislative provision targeting active members of the military, the Foreign Service and the intelligence communities, the tax credit was extended for one year beyond the current deadlines of April 30, 2010 for a binding sales contract and June 30, 2010 for settlement and closing.

The provision only applies to home buyers in the above mentioned groups who have served on official extended duty for 90 days or more outside the U.S. from Jan. 1, 2009 to April 30, 2010.

Also, service members who must sell their home because of official extended duty are excluded from a rule that requires buyers to repay the credit if they move out of their home within three years.

Builders — particularly in cities and towns with a large population of military personnel — should take advantage of the opportunity to market the tax credit extension to qualified military families that are looking to purchase a home.

Resources geared to helping builders spread the word about the benefits of both the tax credit and homeownership are available at www.nahb.org/taxcreditmaterials.

More information on the special provision for military service members can also be found at www.federalhousingtaxcredit.com.

Web Site Is One-Stop Shop for Tax Credit Info

Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit signed into law by President Obama.

Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.

Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.

Builders Need to Remind Buyers of Tax Credit Expiring Soon

In their sales and marketing efforts, home builders should be reminding prospective buyers that they still have the opportunity to take advantage of the $8,000 first-time home buyer or $6,500 repeat buyer tax credit. But home buyers need to act quickly because the sales contract must be signed by April 30 to qualify.

"It's not too late to take advantage of the home buyer tax credit," said NAHB Chairman Bob Jones. “There are plenty of existing homes on the market, and even though the move-in-ready, newly constructed home inventory has dwindled, builders may still be able to finish a home in time."

Buyers who sign a contract by the April 30 deadline then must close on the home by June 30 to qualify for the credit.

More people than ever before are eligible for a home buyer tax credit; NAHB estimates that close to 70% of all potential buyers should qualify.

"First-time" buyers don't have to be buying their first home ever; they are defined by the IRS as those who have not owned a principal residence in the past three years. Repeat buyers may be eligible for the new $6,500 credit, as long as they have owned and lived in their current home at least five consecutive years out of the past eight.

Income limits were increased for the current credits, enabling single taxpayers with incomes up to $125,000 and married couples earning up to $225,000 to potentially qualify for a full credit.

NAHB's Web site at www.federalhousingtaxcredit.com — which has received more than 6.5 million visitors since the site was launched — provides basic information about the credit, detailed question and answer sections and links to additional home-buying resources for consumers.

"If you've been considering buying a home for any reason, the home buyer tax credit, in addition to historically low interest rates and competitive home prices, make it an ideal time to buy," said Jones.

Web Site Is One-Stop Shop for Tax Credit Info

Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit signed into law by President Obama.

Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.

Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.

Eye on the Economy: Housing Stumbles on Road to Recovery

Despite various forces impeding a full recovery for housing, residential construction has clearly improved over the last year.

The bottom for single-family construction was reached in January/February 2009 when starts hit a seasonally adjusted annual rate of 357,000, their slowest pace since reliable records started being kept in 1959. Spurred on by the first-time home buyer tax credit and low mortgage rates, single-family production climbed to an average of 498,000 starts in the third quarter.

Despite an extension of the tax credit and its expansion to repeat home buyers in early November (see www.FederalHousingTaxCredit.com for details), single-family housing starts slid back to an average 480,000 in the fourth quarter. January saw some slight improvement to 484,000 starts.

Single-family existing home sales hit their low for this cycle in November 2008 at a seasonally adjusted annual rate of 4.06 million sales. They subsequently rose to their most recent peak of 5.71 million in November 2009. The strong sales that month were due in large part to first-timers rushing to close before the expiration to the tax credit at the end of November.

All those settlements showed up in the November existing home sales figures, and it was not surprising to see existing sales slow in December and January. As people take advantage of the extended and expanded tax credit, existing home sales will improve in coming months, with April, May and June likely to show the most improvement.

While existing home sales are based on closings that occur in the reported month, and therefore represent the completion of contracts signed weeks or months earlier, new home sales are based on contracts signed, along with a deposit, in the month reported.

As a result, it was no surprise that new home sales began to decline from their local peak of 419,000 (seasonally adjusted annual rate) in July 2009. As late as October, sales stood at 400,000. Sharp drops in November and December, while certainly not welcomed, were not unexpected given that the vast majority of prospective new home buyers who had wanted to take advantage of the original first-time home buyer tax credit had already done so.

With the extension and expansion of the tax credit, there was now an incentive but no immediate pressure to purchase a new home (or existing home for that matter). The big surprise came with the January new home sales number of 309,000, a record low since these data have been recorded going back to 1963. That new low replaced the previous low of 329,000 set in January of last year.

Given that on average it takes about five months from breaking ground to completion of a new home, that leaves little time for a new home buyer to sign a contract, have a home built to their specifications and close by the end of June in order to qualify for the tax credit. Although some homes can be constructed in shorter time, January was close to the last month in which home buyers who wanted to take advantage of the tax credit and desired a home built to their specifications could sign a purchase contract.

