| December 4, 2006 |
By David Pressly
NAHB President and
Jerry Howard
NAHB Executive VP and CEO |
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The latest housing data indicate some stabilizing
of sales activity - a possible glimpse of the light at the end of the tunnel for those who've weathered the worst of the ongoing market slowdown.
The government released new-home sales figures for October on Nov. 29, showing a preliminary sales pace decline of 3.2% to a seasonally adjusted annual rate of just over 1 million units, which is exactly on pace with the average sales rate for the third quarter of 2006. Aspects of the report prompted NAHB Chief Economist David Seiders to pronounce that "A variety of market measures indicate that home sales now are stabilizing following a substantial correction from the unsustainable highs reached last year." Seiders credited aggressive sales efforts by builders, historically low mortgage interest rates and solid growth in employment and household income as primary factors. He also noted that surveys of consumer sentiment show that home buying conditions improved markedly in both October and November. Meanwhile, the inventory of new homes for sale fell for a third straight month in October to 558,000 units, which is equivalent to a 7-month supply at the current sales pace. Completed homes for sale accounted for 30% of that inventory, while units still under construction accounted for 54% and units for sale that were permitted but not yet started amounted to 16%. Also, the median length of time that completed homes stayed on the market was 3.8 months as of October – down from 4 months one year ago. See NAHB's recent press release on new-home sales on our Web site, or see the goverrnment report at the Census Web site.
NAHB Member Benefit: NAHB's expert analysis helps you understand the implications of housing figures that are regularly released by the federal government, and provides context and valuable insights for media reports on the current state of the housing industry. NAHB does extensive outreach to print, radio and TV media outlets when such numbers are announced, thereby ensuring that the views of the home building industry are well represented and helping discourage unobjective reporting on the state of the housing market. Contact Paul Lopez (x8409) for help dealing with media inquires regarding the latest government figures.
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What Federal Reserve Chairman Ben Bernanke said about housing
 in his Nov. 28 speech before the National Italian American Foundation is essentially on message with what NAHB has been telling our members and the media. Focusing a significant portion of his remarks on the housing market, he covered the factors leading up to the current slowdown, including the unsustainable rate of home-price appreciation, and mentioned that the most significant cooling is now happening in markets that heated up the most during the previous boom. Importantly, he also offered this bit of optimism:
"Although residential construction continues to sag, some indications suggest that the rate of home purchase may be stabilizing, perhaps in response to modest declines in mortgage interest rates over the past few months and lower prices in some markets."
Bernanke also cited the University of Michigan's recent survey of consumers that showed an increase in the share of respondents who believe that now is a good time to buy a home, from 56% in September to 67% in November, and noted that the index of applications for mortgages for home purchases has been trending up since July.
That said, Bernanke cautioned that "Although these developments are encouraging, we should keep in mind that even if demand stabilizes in its current range, reducing the inventory of unsold homes to more normal levels will likely involve further adjustments in production." Read Bernanke's complete speech here. (Note, references to housing are largely contained in paragraphs 7 - 11.)
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OFHEO's 3rd Quarter House Price Index
 was released on Thursday, Nov. 30, and is available at the Office of Federal Housing Enterprise Oversight's Web site at www.ofheo.gov. While the report indicates that U.S. home prices rose between July and September, it also shows that the rate of increase continued to slow and that some areas experienced actual price declines. Nationally, home prices were 7.73% higher in the third quarter of 2006 than they were one year earlier. Appreciation for the most recent quarter was .86%, or an annualized rate of 3.45%. OFHEO Director James B. Lockhart noted that "There are still some areas where appreciation rates remain very high but now they are the exception rather than the norm." Since the spring of 2004, year-over-year house price appreciation has fallen from a peak of 13.9% to 7.7% this quarter. Despite this deceleration, however, house prices grew faster over the past year than did prices of non-housing goods and services reflected in the Consumer Price Index (CPI). Read more on the OFHEO numbers in the upcoming NBN Online.
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A meeting of the minds on the meaning of "significant nexus"
 brought 13 environmental experts from around the country to NAHB offices in Washington, DC last week to assess the fallout of the U.S. Supreme Court's complex decision in the Rapanos and Carabell Clean Water Act permitting cases. Builders, developers, and even regulators are uncertain about what the Justices meant when they said there has to be a "significant nexus" to a navigable body of water for a piece of property to be subject to regulation under the Clean Water Act. Environmental Issues Committee Vice Chairman David Smith facilitated the discussion of wetlands experts, engineers and biologists, emphasizing that "Consistency in this interpretation among regulators and builders is extremely important and the final objective of our efforts." While legal minds have already weighed in on many of the issues at hand, the government has yet to decide what kinds of streams, wetlands, ditches and puddles do and don't belong under the federal government's purview. As David pointed out, while that decision is ultimately one of policy, an important first step is looking to the ecological functions of those areas - a discussion that best belongs to the scientific community. NAHB staff is now summarizing the meeting prior to another round of discussions that will take place by phone. When a consensus has been reached, it is hoped that a set of recommendations can be shared with the general membership as well as with regulators who are looking for well-reasoned arguments. Contact: Susan Asmus, x8538.
