December column for Builder & Developer now posted online

My column for the December 2016 issue of Builder and Developer magazine is now posted online.

For this issue, entitled "2016 in Review:  Continued Recovery from The Great Recession," I reviewed the current state of the U.S. economy and what we can expect in 2017.

An excerpt:

U.S. GDP—which had hovered closer to 1.0 percent during the previous three quarters—surged to 2.9 percent in the third quarter, due mostly to rising inventory of goods, higher exports, and more federal government spending.

Job growth, which rose by 161,000 in October, has averaged 181,000 per month throughout 2016. Although this is down 21 percent from 2015’s average level, it is still more than enough to keep up with population growth and continue putting downward pressure on the official unemployment rate.

To read the entire column, click here.

To read the entire December 2016 issue in digital format, click here.

Housing Chronicles hits 10,000 monthly page views

According to the most recent statistics from Blogger, The Housing Chronicles Blog has rebounded to over 10,000 page views over the past month!

Thank you to both our regular readers as well as new visitors who find us through search engines such as Google or Bing, as well as referring sites such as the great Calculated Risk blog.

So how does 10,000 page views relate to traditional building industry publications?  Although we're still a minnow compared to much larger and established titles, here's how we currently rank against the most recently published print circulation figures of popular building and development trade magazines:

• Builder - 103,394
• Professional Builder - 96,116
• Builder and Developer - 40,000+
• DCC Journal - 30,000+
• Green Home Builder - 28,000+
• Multi-Family Executive (MFE) - 20,700
• Affordable Housing Finance - 11,000
• The Housing Chronicles Blog - 10,000+
• Big Builder - 8,600 (currently on a hiatus in the printed form)
• Builder & Remodeler - 8,000

Not bad for one guy with an idea and an interest in blogging!

This blog first launched in November of 2007 as a way to cover stories you might not have noted.  More recently, it's been the place for you to make sure you never miss an important story about housing and economics with the recently launched contribution by MetroIntelligence to the three-times-per-week BuilderBytes email newsletter.

Looking to reach our readers with a targeted advertising campaign?  Contact us for more details!

How tight is new home inventory really?

G.U. Krueger, Principal Economist of HousingEcon.com and an alliance partner to MetroIntelligence Real Estate Advisors, has also contributed an article to the July issue of Builder & Developer magazine on the question of new home inventory.

Whereas many pundits continue to focus on remaining lots in current phases, G.U. argues that the supply in the future phases of active developments will still eventually be released to the marketplace, and thus should not be ignored.

An excerpt:

...there is “inventory is tight” chatter again pointing to declining new home inventory in various markets throughout the U.S. For example, in Southern California’s Riverside County, according to Hanley Wood Market Intelligence there were just 800 units of new home inventory -- or barely eight weeks of supply at the end of April 2009.

Thus, the implication is that in eight weeks or so we are going to be whole again.

However, new home inventory is only a small part of the story. By April 2009, there were an additional 1,159 homes under construction in Riverside County, and lots earmarked for future construction numbered another 21,000 units -- a number which has been dropping but is still large. This future supply is significant because it is a type of pent-up supply which can be easily activated. Consequently, total buildable lot supply reached 25,000 units in April 2000, a 60-month supply at current sales rates -- not quite as tight as local pundits are proclaiming...

Click here to read the entire article.

Determining the value of land

So how can builders compete 'when the land is free?' Well, according to the Calculated Risk blog, they can't -- at least not against REOs.

And it's not like land values haven't already corrected. Since the peak of the market in 4Q 2005 through 1Q 2009, finished lots in L.A. County have fallen by well over 60%. In Riverside County they're down by 60% to 75%. In San Bernardino County, down by 55% to 70%. And in the Coachella Valley, they're down by 60% to 75%.

Even with these price drops, there's still a disconnect between what buyers are willing to pay and what sellers -- mostly banks and some builders -- are willing to accept.

Into this mix are venturing hedge funds and private equity groups. My concern is that since most of them don't know much about land development, they're tapping the same executives who bought so much of the over-priced land that has decimated the industry in the first place. Falling in love with resumes, some seem to be glossing over basic performance benchmarks (i.e., "How many of your prior land deals went BK or to foreclosure?"). Given that it's now the taxpayers picking up the bill for these mistakes, it's a fair question. While the declining market certainly has played a role, in many cases it was a simple lack of proper due diligence that was the problem.

I'll be writing about the importance of the price of land -- and buyers and sellers agreeing on terms -- for my next column in Builder & Developer magazine.

Attending the Int'l Builders Show in Las Vegas?

The 2009 International Builders Show is just days away (January 20-23 in Las Vegas). The Web site for Builder magazine has some interesting stories for any one planning to attend the show, as summarized below.

I will be attending this year on Tuesday, Wednesday and Thursday to cover the show for Builder & Developer magazine, so if you see me please feel free to introduce yourself and say hello.

• How Green Is the Valley?

  The Southern Nevada Green Building Partnership might be a catalyst for reviving the Las Vegas market.

• Show Home Tour

  Two very different show homes for the 2009 International Builders' Show in Las Vegas.

• Information Age

  IBS '09 offers 250 educational programs during show week. These caught our attention.