Buyers will still be able to purchase homes out of builders’ inventory, whether already completed or under construction, and NAHB fully expects the tax credit to encourage potential buyers to do just that.

However, January new home sales were lower than expected. A partial explanation is that unusually wet weather, particularly in the South and Northeast, may have discouraged potential buyers from shopping. A more likely explanation is that the continued uncertainty over the economy and job market has been discouraging potential buyers.

Massive snow storms in the Midwest and along the Eastern seaboard as well as continued wet weather throughout the South in February are likely to continue the below trend sales for that month. March new home sales (reported on April 23) may provide the first true picture of the impact of the extended and expanded home buyer credit and the health of the housing recovery.

At the same time, builders are anticipating the demand arising from the home buyers’ tax credit. Single-family building permits have risen for three months running now (from November through January) and single-family housing starts rose in January. The stock of unused single-family building permits has been increasing as well as builders prepare for the spring. Completions did slump in December and January as builders slowed the final stages of building in order to leave selections to the final buyer.

No Help for Builders on the Cost Front

Home builders have been receiving unwelcome news from their suppliers of late. An index produced by the Bureau of Labor Statistics that tracks building material prices for builders of single-family homes and multifamily structures has now risen three months in a row.

In January, both measures jumped 1.0% from December. Chief contributors to the recent rise are lumber, fuel products (gasoline and diesel), plumbing fixtures and copper products. On a year-over-year basis, the single-family index is up only 0.3% and the multifamily index is up a slight 0.2%.

Nonetheless, with a number of countries around the world on the expansion path, building material prices are likely to continue to rise in coming months.

The recent earthquake in Chile will disrupt supplies of some imported building materials — in particular, moldings and door frames. These items can be, and likely will be, replaced by items from other countries, but at a higher price. Chile is also a major exporter of copper, and although the mines escaped direct damage, operations and shipping will likely be delayed as the country recovers. So far, copper prices on the COMEX are up about 4% since the quake.

But General Inflation Remains Tame

Building materials prices are an exception to general inflation trends, which appear to be tame. For the past five months (September 2009 through January 2010), the Consumer Price Index (CPI) has risen 0.2% per month.

On a year-over-year basis, it is up 2.6%. Excluding food and energy, the index is up 1.6% from a year ago. A broader measure of inflation used by the Federal Reserve — the price index for personal consumption expenditures excluding food and energy — rose 1.6% in the fourth quarter at a seasonally adjusted annual rate and 1.5% from fourth quarter 2008.

These good inflation numbers enable the Fed to continue pursuing its current stimulative monetary policies without fearing they will put much upward pressure on prices. Even with the healthy increase in gross domestic product (GDP) in the fourth quarter (revised up to 5.9% from 5.7% at a seasonally adjusted annual rate), considerable slack remains in the national economy (not just in residential construction) as indicated by February’s unemployment rate of 9.7%.

Stimulus this year will be provided not just from the monetary side but from the fiscal side as well. Of the $787 billion appropriated for the American Recovery and Reinvestment Act of 2009, only a little over a third ($284 billion) had been distributed as of late February.

These funds will be flowing out into the economy in coming months, with construction projects (including road work) picking up in the spring and summer as the weather improves and the annual building/improvement cycle ramps up.

Meanwhile legislation was signed into law on March 2 that extends unemployment benefits for 30 days for people who have been out of work for more than 26 weeks. This temporary legislation will undoubtedly be followed up with an extension of benefits for a longer period.

These stimulus measures should assist the economy along its recovery path and we should soon start finally seeing employment growth. As the economy continues to advance and employment growth turns positive, the outlook of consumers will improve. Job growth will help restore home buyers’ confidence and return them to the housing market.

Multifamily Construction Has Its Own Struggles

Multifamily construction has gradually improved since October’s historic low of 53,000 starts, a suggestion that the worst may be over. Nonetheless, January’s multifamily starts of 107,000 are hardly stellar. Activity in this sector has been hampered by the difficulty in obtaining financing for new projects and competition from rentable single-family homes in the foreclosed inventory.

The decline has been relatively recent and rapid. In first quarter 2008, multifamily housing starts averaged 324,000 at a seasonally adjusted annual rate. The starkness of the slowdown in construction can be seen in the Census Bureau’s value put in place numbers.

From December to January, the value of single-family construction fell a scant 0.2%, compared to an 11.1% decline for multifamily construction. On a year-over-year basis, single-family was down 8.6% in January, while multifamily fell an astounding 51.2%.

A Looming Shortage of Places to Live?

It may seem absurd to think about, let alone talk about the possibility of a shortage of housing units given the number of foreclosed homes still on the market and the likely addition of foreclosed units in the next few months. However, even with the low new home sales numbers home builders managed to keep their inventory of new homes for sale virtually unchanged at 234,000 in January (up a statistically insignificant 1,000 from December), a level that was last observed in 1971 despite a considerable increase in U.S. population.