NAHB Member Benefit: NAHB is doing what we can to help resolve the many issues that remain in the wake of the Rapanos decision regarding Clean Water Act jurisdiction and related permits. The ongoing confusion stemming from this lack of regulatory clarity has turned development plans on their heads in many parts of the country - some for the better, as regulators relax their permitting requirements while they await official guidance -- but most for the worse, as for Ohio builders who have seen the permitting process stalled completely until such guidance materializes. Gathering the views of environmental and other experts from across the country is a necessary step toward coming up with a well-supported argument for how jurisdiction may be consistently determined and thereby helping NAHB members get on with their daily business.
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Proposed government revisions to the Nationwide Permits program
 have drawn mixed reviews from NAHB. Essentially we view them as a step in the right direction, but the proposal still needs a lot of work, we told the Army Corps of Engineers in official comments submitted via a 47-page letter. Among other concerns, NAHB noted that the Corps needs to keep the program going and not let Nationwide Permits (NWPs) lapse while the proposal goes through the approval process. "Contrary to the Corps' stance that NWPs are optional permits, in reality they are not," we said. "For many applicants, the process and delay associated with individual [rather than general] permits would render a project infeasible." Moreover, we said, the Corps needs to get a grip on the extent of its jurisdiction with NWPs and needs to provide a better explanation of why a general permit can't be used when a project only affects half an acre and why it should be notified of any residential building activity. We also specifically noted that with each new reissue of the NWPs, the acreage limit shrinks. Read more about our comments in the upcoming NBN Online, or contact Calli Schmidt at x8132.
NAHB Member Benefit: NAHB's submission of such comments during the public review stage of the NWP reissuance proposal are aimed at improving a crucial program for our members. Approximately 88% of all Clean Water Act development-related permit decisions made in 2003 were via a general - not individual - permit, and the NWPs accounted for half of those. Our aim is to help you avoid the costly and time-consuming process of pursuing an individual permit by ensuring the best possible outcome for the NWPs.
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The most affordable major housing market, five times over...
 is Indianapolis, IN, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) for the third quarter, released Nov. 20. Just under 86% of all homes sold in the city during the third quarter were affordable to families earning the area's median household income of $65,100, with the median sales price of those homes gauged at $122,000. That makes Indianapolis a five-time winner in the affordability category. Meanwhile, on a national basis, the HOI showed that housing affordability remained virtually unchanged from the second quarter despite a sizeable increase in the average mortgage interest rate for the period. Overall, 40.4% of all new and existing homes sold in the U.S. throughout the third quarter were affordable to families earning the median U.S. income of $59,600. Beyond Indianapolis, other major metros at the top of the affordability chart included Youngstown-Warren-Boardman, OH-PA; Detroit-Livonia-Dearborn, MI; Buffalo-Niagara Falls, NY; and Grand Rapids-Wyoming, MI, in that order. All of the major metro areas at the very bottom of the affordability chart were in California, starting with the least affordable market of Los Angeles-Long Beach-Glendale and continuing with Santa Ana-Anaheim-Irvine, Modesto, Stockton, and San Deigo-Carlsbad-San Marcos, in that order. See our HOI press release and tables online, or contact Gopal Ahluwalia (x8480) or Rose Quint (x8527) for more information.
NAHB Member Benefit: NAHB's quarterly Housing Opportunity Index is a practical gauge of housing affordability that provides valuable perspective to builders and home buyers alike. Prior to the time that the HOI is released, NAHB contacts most HBA Executive Officers in an effort to help prepare them for the media attention that may be generated by the numbers being released in their market. This is one more way that NAHB works in tandem with its over 800 affiliated HBAs to get the right information about housing market conditions out to the local and national media.
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Apartment rentals are thriving as condo markets falter
according to two newly released market indexes from NAHB Economics that are based on surveys of multifamily professionals. On the up side, those responding to the NAHB/Fannie Mae Multifamily Rental Market Index (MRMI) indicated that solid economic conditions including good job growth and also a tight supply of units are truly benefitting the apartment market. On a scale of 0 to 100 with 50 generally indicating that the number of positive responses is about the same as the number of negative responses, the MRMI component tracking current demand for units rose to 66 for Class B apartments (up from 58.5 the same time last year), 67.3 for Class A apartments (up from 60) and 61.5 for Class C apartments (up from 58.5 earlier). Asked to gauge their expectations for the rental market over the next six months, multifamily builders expressed continued optimism reaching 70.0, 75.0 and 69.2 on the MRMI scale for Class A, B and C apartments, respectively. See the NAHB/Fannie Mae MRMI press release and tables online, or contact Ann Marie Moriarty at x8350.
