Jay McKenzie

By Jay McKenzie

Recently, the National Association of Home Builders (NAHB) hosted “Building in 2012,” its annual Mid-Year Update and Economic Forecast.

If you weren’t able to attend this important industry webinar on July 12, 2012, BDX has summarized key findings that NAHB shared with members, the media, and industry leaders.

Some of the key take-away’s:

  • NAHB sees clear evidence of a housing rebound, dating to last year.
  • Since September 2011:
    • Total housing permits are up 26.6% nationally.
    • Single-family housing permits are up 15.4%.
    • Existing home sales are up 6.6%.
    • New home sales are up a much stronger 21%.
    • Housing prices are up slightly nationally — and up significantly in many markets.
    • The NAHB/Wells Fargo Housing Market Index is up 107%.
    • New home sales from large public/private builders surveyed by NAHB are up 23.5%.

As strong as these indicators are, NAHB sees three major factors slowing the pace of recovery: slow job growth, housing units in/poised for foreclosure, and tight mortgage lending standards.

NAHB compared current housing production levels to an average for 2000 to 2002, prior to the boom and bust cycle in housing. According to NAHB:

  • Remodeling production has rebounded to 102% of 2000-2002 levels.
  • Multi-family home production is at 66% of 2000-2002 levels.
  • Single-family home production is at 38% of 2000-2002 levels.

Clearly, single-family production — typically the largest component of the market — is lagging other product segments. NAHB cited these reasons for the slower pace of recovery in single-family home sales:

  • For the past five years, average household formations are at 43.3% of the prior five-year average.
  • 80% of new households in the last five years are renting housing, not buying it.
  • Real incomes have declined for all age groups except 65+.

While builders remain concerned about losing market share to resale and foreclosed homes, the number of homes in foreclosure or more than 90 days past due varies widely by state. Six states (Florida, New Jersey, Maryland, Illinois, Delaware and Connecticut) have more than a 12-month supply of distressed homes; 24 states have less than a six-month supply.

Similarly, home values vary widely by market. To zero in on the pace of recovery by market, NAHB created its Improving Market Index (IMI) which ranks major metropolitan areas on three barometers of recovery in each market: employment, single-family permits, and change in home prices.

Based on those criteria, The NAHB/First American Improving Markets Index is up 600% — from 12 markets in September 2012 to 84 markets in July 2012.

NAHB closed the economic update by noting that mortgage credit standards are very tight.

As David Crowe, Chief Economist of NAHB put it, “Lenders were approving mortgages for buyers with a FICO Score of 710 before the boom. Now they’re denying loans to buyers with FICO Scores of 730.”

Despite concerns around the pace of housing’s recovery, NAHB sees a clear rebound in the market for single-family homes and forecasts that sales will rise 19% in 2012 to 519,000 units.

Jay McKenzie heads up content for Builders Digital Experience.

Best Practices from Fulton Homes and Other Top Builders from the BDX-Led Panel Discussion at The International Builders’ Show

A recent Panel Discussion at The NAHB International Builders’ Show moderated by Jay McKenzie of Builders Digital Experience (BDX) provided builders with proven best practices to successfully sell new homes versus foreclosures.

Dennis Webb, VP Operations for Fulton Homes in Phoenix, shared with builders how his firm is selling hundreds of new homes annually — in a market where 46% of homes sold last year were foreclosures.

“Our main strategy to sell against foreclosures is to provide features and amenities in our homes and new home communities that foreclosures can’t–and don’t–offer,” Webb said.

“First, we build highly amenitized homes with many premium products and offerings included in our base price. Second, we’ve built to the latest EnergyStar standard—which took effect January 1, 2012—since October 1, 2010, which dramatically lowers energy costs.  Third, in our largest community, we leverage our $100 million investment in infrastructure. We’re building new homes a mile away from the most successful employer in the state, Intel.”

The Fulton Homes website also provides an innovative Foreclosure Calculator consumers and real estate professionals can use to see the true cost to buy and repair a foreclosed home. It provides typical costs to repair or replace expensive items often damaged or missing in foreclosed homes.

Once a home shopper calculates the total cost to buy and repair a foreclosed home, a link in the Foreclosure Calculator shows how much home they can get at the same price- in a brand-new Fulton home plan that they select and personalize, with many upgrades included standard, in a brand-new home that’s under warranty, and that’s built to the latest energy standard.

Fulton Homes’ Foreclosure Calculator was a big reason why real estate expert Kenneth Harney chose to cover this BDX Panel Discussion at IBS in his nationally-syndicated column in The Washington Post, The Los Angeles Times and many other leading newspapers.  To read Kenneth Harney’s column – and to see Fulton Homes Foreclosure Calculator – click here: http://wapo.st/yxBpZP

Other strategies that Fulton Homes is using to sell new homes versus foreclosures include:

  • Build larger homes (from 3,000 to 5,000 square feet) based on the latest energy standards for sizable savings on utilities
  • Build only single-story homes. No stairs to climb is a big benefit for many buyers
  • 4 car garages standard in all homes, 6 car garages available
  • Offer a huge selection of options for buyers to personalize their home. All 5 top executives of Fulton Homes came from retail prior to their years as home builders
  • Fulton uses the Envision Option Selection/Management System from BDX and a state of the art, 13,000 square foot Design Center to make it easy for homebuyers to select –and upgrade—appliances, countertops, flooring, cabinets and more

Prefacing these valuable strategies from Fulton Homes, Charlie Engle of RealtyTrac provided builders with the latest data on foreclosures.

RealtyTrac data covers the key stages in the pre-foreclosure and foreclosure process. Engle provided builders with just-calculated data for 2011 not published before. RealtyTrac’s data covers 92% of American counties and is relied upon by media, governmental agencies and academia.

Since 2007, more than 8.2 million homes have started the foreclosure process and more than 4 million homes have become bank-owned homes. At present absorption rates, RealtyTrac estimates that there is a 16-month supply of bank-owned homes and a 49-month supply of delinquent homes.

While the statistics on foreclosures are sobering, as BDX’s Jay McKenzie pointed out in his segment of the Panel Discussion, The NAHB Wells Fargo Housing Market Index (HMI) has shown five consecutive monthly gains in new home sales and model home traffic. Jobs are returning (although more slowly than desired) and many other builders are successfully competing with foreclosures.

Foreclosed homes are sold “as is,” often with no inspection.  Many foreclosures require major, often hidden repair costs. Financing a foreclosure can be more difficult than a new home. Some foreclosure buyers may also need to pay additional cash at close to catch up on past due taxes, HOA fees.

In sharp contrast, builders BDX spoke to are successfully citing many compelling benefits for buying a new home versus a foreclosure:

  • New homes and the products they contain are brand new and under warranty
  • Many new homes are far more energy-efficient than homes built just 5 years ago
  • New homes reflect the way we live today
    • Open floorplans, higher ceilings, multiple living spaces
    • Larger master bathrooms and closets, media rooms, extensive storage
    • New homes allow you to select the choices you want vs. inheriting someone else’s choices
      • Pick the floorplan, elevation and bonus rooms and spaces you want
      • Personalize your new home with appliances, cabinets, countertops and flooring
      • New home options can be financed at unprecedented low and tax-deductible interest rates
      • Advanced technologies insure year-round comfort and high indoor air quality
      • A new home means many years of enjoyment, with much lower chances of costly repairs

Given the many advantages of new homes, it’s clear that builders can successfully compete with foreclosures. To access the slides from this Panel Discussion, click here:  http://blog.thebdx.com/?p=551