At the same time, the low level of multifamily starts will limit the supply of completed rental projects for several years because it takes three to four years to plan, get approval and construct multifamily projects.

As the economy improves and jobs return, new households will form from their current doubled-up and return-to-parents living arrangements. Many young individuals and families will first turn to the rental market or to starter homes.

The current excess inventory that is appropriate and in the right places for the newest households could be consumed relatively quickly and pressure on new construction could return quickly.

While concerns about shortages seem far from reality as we struggle to dig out of a huge hole, it is that same “never could happen” attitude that got some companies to run well ahead of reality. As today’s hesitant recovery unfolds, it will pay to keep an eye on the distant future.

NAHB Chief Economist David Crowe 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 March 5 edition. To subscribe to “Eye on the Economy,” click here.

Web Site One-Stop Shop for Tax Credit Info

Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit signed into law by President Obama.

Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.

Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.

Useful Links to Monitor Economic and Housing Trends

The 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.

• U.S. Census Bureau Construction Price Indexes
  
  
• NAHB's Housing Forecast
  Housing starts, sales and interest rate projections through 2009.
  
  
• Latest Home Mortgage Interest Rates
  Contains current and historical data on fixed and adjustable mortgage rates. Updated weekly.
  
  
• Characteristics of New Housing
  Highlights the latest data on new-home characteristics released by the U.S. Census Department. Includes links to the complete Census report and other trends researched by NAHB.
  
  Additional breakouts of this data and other trends researched by NAHB are available at www.nahb.org/constructionstats under “Selected Characteristics of New Housing” (dated 4/3/2008).
  
  
• Housing Starts
  Updated monthly and based on a seasonally adjusted annual rate.
  
  
• New and Existing Home Sales
  Updated monthly and based on a seasonally adjusted annual rate.
  
  
• New and Existing Single-Family Median Home Prices
  Updated monthly.
  
  
• Home Price Index
  The index measures average home appreciation in more than 250 metropolitan markets. Updated quarterly.
  
  
• Metro Home Building Permits
  Local and state data on housing construction rates. Updated monthly.
  
  
• Employment Trends for Metro/State Markets
  Provides metro and state employment data nationwide. Updated monthly.
  
  
• Local Economic Impact of Housing
  Shows how building 100 homes benefits a typical metropolitan area.
  
  
• Home Building’s Direct Impact on the Economy
  
  
• Housing’s Contribution to Gross State Product
  Measures how much housing contributes to the economic output of each state.
  
  
• Housing Market Statistics from HousingEconomics.com
  Full array of statistical categories available to NAHB members, a limited number available to non-members.
  
  
• In-Depth Analysis from HousingEconomics.com
  Full array of analysis of factors affecting housing and the impact on the industry available to NAHB members, a limited number available to non-members.
  
  

Web Site Is One-Stop Shop for Tax Credit Info

Builders and other industry professionals can help spur home sales by referring prospective home buyers to www.federalhousingtaxcredit.com. The NAHB Web site provides detailed information on both the extended $8,000 first-time home buyer tax credit and the new $6,500 repeat buyer tax credit signed into law by President Obama.

Consumers can use the Web site to find information on both tax credits — including frequently asked questions and links to social media sites that provide updated information as it becomes available. It also includes a number of home-buying resources for consumers.

Industry professionals are encouraged to highlight the tax credit Web site when marketing to their potential home buyer market.

Builders’ Tip: A Simple Angle Grinder Dust Collector

	Click for larger image.

No cleanup is required when I use my angle grinder to cut plaster and tile indoors.

As shown in the accompanying drawing, I created a dust collector for my angle grinder using a one-gallon milk jug.

• I simply cut the bottom off the jug and attached the neck of the jug to a shop vacuum hose with duct tape.
  
  
• When it’s time to cut the tiles, my helper positions the dust collector just so.
  
  
• There’s no dust in the air during or after the job because the vacuum gets it all.

I have found that the harder plastic laundry detergent jugs work just as well as milk jugs, too.

— David Crosby, Santa Fe, N.M.

Tips & Techniques provided by Fine Homebuilding.
©2009 The Taunton Press

To contact Fine Homebuilding, e-mail Christina Glennon.

Set Yourself Apart With CGB Designation

Join the ranks of the nation’s top building industry professionals with the Certified Graduate Builder (CGB) designation. The “Builder Assessment Review” (BAR) is your first step towards obtaining the CGB.

This comprehensive assessment measures your expertise in the four key areas of the building industry: building technology, business and finance, project management and sales and marketing.

Your results will show the areas where your knowledge is strongest and weakest and will help determine the courses required for you to obtain your CGB.

To learn where the next BAR will be held, visit NAHB’s education listings, or call the Professional Designation Help Line at 800-368-5242 x8154.

BuilderBooks.com Offers More Than 250 Books That Help You Build Your Business

BuilderBooks.com is your source for training and education products for the building industry. The official bookstore for NAHB, BuilderBooks.com offers award-winning publications, software, brochures and more available in both English and Spanish.

