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• BuildPerks - June 2015 - Page 23
Saturday Matinee Someone’s not doing it right. Everyone complains about the lack of first-time home buyers in the market—just 33% of the total in 2014, their lowest level since 1987. Most builders are apparently focusing on the move-up market, judging by the median price of a new home: $277,400 in March. That made sense when credit was tight as a drum, but the two largest lenders, J.P. Morgan Chase and Wells Fargo, reported huge YoY increases in mortgage lending in 1Q 2015: 45% and 36% respectively. It’s getting easier to get a loan, and it’ll get easier yet this year as a new Fannie Mae initiative kicks in. Some people don’t think looser credit is a good idea. D. R. Horton isn’t one of them. In 1Q 2015, sales of its entry-level line, called Express Homes, tripled YoY and represented 18% of total 1Q sales. At $179,000, Horton is scooping up first- time buyers other builders are still ignoring. Low standards in the U.S. American analysts have been fretting about another housing bubble ever since we came off the bottom. Not happening, says The Economist. In its latest global house price index, the U.S. is tied with Germany for the lowest price-to-income ratio among major Western economies. Greg Brooks, president of the Building Supply Channel, Inc. and editor of LBM Executive, is a market analyst, consultant, trainer, and author specializing in residential construction supply. He is a 46-year veteran of the building supply business who has spent 19 years in the field, five as a trainer and instructional designer, and 23 years covering the industry as a writer and editor. Brooks is a steering committee member at the Harvard University Joint Center for Housing Studies and an internationally-known speaker who has conducted workshops on channel trends and strategies for thousands of executives throughout North America. Among countries with over $1 trillion GDP, only Japan and China rank lower— one because its economy has been stagnant for two decades and the other because its housing market is crashing. Watch your housing market rise from the dead. Nationwide Insurance came up with what it calls a Leading Index of Healthy Housing Markets, a composite based on employment, demographics, home prices, and the mortgage market. The interactive map at its website charts every county in the U.S. from 1Q 2001 through 4Q 2014—just click the button and watch the crash play out quarter by quarter. The only surprising thing is how much of the country had turned negative as early as 2002. Congress actually did something. To boost housing, that is. HousingWire is reporting that the House of Representatives passed bills last week to clarify some provisions of Dodd-Frank, give low-income home buyers better access to manufactured homes, and help small credit unions compete. They’ll all help push the credit market in the direction of normal, but the truly amazing thing is that they were all passed with bipartisan support. Woe is builders. NAHB recently asked builders to rank the most significant problems they faced in 2014 and expect to face in 2015. Not surprisingly, labor topped the list for 2015 with 68% saying it would be a headache. Also not surprisingly, material prices ranked No. 2 at 66%. The difference is that there really is a shortage of skilled labor. Random Lengths’ composite framing lumber price has declined every month since September. In March, it was down 10.4% YoY and 25.2% below its March 2013 level. Just what we need. John Burns wonders why “big, publicly traded home builders dominate the Southeast less than other areas.” One of his recent surveys found that while publicly-held builders own around two-thirds of the subdivisions in Las Vegas, San Jose, and Denver, their share of developed land in markets like Atlanta, Raleigh, and Charlotte is as low as one-third. It might be worth investigating how much of that land was optioned when the crash came—maybe developers in the Southeast have longer memories. One way or another, Burns predicts that we’ll see more M&A activity in the region before long. And maybe they’ll build houses like Laurel and Hardy in 1928: Best Practices