Green Homes Show Growth

Residential construction in a key engine behind economic growth and single and multifamily housing projects account for approximately 45% of the value of all construction projects.  The growth in the housing industry is expected to continue at a steady pace in the coming years.

Since 2006 the evolution of green building for single family homes has grown significantly.  Buyers are willing to pay more for green features.  Many lenders and appraisers throughout the country are recognizing the value of green homes.

More builders are engaging in sustainable building practices with consumers demanding higher quality homes and taking advantage of utility incentives.

New Home Inventory Growing

Sales of new single-family homes are rebounding with a 6.4% increase in April to an adjusted annual rate of 433,000 units, according to the Commerce Department reports. This is the first upswing in new-home sales following two consecutive months of decline.

Builders are showing signs of increasing their inventories of homes for sale.  New-home inventories reached a three-and-half-year high in April, with 5.3 month supply at the current sales pace.  Still, the stock of new houses for sale remains more than 50 percent below its pre-recession level.

“Builders are adding inventory in anticipation of further release of pent-up-demand,” says David Crowe, chief economist for the National Association of Home Builders.  “We are only about halfway back to what could be considered normal market, but relatively low mortgage rates and affordable home prices are other factors that should help keep starts and sales on a slow trajectory in the months ahead.”

With rising inventories, the median price of new home dropped 1.3 percent in April compared to a year ago, averaging $275,800 nationwide.

Regionally, new-home sales rose the most in the Midwest by 47.4 percent in April compared to March.  Followed by a 3.1 percent gain in the South and the West held steady and the Northeast posted a 26.7 percent drop.

Builders are gradually increasing sales, but tight credit for first-time home buyers are impeding a more robust recovery.

Healthy Housing Industry Spurs Job Growth

The health of housing is key for the overall state of the U.S. economy and housing stands poised to serve as an engine of job growth with the right policies in place, the National Association of Home Builders (NAHB) told Congress.

Testifying before the Senate Banking Committee’s Subcommittee on Economic Policy during a hearing examining the drivers of job creation, NAHB economist Robert Dietz said that home building and remodeling have generated 274,000 jobs over the past 2 ½ years.

“This expansion has direct economic benefits,” said Dietz.  “Housing provides the momentum behind an economic recovery because home building and associated businesses employ such a wide range of workers.” Continue reading

Housing Market Continues to Grow

A growing economy, pent-up demand, competitive mortgage rates and affordable home prices will keep housing on an upward path through 2015.  However, several obstacles including tight consumer credit, shortage of lots and labor and rising material prices are hindering a more robust recovery, according to economists.

“Housing needs an improved economy,” said NAHB Chief Economist David Crowe, adding that the economy is expected to respond as payroll employment continues to grow and the unemployment rate slowly declines.

Consumer confidence is back to pre-recession levels and the purchase of motor vehicles and home furnishings are on the rise, indicating that consumers are increasingly willing to buy big-ticket items such as houses.

Reflecting an increase in credit demand and economic growth, mortgage interest rates are projected to rise to 5 percent by the end of 2014 and 6 percent by the end of next year.  These rates are still low by historical standards and this would not be a significant deterrent to expansion in the housing market.

However, builders continue to face a number of headwinds.  Supply constraints related to lots and labor and rising lumber, gypsum and OSB prices are hurting the ability of builders to meet demand.  Moreover, creditworthy borrowers, particularly younger families and first-time home buyers, are having difficulties in getting home loans.

 

New-Home Construction Ramps Up in Midwest and Northeast

Groundbreaking on new single-family homes posted a 6 percent rise in March, showing a gradual strengthening in the sector — particularly in the Northeast and Midwest — according to new figures by the Commerce Department.

On the other hand, the volatile multifamily market saw starts fall 6.1 percent in March. Overall, housing production, which reflects both multifamily and single-family starts, rose 2.8 percent month-over-month. Starts were down 5.9 percent compared to March 2013, the largest year-over-year decline since April 2011.

Still, “we see improving signs of new-home construction as we move into the spring buying season,” says Kevin Kelly, chairman of the National Association of Home Builders. “The strongest recovery is in the Northeast and Midwest, where builders were hampered by severe winter weather earlier in the year.”

Single-family and multifamily housing starts rose the strongest in the Northeast and Midwest with gains of 30.7 percent and 65.5 percent, respectively. Starts fell in the South by 9.1 percent and by 4.5 percent in the West.

Builders remain cautious about demand, facing continued tight credit conditions for home buyers and erratic job growth, says NAHB Chief Economist David Crowe.

Construction permits, a gauge of future construction, dropped 2.4 percent to 990,000 units in March. Permits rose 33.3 percent in the Northeast and 26 percent in the Midwest, while declining 17.1 percent in the South and remaining unchanged in the West.

First-Time Home Buyers Shrinking Share of Market

The National Association of Realtors reports first-time buyers are a shrinking share of the market, only 27 percent of buyers, compared to 40 percent in more normal market. It’s not that young households don’t want to buy.  It’s that desire is not matching up with their ability.  Many young households are saddled with student loan debt while job creation and wages have been heading up only slowly.  And the qualified mortgage rule that took effect this year to ensure lenders don’t make bad loans won’t help, since it tightens how much student loan and other debt loan applicants can carry.