To view these publications online, click here, or call 800-223-2665.

Market Effectively, Efficiently With Automated Marketing

Tougher market conditions and tighter budgets have forced many companies to get innovative in order to do more with less. Now, as the industry slowly begins to return to health, these same innovations can help position builders, not just for survival, but for rapid growth as markets rebound.

The marketing landscape has changed dramatically in recent years. Traditional marketing channels, such as print advertising, have been supplanted by a range of different online marketing outlets — from social media to pay-per-click ads. Many companies have struggled to keep up with these changes.

Even those who have moved more of their marketing efforts online may not be taking full advantage of the opportunities to reduce costs and track performance, increasing — and monitoring — the return on investment (ROI) of their efforts.

Furthermore, taking advantage of the full potential of online channels and enabling technologies is not just about marketing online, it’s also about leveraging electronic tools to streamline the generation and management of both online and offline leads.

It is not surprising, then, that there has been a recent surge of interest among home builders in marketing automation.

Marketing Automation in Broad Brush

Basically, marketing automation is all about doing more with less — conducting more marketing campaigns, reaching more prospects and collecting more leads while minimizing costs.

To accomplish that, marketing automation encompasses a variety of different kinds of technology solutions all designed to facilitate the planning, execution, management and tracking of marketing activities — from traditional print advertising to direct mail, e-mail, sales events and promotions.

For example, marketing automation can encompass event management solutions, e-mail and direct-mail applications, planning tools, marketing-analysis programs and more.

Ultimately, marketing automation is about incorporating a new set of tools to sell more homes faster — at a lower cost of sale.

Take Advantage of an Inexpensive Channel

Good marketing automation systems help builders and marketers manage and analyze the totality of their marketing initiatives, whether these include advertisements in print newspapers, glossy brochures sent by mail or in-person sales center events.

But one of the greatest advantages of automated marketing systems is that they enable builders to maximize the potential of the lowest-cost marketing channel — the Internet.

The Internet rapidly skyrocketed in its importance to the industry in just a few short years to the point where home builders today aren’t just using the Internet for marketing because it’s cost-effective, they’re using it because the Internet is where the home buyers are.

Studies conducted for NAHB’s Institute of Residential Marketing found that, not only did Internet-using consumers value online resources highly in their home buying search, they found them the most useful, most important resources they were most likely to use in future home searches.

When considered along with statistics from a study by the National Association of Realtors® indicating that 77% of home buyers use the Web when looking for a home, the picture is clear — builders who neglect or insufficiently utilize online channels are passing up an obvious and relatively inexpensive approach for reaching the majority of potential buyers in their market.

Nor is this push toward greater use of online channels driven purely by consumers; builders have reported that their best-quality leads find them on the Web.

Reaching More Home Buyers and Learning More About Them

The linchpin of marketing automation is e-mail marketing — a communication channel that allows builders to reach almost limitless numbers of potential customers without increasing costs.

With automated marketing systems, builders can create compelling, rich-media e-mail communications and customize them to reflect the recipient’s name, location and interests. Plus, with a small investment in creating content tailored to specific preferences and conditions, home builders can design highly personalized campaigns that really connect with the buyer, increasing e-mail open rates and sales conversions.

This can be accomplished by installing simple forms on the builder’s Web site or on kiosks at sales centers that allow for fast, easy collection of initial information about interested home buyers. Follow-up e-mails to the prospects who fill out the forms provide a perfect opportunity to gather further qualifying information in exchange for incentives and marketing collateral.

By using each touch-point as a chance to collect more detailed information about leads, home builders can avoid overwhelming prospective home buyers with a barrage of intrusive questions all at once — while also slowly building an ongoing relationship and valuable two-way exchange.

As builders learn more about buyer preferences and interests, they can use this information in tandem with marketing automation technology to further personalize communications.

For example, if a prospect has young children, the system can send useful information about the quality of neighborhood schools. Or, if a prospect is an avid golfer, the system can automatically send tantalizing descriptions of area golf courses.

As more in-depth information about prospects is gathered, increasingly sophisticated database segmentation can be performed, allowing for precise targeting of marketing initiatives.

Managing Leads More Effectively

During the housing boom, few builders complained about ineffectiveness of their marketing efforts. Instead, most builders were overwhelmed by a massive influx of leads from the Web and other sources, to the point where they had had trouble effectively assembling, assessing and managing the leads.

In a hot market, builders may be able to get away with ineffective lead management, but in cooler times, mishandled leads can translate directly into lost sales. The fact is that, whatever the market condition, builders need reliable systems to help them prioritize and manage their leads.

The secret to cementing marketing’s importance in home sales is to create a fluid process that integrates marketing directly with the sales team. Builders can close the loop between marketing and sales — and ensure consistent lead follow-up — by implementing marketing automation systems that include robust lead management functionality.

With marketing automation systems, home builders can define criteria, such as readiness to buy and financial preparedness, that can be used to automatically qualify and classify leads as they come in. If further information is required to qualify the lead, follow-up e-mails can be automatically triggered to complete the lead classification.