• Hot Products

  The exhibit floor is sure to be chock-full of good ideas. Here are a few to look out for.

• First Time?

  The IBS will offer an orientation to first-time attendees and an a la carte fee structure to attract builders to the show.

• Green Day, Take Two

  The NAHB follows up last year's successful launch of green building initiatives will a full slate of activities in 2009.

• Coached Up

  Lou Holtz headlines the show as this year's keynote speaker.

Why a new home market rebound may be delayed

A funny thing happened on the way to the housing bust: rising foreclosures of newer homes, which are increasingly competing with homes offered by builders in both price and quality. In the past, the new home market often rebounded faster than existing resales, but this time might be different. I pulled some stats from the early 1990s and compared this downturn with the last one and summarized it in my latest column for Builder & Developer magazine:

Whereas in the past homes being auctioned on the courthouse steps or offered by the REO departments of lenders were often old and in need of updating, many of today’s foreclosures are newer homes that increasingly compete with unsold new home inventory. The trend is startling: with buyers enjoying rising home equity during the first half of this decade and low teaser rates offered on sub-prime and Option ARM loans from 2004 through 2007, mortgage delinquencies either fell or rose very slightly, generally less than 2%. But as these loans began to re-set and borrowers found themselves unable to finance due to negative equity, by the first quarter of 2008 delinquencies spiked up by 30% and the first stages of foreclosures skyrocketed by 71% on the heels of a 40% jump a year earlier.

It seems reasonable to assume that such record jumps in housing inventory – homes that will have to be discounted in price to sell – will impact both the timing and trajectory for a new home market recovery.

How we got here -- and how we get out

Philip Simmons, previously a Division President for the Urban division of John Laing Homes and now a management consultant for homebuilders and developers, has penned an excellent overview of the how the building industry got into its current mess and, more importantly, how to get out. And no, I'm not just saying that because he quoted me. From an article at Builder & Developer magazine:

This is the first time in decades that we are paying such a steep price for management that does not have the depth of experience to manage through a major market adjustment...

After more than a decade of soaring profits and over-staffed offices, industry managers are for the first time being forced to get back to basics, limit their resources and make painful and difficult decisions.

In addition to being forced to take a long hard look at the adequacy of their staff capability and organizational structure, individual managers also need to simultaneously juggle an increased number of operational functions within the organization. It is a trial-by-fire for those executives and managers who have never before been through this type of cycle...

The markets no longer forgive feasibility oversights, erroneous entitlement assumptions, costly design defects, schedule delays, or sloppy sales and marketing programs...

Companies can no longer afford to tolerate team members who fail to fully engage with the program. In order to thrive a company must first survive, and only a fully committed, competent, focused and disciplined team will prevail against the challenges we face.

My column in June edition of Builder & Developer magazine now online

My latest column for Builder & Developer magazine entitled "Know Thy Buyer or Perish" is now online at the magazine's website.

It focuses on how builders should not only determine who their buyers are for their communities, but should also define for their entire companies the values which set them apart from their competitors and communicate that message throughout the organization.

The future of green homebuilding

Although 'green building' has been noted a lot the last couple of years, it wasn't until recently that homebuilders have instituted a national set of standards to bring various local groups together. On a local level -- such as in Atlanta, GA -- green building techniques have helped to spike sales while offering homebuyers greater efficiency in a time of scarce energy resources.

My most recent article for Builder & Developer magazine discusses these trends in more detail:

It was in early 1977 when a newly elected President Jimmy Carter donned a cardigan sweater on national television, urged Americans to do the same and then asked them to turn down their thermostats to conserve energy. But who could guess that he was on the forefront of a movement towards resource sustainability that would take another 30 years to coalesce? Not only has green building and conservation emerged as the most important trend in homebuilding, but according to some experts will help drive the U.S. economy once the current recession eventually rebounds...

...according to the NAHB 2007-2008 Consumer Preference Survey as analyzed by Jonathan Smoke at HousingIntelligence.com, nearly 90% of respondents are concerned about the impact their homes have on the environment. Yet because only 16% are willing to pay extra to address that concern, homebuilders would be wise to first target those consumer segments actually willing to spend a premium. Fortunately, Smoke thinks three of his defined consumer groups fit into this category, including “Feature and Location,” “Elite” and “Active Adult Elite” buyers, who share in common a desire for quality, prestige and community. To further increase the odds of success, he suggests builders focus on top-rated green items including Energy Star-rated windows, energy-certified appliances and generous insulation while getting rid of now-dated design features such as two-story foyers which are expensive to heat and cool...

For those harried sales agents already under pressure to explain the specifics of a home plan and neighborhood, when it comes to explaining green building – or green mortgages, which allow buyers to qualify for higher loan amounts when they’re buying energy-certified homes -- it’s best to let simple displays in the model homes and colorful collateral in the sales office do the talking.

With some clever design elements, that collateral could easily double as a benefits list for comparison shopping – and pity the poor builder who thinks green building is just another fad, because they’re now in the minority. In a 2007 survey conducted by Professional Builder, 70% of homebuilders agreed that this is a trend that’s here to stay, and of those respondents, 83% considered it extremely important to their marketing strategy which has had a positive impact on sales.