This situation is worrisome, because all of the recent growth in household formation has been among renters.  Unless a healthy portion of today’s 40 million renter households become homeowners, the housing market will continue to struggle.

There are two issues to be tackled if first-time buyers are to get back to more normal levels.  First, we must monitor the impact of the Qualified Mortgage Rule to see if lenders are being to risk averse. There is reason to think they are, because mortgage default rates have been at historic lows in the last few years.  That suggests lenders have restricted underwriting too much.  Second, builders need to step up home building, bringing construction levels closer to historical norms.  More inventory helps tame price growth, and it gives buyers something they don’t have much of now: selection.

The housing market continues to struggle.  In 2000, when the market was rather boring, with no bubble and no crash, there were 5.2 million existing-home sales and 1.6 million housing starts.  Today, home sales are struggling to reach 5 million annually and new starts total only about 1 million, yet the country has 34 million more people and mortgage rates remain historically low.

High Expectations for Retirement Homes

Seventy percent of baby boomers say that they house they live in when they retire will be the best home they’ve ever had, according to a survey conducted by Better Homes and Gardens Real Estate.

What’s more, 57 percent say they plan to move out of their current home in order to search for their dream retirement home.

With approximately 77 million boomers in the U.S., it’s quite significant for our industry to see that this population has so much positive anticipation for the home in which they will be retiring and for the majority, their aspirations involve making a move.  Baby boomers are known for being a hardworking, trailblazing generation.  As they have done with every other major life event, they are marching head-on into retirement with big plans.  The survey found that boomers continue to surprise with nuances of what they care about and what they are prioritizing.

Additional findings from the survey:

  • About one in four boomers say they likely will buy a second home to use during their retirement years, such as a vacation or beach house.
  • Thirty-nine percent of baby boomers say they want to live in a rural community, such as a farm or small town; 27 percent say they desire a traditional retirement community, such as a 55+ exclusive neighborhood; 26 percent say they want to live in an urban community.
  • Of those who haven’t retired yet, 72 percent say they plan to retire in the same state that they currently live.
  • Of those who plan to move to a new house, 69 percent say they’re willing to make updates or renovations to their next home to make it fit their specific wants and needs.
  • Forty-two percent say the most important factor in choosing their next home is lower-maintenance home features and energy efficiency.

Energy Efficiency Top Priority for New Homes

This winter has been very long and cold and has impacted most of the country.  Heating costs have risen 28 percent and in some areas of the country doubled in cost.  While new homebuyers have been demanding energy-efficient homes for some time, it has become a top priority for homebuyers in 2014.

The demand for energy-efficient windows, programmable thermostats and highly efficient insulation has more than doubled over the past five years.  However, many homebuyers are evaluating the cost of the insulation and the payback.

I received a phone call from Jim Waldo who is building a custom home.  “I want my home to be energy-efficient and I have done my homework” he commented.  “Cellulose insulation is the best insulation on the market with highest return on my investment.”

Many professional insulation contractors offer a variety of insulation products.  They can provide expert advice on how to make your new or existing home energy-efficient.  Energy efficiency does not start and end with the insulation.  Caulking and sealing and proper attic ventilation play a very important role.

Whether you building a new home or have an existing home, contact a professional insulation contractor to discuss your energy-efficient needs.

How to Prevent Ice Damming

Ice dams are a pervasive and damaging winter roofing problem caused by poor roof ventilation and a warm attic space. Left untreated, ice dams can cause serious damage to your roof, gutters, paint, insulation, drywall, structure and even contribute to mold.

Ice dams form when melting snow on a roof runs off and refreezes at the edge of a roof. This condition occurs when the snow is melted by a warm roof, creating water running between the snow and the warm roof surface, then freezing and turning to ice when it gets past the exterior wall and hits a cold unheated roof edge or gutter. As the bottom of the snow pack continues to melt, water continues to flow down the roof surface until it hits the ice, thereby creating a larger and larger ice dam.

The best solution to stop the ice from forming on the roof is with proper attic insulation.  Cellulose insulation is one of the best performing products at extreme cold temperatures.  Cellulose insulation is easily installed over existing insulation preventing the removal of the current insulation in your home.

We highly recommend you contact a professional insulation contractor to inspect your attic for proper ventilation and to install sufficient amount of insulation as recommended by the Department of Energy.

Subcontractors Essential to Home Building Industry

Subcontractors are an often over looked but essential part of the home building industry.  Many outside the industry do not understand how large a part subcontractors have in the construction of a home.  Home builders and remodelers subcontract a large portion of their construction work out to trade contractors who can more efficiently deliver individual pieces of the construction process.  Specialized subcontractors perform much or even all of the actual labor.

About 71 percent of those employed in the home building industry are subcontractors.  Total employment in the home building industry stands at 2.231 million with 647,000 consisting of builders and the remaining 1.584 million subcontractors.

During the past 40 years, the use of subcontractors significantly accelerated.  In 2012, 68 percent of home builders subcontracted 75 percent or more of the construction costs, whereas in 1959 on 31% was subcontracted.  A major reason for this trend is due to the increasing complexity, features and amenities supplied with new homes.

There continues to be a shortage of subcontractors. After the housing bust, many were forced to find other lines of work.  Some builders are seeing delays in construction up to 60 days due to the lack of skilled subcontractors.  However, home builders are hoping a stronger housing industry outlook will bring workers into the field in 2014.