Once the leads are classified, they can be immediately funneled into an appropriate chain of activity — with hot leads assigned directly to the appropriate home sales consultants according to territory, specialization or other parameters the builder establishes, and longer-term leads assigned to automated communications based on their particular classification and attributes.

This process ensures the most efficient use of every sales consultant’s time, while also guaranteeing that, rather than ignoring cooler leads, builders can nurture them by placing them on an appropriate path of communication until they are ready to make a purchase.

With marketing automation, the often labor-intensive and error-prone steps of lead qualification, distribution and nurturing is now a thing of the past as it makes way for work-free, automated processes that advance consistency and free up your sales consultants’ time to focus on the best leads.

Measuring Marketing Success

An essential part of closing the loop between marketing and sales is to be able to accurately track the results of marketing initiatives. Marketing automation systems typically allow builders to track a range of useful metrics about campaigns — open rates, response rates, sales conversions and more.

Sophisticated systems not only enable builders to track projected and actual campaign costs, but also to assign a persistent lead source designation to an individual, allowing builders to reliably trace customers back to marketing activities and to track the lifetime revenues associated with them. This provides the information required to accurately report on success rates and ROI.

There’s No Time Like the Present

Marketers generally don’t begin to think seriously about ROI and efficiency until budgets are slashed. Marketing automation can be invaluable to help marketers do more with less when times are tough.

But as markets pick up, marketing automation tools are indispensable in helping builders manage volume, streamline operations and measure performance, alleviating a lot of manual processes and freeing marketers to think more creatively.

Strategic-thinking builders invest in solutions that will help them realize immediate returns while also equipping them to more effectively deal with future market changes — whether good or bad.

As builders consider areas for greater efficiency and cost-cutting and look to market smarter, marketing automation and lead management systems offer an attractive area for exploration.

Steve Lewkowitz is the professional services director at CDC Software, providers of Pivotal CRM for home building and real estate. For more information, e-mail Lewkowitz, or call him at 732-297-4060.

This article was first published in one of NAHB’s Biztools three builder business guides, a compilation of articles gathered under three themes — business management, financial management and information technology published every year and free to members. To download the guides, visit www.nahb.org/bbg.

Three New Biztools Business Guides Available Free to Members

Three new Biztools builder business guides ― created to help NAHB members manage their businesses more effectively and increase their profits — are now available free to members through the NAHB Web site.

The guides offer members tips on technology, business planning, how to ensure the financial health of their businesses and more.

Produced by NAHB's Business Management and Information Technology Committee and found in the business management resources section of the NAHB Web site, the new 2010 Biztools builder business guides include:

• “Business Management for Home Builders: Poising for Recovery as the Market Turns”
• “Financial Management for Home Builders: Measuring Key Metrics to Plan Your Path”
• “Information Technology for Home Builders: Using Technology to Better Market Your Business”

All three concise guides ― which include lists of other valuable NAHB Biztools resources ― are written by experts in the field and can be downloaded by members for free at www.nahb.org/bbg.

Free Earlier Edition Biztools Business Guides Also Available

The 2006, 2007, 2008 and 2009 Biztools builder business guides are all available free to NAHB members and can be downloaded from the NAHB Web site in a PDF format only.

To view or download these guides, click here.

‘Social Media for Home Builders’ Available at BuilderBooks.com

“Social Media for Home Builders: It’s Easier Than You Think,” available at BuilderBooks.com, demonstrates the power of social media through case studies and online outlets created specifically for the home building industry.

Learn how to use social media sites to build your brand, engage new and existing consumers, manage your online reputation and sell more homes.

To view or purchase this publication online, click here, or call 800-223-2665.

NAHB Has Nearly 300 Resources to Help You Run Your Business More Profitably

Go to NAHB's Business Management Tools Web pages (available to members only) for instant access to nearly 300 timesaving, moneymaking and cost-cutting business resources to help you run your business more profitably. Get guidance on accounting and financial management, business strategy, computers and information technology, customer service, human resources and more.

Resources are added weekly, so bookmark www.nahb.org/Biztools to go directly to these vital business management resources.

Compare Business Performance in ‘Cost of Doing Business Study’

Builders now have an opportunity to see how their business stacks up against the competition with NAHB's “Cost of Doing Business Study, 2010 Edition.”

Available from BuilderBooks.com, this one-of-a-kind resource gives home builders a rare glimpse at other builders’ financial information by providing data about profitability, cost of sales and expenses from hundreds of home builders across the country.

The “Cost of Doing Business Study” examines and compares financial performance according to builder type and size as well as industry-wide averages using the following key indicators:

• Gross margin
• Net profit
• Cost of goods sold
• Financial ratios (current ratio, debt-to-equity ratio and more)

This valuable resource contains a wealth of data, analysis and guidance to help builders boost profitability, increase efficiency, set realistic budget targets and improve upon their business practices.