On the down side, responding to slower sales and a growing inventory of units on the market, builder confidence in the condominium segment eroded in this year's third quarter according to the NAHB/Fannie Mae Multifamily Condo Market Index (MCMI), released Nov. 21. NAHB Chief Economist David Seiders reasoned that "Many condo communities are large, urban projects or high-rise communities in resort locations, and as such, they take a long time to plan and build compared to a single-family home. As a result, multifamily developers cannot simply turn off the supply overnight, so it is going to take a little while before we work through the large overhang of inventory in this sector." The component of the MCMI that tracks current condo supply conditions fell markedly to 19.7 during the third quarter, compared with a 47.1 reading at the same time last year. Meanwhile, the index tracking builder expectations for the condo market over the next six months also fell, to 27.9 versus the year-ago level of 55.3. See the MCMI press release and tables online, or contact Ann Marie Moriarty at x8350.
NAHB Member Benefit: Through builder surveys and extensive research, NAHB Economics has its thumb on the pulse of the multifamily marketplace and offers the best analysis available to help our members and the media decipher market trends. NAHB also helps our multifamily members respond to media inquiries on the state of the multifamily industry to help control the message and keep things in the proper perspective.
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Remodeling activity picked up in the third quarter of 2006,
 according to NAHB's latest Remodeling Market Index (RMI). The index gauges professional remodelers' perceptions of market demand for current and future residential remodeling projects. Its current market conditions index increased from 45.6 to 47.8 on a seasonally adjusted basis, while future expectations moved up by nearly two points to 45.4 this time around. "Though market strength varies across the country, we are pleased to see a rebound in remodeling activity" as determined by the RMI, said NAHB 2006 Remodelors Council Chairman Vince Butler. NAHB Chief Economist David Seiders added that our current forecast is for $233 billion in home remodeling spending for 2006, up from $215 billion in 2005. Special questions included with the RMI survey this time focused on energy efficiency and "green" remodeling trends. Of the companies surveyed, 25% saw an increase in demand for energy-efficient features within the last three months. In terms of common energy-saving materials installed within the last three months, the most popular were low-energy windows (86%), insulated exterior doors (69%), upgraded insulation (65%), and ceiling fans (59%). Overall, 62% of remodeling companies reported using recycled or recyclable products in the homes on which they worked. Read our press release and see the RMI tables online, or contact Gopal Ahluwalia (x8480) for more information.
NAHB Member Benefit: Founded in 1982, NAHB's Remodelors Council represents and serves the interests of more than 10,000 remodeling industry members. Membership gives you access to valuable resources, offers opportunities to network with others in the remodeling industry, and ensures that the voice of the professional residential remodeler is heard loud and clear in the Halls of Congress, in the offices of the regulatory arena and in the courtrooms of America. The RMI is just one example of how the substantial resources, economic expertise and media outreach activities of the broader NAHB federation are focused on the livelihood of our professional remodeler members.
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The maximum 2007 conforming loan limit for single-family mortgages
 to be purchased by Fannie Mae and Freddie Mac will not change from its 2006 level of $417,000 for one-unit properties across most of the United States, the Office of Federal Housing Enterprise Oversight (OFHEO) announced last week. OFHEO uses the October-to-October percentage increase in the Federal Housing Finance Board's average house price to adjust the maximum conforming loan limits for each subsequent year. This time around, the average price declined 0.16%; however, OFHEO had previously announced that if such a decrease were to occur, 2007 loan levels would remain unchanged and the amount of the decrease would be subtracted from any increase to be assigned to loan levels for 2008. Loan limits for larger properties will also remain at their current levels, including: $533,850 for mortgages on two-family properties; $645,300 for mortgages on three-family properties; and $801,950 for mortgages on four-family properties. Read more in the Dec. 4 edition of NBN Online, or contact Chellie Hamecs (x8425) or Bill Renner (x8597).
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What's new at the 2007 IBS?
For starters, there's a great new education track called "Changing Markets" that includes more than two dozen classes to help you position your business for success in the new year. In one class, you get 20 proven techniques for cutting construction costs; in another, you'll learn about Web-based software, online marketing and other ways that the Internet can help you improve efficiency and boost profitability. Another class offers "107 Marketing Ideas for 2007." The idea is to help building professionals stay competitive in the current economic climate. Of course, "Changing Markets" is but one of the 19 different educational tracks available to IBS attendees. It just goes to show you, every year there's something new to see, learn and experience at the biggest and most important trade show ever produced for the building industry. Get more information on registering for classes and see the full array of educational offerings at www.BuildersShow.com/Seminars. Remember, discounted online registration for the IBS (at www.BuildersShow.com) ends January 5, 2007 and on-site registration begins at the Orange County Convention Center in Orlando, FL on Sunday, Feb. 4.
NAHB Member Benefit: NAHB members enjoy discounted registration for the most important building trade show for all aspects of the housing and light construction industries all year -- the International Builders' Show. The IBS may be your most important member benefit because of all that you come away with in terms of business education, professional contacts and knowledge of the latest products and services geared specifically to your needs.
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