This year’s slump in new home sales, which is shaping up to be the worst on record, is pushing the key home-building industry into its fifth year of decline and keeping the U.S. economy from a rebound. “If the recovery is going to come, it is going to be driven by two sectors: manufacturing and construction, and it doesn’t look like there is going to be a big recovery in manufacturing,” said economist Ed Leamer, director of the UCLA Andersen Forecast. “It is going to have to come in housing; otherwise we are going to limp along as we have been.” Builders’ slower sales pace may be a kind of self-inflicted wound. The big companies are not dropping their prices, analysts said, because they can’t go any lower and continue covering their costs. Sales of foreclosed homes are keeping prices low, and builders can’t compete with those discounted levels. There are some signs of deepening retrenchment. Calabasas, Calif.-based Ryland Group Inc. recently said it was ending operations in Jacksonville, Fla., and Dallas. Several builders have diversified into other activities since the downturn. Toll Bros. Inc. is beginning to build in more luxury markets, putting up high rises in Manhattan as well as getting into managing golf courses, said S&P analyst Kenneth Leon. Beazer USA Inc. is going into the rental market, taking some of the many vacant homes in Arizona, fixing them and renting them out. KB Home has made a big push into more sustainable building and energy-efficient design. “KB holds the dominant position in going green, which I think will catch on for young families,” Leon said. “It just doesn’t play that great with such a severe downturn.” (www.latimes.com)
Los Angeles Times (9/2/11); Alejandro Lazo

The continued slump in the housing market is one reason for a weak economic recovery that has sapped overall demand for goods and services, and hence small businesses’ growth prospects. But many business owners also took out toxic mortgages on their homes during the bubble years. Now in default or foreclosure, they cannot access credit just as their firms’ sales are tanking. “Small business owners have a large amount of real estate and they leveraged it,” says William Dennis, Jr., a senior research fellow at the National Federation of Independent Business in Nashville, Tenn.  Now “the value of small businesses’ collateral has gone down, often by substantial amounts,” Dennis says. “You add to that weak sales, and it’s dampened their enthusiasm to hire or expand." Samuel D. Bornstein, an accounting professor at Kean University School of Business, has conducted surveys suggesting that over half of alternative-A mortgages in California alone went to small-business owners. Such high exposure to bad home loans could delay the recovery of small business hiring — and of the rest of the economy — for years. “There’s an unrecognized link between small businesses, toxic mortgages and the housing crisis,” says Bornstein. “Small business owners are always looking to quench their need for cash and the mortgage companies were eager to tap the equity in their homes to fund their operations, but then struggled when home prices dropped and access to credit shriveled.” (www.americanbanker.com)
American Banker (8/19/11); Kate Berry

Welcome to the era of the $100,000 home in North Carolina. A number of factors have allowed builders to construct homes at these prices, but chief among them are lower costs of land and tight margins. And buyer financing through the U.S. Department of Agriculture’s rural housing program allows buyers with a credit score of at least 640 to purchase a home without a downpayment, widening the pool of potential buyers in all of Brunswick and Pender counties and parts of New Hanover. “Builders are now walking a tightrope as far as being profitable or not,” said Buddy Blake, who owns Re/Max Essential in Wilmington. “It’s not a matter of making a good living; it’s a matter of survival.” Margins are “staggeringly low,” he added. “In some cases, your $99,900 product may not have any margin but may be a loss leader,” said Chris Stevens of Pyramid Builders, which is constructing such homes at Windsor Park in Leland. “Sometimes someone comes to look at $99,900 but then decides on a larger house. So many times people get involved with housing and they determine they want more things.” The competition, Stevens said, is from short sales and foreclosures. But he added that for a bit more money buyers are attracted to brand-new. Not all building activity is at rock bottom prices, but builders are responding to the marketplace and building in the $150,000 to $250,000 price range, said Donna Giradot, executive officer of the Wilmington-Cape Fear Home Builders Association. “A number of our builders are shifting their marketing efforts to concentrate entirely on designing for and marketing to entry-level buyers,” she said. “They are introducing several new home designs that will cost $250,000 and below and a few of them are even focusing on the $130,000 and below price point in hopes of expanding their pool of potential buyers.” (www.starnewsonline.com)
Wilmington Star-News (8/14/11); Wayne Faulkner, McClatchy-Tribune Regional News

In a study covering existing and new houses sold between May of last year and April 30 of this year, the Earth Advantage Institute, a nonprofit group based in Portland, Ore., found that newly constructed homes with third-party certifications for sustainability and energy efficiency sold for 8% more on average than noncertified homes in the six-county Portland metropolitan area. Existing houses with certifications sold for 30% more. Officials caution that using average sales prices pulled from MLS data without attempting to measure “comparable” homes against one another directly may not be conclusive. For instance, newly constructed certified houses may be more expensive to start, and existing certified homes may be larger and more likely to be located in higher-cost neighborhoods where home owner adoption rates for energy-efficiency measures are higher. Nonetheless, said Dakota Gale, Earth Advantage’s manager of sustainable finance, looking back at four years of studies, “We can still see a consistent trend that third-party certification continues to result in a higher sales price, even during the past year when homes sales were down.” (www.washingtonpost.com)
Washington Post (8/27/11); Ken Harney

Betsy McCann and her husband, Jim Forbes, often worried that his mother was growing isolated in her Los Angeles-area home. At 90, Lois Brokus had stopped driving and was sometimes afraid to be alone in her house. Jane and William Merrill also decided that they didn’t want his mother living on her own. Then 81, Jane Merrill, who shares her daughter-in-law’s name, was still active but in need of companionship. Both families considered nursing homes, assisted living and retirement communities. In the end, they came to the same conclusion: Their homes were the best place for their mothers. But they needed more home. So McCann and Forbes added a 400-square-foot bedroom and bathroom to their Escondido, Calif., home; the Merrills converted a two-car garage at their eight-acre spread in Carmel, a suburb of Indianapolis. Now both older women live with their adult children, with a large degree of independence and privacy. Home builders across the country say they are getting an increasing number of requests for such additions, known as mother-in-law suites, granny flats or accessory dwellings. According to NAHB, 62% of builders surveyed in 2010 were working on a home modification related to aging. About one in five builders added an entry-level bedroom. About 3.5 million American households last year included adult children and their parents — a number expected to rise as the country ages and baby boomers move into retirement, said Nancy Thompson of AARP. To meet the demand, AARP teamed up with the home builders association to create a designation for Certified Aging in Place Specialists, who are trained in designing and modifying buildings for the elderly. About 3,000 builders, contractors, remodelers and architects have been certified. (www.nj.com/times)
Times of Trenton (8/23/11); Monic Rhor, Associated Press

Today’s new-home shopper looks for self-sufficient homes, say builders. In NAHB’s “Home of the Future” study, industry experts said low-maintenance interiors are “critical” or “very critical” in today’s new homes. The higher the square footage, the more likely buyers want maintenance-free homes. Steve Braun, sales manager for Adams Homes, agrees: “We construct houses specifically designed for low-maintenance living. Our single-family homes are built on walled slab foundations so there is never a problem with moisture or insects as with homes with a crawl space. The all-brick exteriors and the vinyl-covered soffits and gables will never need painting, nor will the synthetic products of all the exterior and garage doors and shutters. The result of the use of these types of construction materials is “a low-maintenance, high-quality home that is not only a good investment for the home owner but will save both time and money.” (www.wral.com)
WRAL.com (9/5/11); Barbara Hobbs, for New Homes & Ideas