It also includes more than 25 proven cost-cutting, profit-raising ideas that builders can apply to their businesses.

For more information or to order the "Cost of Doing Business Study," click here, or call 800-223-2665.

Toolkit Helps NAHB Members Market New Homes Month

In April, NAHB will be celebrating New Homes Month to highlight the benefits of homeownership and, in particular, buying a new home.

Late last year, the $8,000 first-time home buyer tax credit was extended and a new $6,500 repeat buyer tax credit was introduced, providing an extra benefit for potential home buyers to move off the fence and into their new home.

In order to qualify for the credit, however, prospective buyers need to sign a contract by the end of April, which makes New Homes Month the perfect opportunity to get last minute buyers into the home of their dreams before it is too late.

Among other points that home builders can emphasize to attract buyers:

• New homes today are better than ever before, with numerous features and amenities to accommodate today’s discerning home buyers and their busy lifestyles. New technologies, more efficient square footage and improved layouts make today’s new homes more comfortable and livable than at any time in the past.
  
  
• New homes are also built to be more energy-efficient. In fact, new homes built today include features that can make them more than twice as energy-efficient as new homes were just 20 years ago.

To help its members take full advantage of New Homes Month, NAHB is providing a free, online promotional toolkit packed with resources and materials for builders and local associations to use throughout the month and tips for maximizing these resources with New Homes Month activities in April — such as spring homes shows or parades of homes and other special events.

The toolkit includes a series of articles, advertisements, consumer flyers and other resources to help maximize the potential of New Homes Month and also promote the home buyer tax credit.

To view the resources available in the New Homes Month promotional toolkit, click here.

For more information, e-mail Brooke Fishel at NAHB, or call her at 800-368-5242 x8061.

‘Social Media for Home Builders’ Available at BuilderBooks.com

“Social Media for Home Builders: It’s Easier Than You Think,” available at BuilderBooks.com, demonstrates the power of social media through case studies and online outlets created specifically for the home building industry.

Learn how to use social media sites to build your brand, engage new and existing consumers, manage your online reputation and sell more homes.

To view or purchase this publication online, click here, or call 800-223-2665.

In Today’s Market, 'Think Sold!' With Help From BuilderBooks

“Think Sold! Creating Home Sales in Any Market,” available at BuilderBooks.com, is a practical, how-to guide for developing the self-awareness, knowledge and skills needed to succeed in the competitive field of new home sales.

The book covers everything from the home buying process and new home financing to strategies for making better sales presentations and sizing up the competition. It teaches readers how to overcome customers’ concerns and provides specific examples of how to explain the benefits of new home features in customer-friendly language.

“Think Sold” provides insights on how to approach sales and life from a position of optimism that will create successful outcomes; how to improve upon potential customer prospecting and follow-up skills; and how to communicate effectively with various types of buyers and learn how to adjust communication strategies to increase rapport and alignment with buyers’ motives.

To view or purchase this publication online, click here, or call 800-223-2665.

NAHB Book Provides Social Media Strategies for Selling Homes

"Social Media for Home Builders: It’s Easier Than You Think!" is a new resource that teaches builders and residential construction professionals how to use social media tools such as Facebook, Twitter, and YouTube to increase their visibility and improve their sales results.

Available at BuilderBooks.com, “Social Media for Home Builders: It’s Easier Than You Think!” demonstrates how builders and developers are effectively using two-way communication via the Internet and social media outlets to attract consumers, follow up on leads and improve customer service.

This is the only book that specifically addresses the needs of the real estate industry and teaches home builders how to build a social media presence.

Author Carol Flammer outlines how to engage consumers through social media. She demonstrates the power of social media through case studies and online outlets created specifically for the home building industry. She will help readers understand social media and create a strategic plan for using it to attract new home buyers.

Readers learn how to use social media sites to:

• Build a brand
• Engage new and existing consumers
• Manage their online reputation
• Increase Web site traffic
• Perform social media optimization
• Sell more homes

For more information or to order “Social Media for Home Builders,” click here, or call 800-223-2665.

Summaries of 30 Most Popular IBS Sessions Available

Executive summaries of the 30 most popular sessions at the 2010 International Builders’ Show in Las Vegas are now available from BuilderBooks.

Covering the timeliest topics, the two- to four-page program summaries include all the takeaways, highlights and action items to help builders and remodelers:

• Stay ahead of the competition with green building knowledge and skills
• Ensure contracts and construction documents minimize risk and maximize profit
• Find the best new opportunities for staying in business and gearing up to grow
• Diversify to emerge from the economic recession stronger than ever

The executive summaries are online from BuilderBooks.com in one 87-page PDF-formatted document. The 30 most popular sessions at IBS include:

• “Best Practices for Integrating Technology in Your Business”
• “Bottom-Line Research Keeps You From Leaving Money on the Table and Delivers the Home Your Market Wants at a Price They Will Pay”
• “Braced Wall Basics”
• “Building Prefab Green From Start to Finish”
• “Consumer Preferences 2010”
• “Customer Communication Protocols”
• “Customer Referral Sales: A Critical Survival Plan”
• “Customer Service: Fundamentals of Post Close Service and Warranty Processes”
• “Does Your Sales/Construction Contract Do All It Can For You?”
• “Educational and Event Marketing to Attract Women: Hundred Dollar Strategies to Lure a Trillion Dollar Market”
• “Estimating With Microsoft Excel”
• “Gearing up to Grow — Legal Lessons for Recovery”
• “Getting in Front of Green Builders With Green Approved Products”
• “Green Advantages of Concrete Wall Systems”
• “Green Energy Retrofit: Futureproofing Your Home”
• “Green-Speak: Communicating Green to the Consumer”
• “How to Market Green Buildings and Materials: Complying With Applicable Green Standards and Laws”
• “How to Minimize the Cost of Building Green-"Achievements Made in the Past Year"
• “Legal Issues: Property Rights and land Development”
• “Light Commercial Construction: Diversifying Your Business”
• “Marketing Essentials for Green Builders”
• “Modular Homes 101”
• “New Trends in Solar Installation and Homes”
• “90 Minute Law School for Builders and Remodelers”
• “Ramping Up in a Changing Economic Environment”
• “Repositioning and Maximizing the Value of Distressed Assets”
• “Selling to Women Through the Social Media Grapevine”
• “Think Sold!”
• “Upgrading Quality Management Systems for High-Performance Homes”
• “Up-selling Remodeling With Energy Efficiency”

For more information or to order the “2010 IBS Executive Summaries,” click here, or call 800-223-2665.

Webinar to Discuss Selling to 50+ Buyers in New Decade

Participants in the upcoming webinar, “The ‘New Deal’ for Selling in the New Decade,” will learn how experts are redefining the "four Ps" of marketing — people, process, pursuit and purchase — for the 50+ market and how they can be applied to provide a higher probability of sales success.

The hour-long webinar will begin at 2:00 p.m. EDT on Wednesday, March 31.

The webinar is free to NAHB 50+ Housing Council members. The fee is $69 for other NAHB members and $100 for non-members.

Panelists include:

• Todd Harff, CAASH, of Creating Results, and Jane Marie O’Connor, CAASH, MIRM, CMP, CAPS, of 55 Plus, LLC. Both served as content providers for the sales and marketing courses for NAHB’s Certified Active Adult Specialist in Housing (CAASH) designation.
  
  
• Barbara Kleger, CAASH, of 55+ Consulting, a division of KD Partners, LLC, have helped hundreds of clients market and sell 50+ communities across the country.

Participants can receive one hour of continuing education credit for CAASH, MIRM, MCSP, CSP, CMP and other NAHB designations.

To Register

To register for the webinar, click here.

For a list of upcoming 50+ Housing Council webinars and to view past webinars, visit www.nahb.org/50pluswebseminar .

For more information, e-mail Jeff Jenkins at NAHB, or call him at 800-368-5242 x8292.

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 determine the right design, home features and amenities to attract boomer home buyers in your market.

Author Margaret A. 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.

Enter the AARP-NAHB Livable Communities Awards

Entries are now open for NAHB and AARP’s fourth annual Livable Communities Awards recognizing builders, remodelers, developers architects and land planners who have designed, built and created unique homes and community projects that improve the daily comfort, ease and safety of their residents and highlight the critical elements needed for a livable community.

The awards are open to builders, remodelers, developers and architects and land planners.

Applications are due by July 16.

Winning entries will be honored for:

• Design elements that accommodate the needs of all residents with all levels of physical ability — from children through grandparents
• Easy access to community services and features such as retail, restaurants, medical, social and cultural activities, as well as viable transportation options
• Improved energy efficiency that reduces long-term utility costs
• Enhanced site design that enables residents of a neighborhood to commute easily to the broader community

A panel selected by NAHB and AARP will review the applications and select the finalists.

Judging criteria vary from category to category, but points will be awarded based on:

• Universal design features
• Ease of maintenance and energy efficiency
• Exterior design and landscaping/site design
• Incorporation of livable community design features
• Stakeholder involvement 

Four projects were selected as winners of the award in 2008:

• Builder, up to 2,500 square feet
  Eskaton Senior Residences
  Eskaton National Demonstration Home
  Roseville, Calif.
  
  
• Builder, more than 2,500 square feet
  Yorkshire Enterprises, LLC
  North Morningside Craftsman
  Atlanta
  
  
• Developer, more than 250 Units
  The Lakota Group
  NorthCenter Senior Campus
  Chicago
  
  
• Home Architect
  ZAI Inc.
  Green Lake Residence
  Seattle

For more information on the awards or to apply online, visit www.nahb.org/livablecommunities.

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 determine the right design, home features and amenities to attract boomer home buyers in your market.

Author Margaret A. 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.

Cohousing Conference Set for March 20 in Maryland

Mid Atlantic Cohousing — a non-profit consortium of cohousing neighborhoods in Maryland, Pennsylvania, Virginia and Washington, D.C., — is sponsoring “Cohousing: Growing Smart Communities Conference.”

The conference will focus on building, developing and marketing cohousing communities and will include a seminar on aging in place.

Cohousing is a planned neighborhood model where future residents participate in marketing their community. Cohousing typically achieves 75% pre-sales prior to construction.

The cohousing conference will be from 8:30 a.m. to 6:30 p.m. on Saturday, March 20, at the University of Maryland, College Park campus.

Conference presentations will include:

• “The 4 C’s of Cohousing: Conversions, Commissioning, Cash and Cows,” by Stanley Sersen, LEED AP, CEO and founder of The EnviroCenter and founder and board president of The Green Building Institute
  
  
• “Professional Best Practices: Including Clients in the Development Process,” by Jack Wilbern, AIA, Cohousing Collaborative, LLC
  
  
• "Building One-Planet Communities: NetZero or Net+Energy!” by Bill Fleming, Sustainable Systems, LLC
  
  
• “Cohousing for All: Making Cohousing Green, Accessible and Affordable,” by Don Tucker, president of ECO Housing Corporation and developer of Eastern Village Cohousing in Silver Spring, Md.

Speakers on the “Aging in Place in Community” panel include Dene Peterson, developer of the ElderSpirit Community in Abingdon, Va., which includes affordable and accessible homes that are half rental and half ownership; Joan King, a founding resident and elder at the mixed-income accessible cohousing neighborhood Eastern Village Cohousing, in Silver Spring; and Rita Kostiuk, village coordinator for Beacon Hill Village, Boston.

The seminar — hosted by the University of Maryland School of Architecture, Planning and Preservation — will be held in Architecture Building 145.

To Register

The conference registration fee is $60, including workshops, morning and afternoon refreshments and a reception following the presentations.

For more information or to register, visit www.MidAtlanticCohousing.org.

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 determine the right design, home features and amenities to attract boomer home buyers in your market.

Author Margaret A. 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.

Good Marketing Can Rent Up Apartments in Tough Times

In the face of national vacancy rates that are running at a 23-year old high, Lori Snider, of Creativity for Rent, Littleton, Colo., and Jennifer Nevitt Casey, of Bravo Strategic Marketing, Elkins Park, Pa., told an audience at the International Builders Show in Las Vegas in January that there are marketing strategies that will help multifamily companies prevail during these challenging times.

The two speakers advised builders that today’s renters are nervous and likely to balk if the close is heavy-handed. And chances are that they have already looked extensively online before ever walking into the leasing office, especially if they are young. At a time when “everyone is clipping coupons,” offering an online coupon on the property’s Web site is a good way to bring those prospects in, they said.

While many more communities are now accepting pets, some have gone further, waiving a pet deposit, explicitly communicating the message that they’re doing it because, “We don’t charge extra for any other member of your family.”

While marketing luxury and decadence worked during the boom times, the presenters suggested that managers now need to convey messages of optimism and hope, communicating an understanding that the community will be supportive if bad things happen. For instance, some companies offer an unemployment assurance plan that releases residents from the remainder of their lease if they lose their job.

Firms are also offering more flexible lease terms, from two months to 18 months — whatever the client chooses.

With young professionals entering the rental market with average student debt of $23,000, some communities are even offering plans that help them pay off their college loans. Residents who have lived in the community for 24 months and never had a late payment can receive between $1,000 and $2,000 toward repaying their student loan debt at some properties.

At the opposite end of the age spectrum, to attract empty nesters, Snider and Casey recommend stressing units where residents can park close to their home and have space to entertain.

Because even older renters shop online before visiting, the presenters cited the need for optimizing the community’s position on the major search engines and making sure it appears on sites such as move.com and apartment.com.

Managers should pay close attention to the apartment rating sites. “If your community gets a bad rating, you can’t ignore it — you need to answer it.”

With residents having so many ways to share their complaints these days, good customer service is imperative, they added. When you have happy residents, encourage them to comment on the rating sites by telling them, “Please do not hesitate to share your experience living here.”

The social media should also not be ignored. The community needs to have an up-to-date Facebook page that includes useful content, said the presenters, who said it was important to dedicate staff time for keeping these pages current and lively. The pages should be checked for comments every day. In addition, said Snider and Casey, managers should have their employees sign an agreement NOT to post nasty things about their employer on Facebook.

Looking at the best marketing mix for leasing up a newly built community, they said that the print media no longer rule. These experts now put most of their clients’ marketing dollars into the Internet (57%), followed by apartment publications and guides (25%), signage (7%) and referral programs (7%). That leaves a scant 2% of the budget for print advertising.

Today’s renters have different priorities and needs, said Casey and Snider, and the approaches apartment communities use to reach potential residents must recognize and respond to them.

For more information, e-mail Ann Marie Moriarty at NAHB, or call her at 800-368-5242 x8350.