Tag Archives: housing market

The Housing Economy Experiences Gradual Growth

2 Aug

Harvard’s Joint Center for Housing Study Releases Important Data

Human hand add a  coin in the final row

With numerous housing reports coming out each month, many have debated what these new economic performance measurements will mean for the future of housing rates and for the building industry. According to Harvard’s The State of the Nation’s Housing 2016 report, new home sales are strengthening with a 6.39% increase to 5.3 million. Although these numbers may indicate that the housing economy is not back to where it once was, it does show that there is substantial improvement from recent years.

Major report findings:

  • Multifamily starts rose 11.8% to 397,300, the highest in 27 years. Single-family starts were also up, rising 10.5% to 715,000.
  • Sales of both new and existing homes are up. The existing homes inventory remains tight with a supply of 4.8 months.
  • The inventories of for-sale homes in the low and middle price tiers dropped 9% between 2014 and 2015, contributing to a total decline of 38% between 2010 and 2015.
  • The median price of existing homes rose 6.6% to $222,400. Rising home prices have contributed to a reduction in the number of homeowners with negative equity.

However, other issues have risen, specifically the cost burden for renters. According to the report, 36.4% of households in 2015 opted to rent, which is the highest numbers seen since the late 1960s. This stems from low-income rates, as well as millennials who still are deeply in debt with school. Many millennials say that they envision themselves purchasing a home of their own one day, but due to financial troubles do not see themselves buying a home in the near future.

The report also shows that US housing starts have risen more than excepted in June due to construction activity. Despite the rise in housing starts, data points show that there will be a leaner second quarter, especially with it being an election year. While we are still far away from a boom period in housing, the latest housing starts from Harvard’s Joint Center for Housing Study shows that we are on a gradual recovery path.

Key Takeaways:

  • Americans remain optimistic toward homeownership
  • Household growth is on the rise
  • Rental housing remains in high demand
  • New construction of single-family homes is on the rise

While the numbers show a gradual recovery, there’s still a lot of situations in which the housing economy may not reach the housing peak that it once was. Although, with those numbers being as unstable as they were, it’s possible that they may not be such a bad thing.

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5 Building Product Trends In the New Housing Market

18 Apr


The Housing Market is Evolving – Be Ready

As we move into 2013, I think everyone is in agreement, the housing market is recovering. In some places, it’s recovered, others sill have excess inventory or foreclosures, but overall – we are through the worst time our industry has ever seen (or wants to see).

So as we look forward to this ‘new’ normal what will the housing market look like? What trends do we think will occur or impact our business? the home buyer? the manufacturer? the lumberyards?

Heres my take on 5 things this ‘new’ normal means to our industry

  1. We all have to remember what we have gone through these past few years. It’s human nature to only remember the good things and let those bad memories fade away. We can’t let that happen this time. We need to manage inventories, not simply look for the quick buck and actually manage our businesses with the long-term in mind. Too many bad decisions combined with bad business practices left too many companies out of business.
  2. People will continue to stay in the homes longer. Maybe it’s just me, but it seems like homeowners have also learned some hard lessons. Too many people bought a home they couldn’t afford and then wondered why they couldn’t make that huge payout after 2 years. There’s enough hedge funds buying up real estate. People need to buy a home they can afford.
  3. Universal design and aging in place will explode. As a component of #2, people are aging in their homes. Some because they love the house they have lived in, but for many, it’s a very easy financial decision. The cost to make your home more accessible and useable as you age far outweighs the cost to sell your home and move; especially to any assisted living facility. Manufacturers and pros need to look at this as a huge opportunity.
  4. Multi-generational living isn’t going away. While initially people saw this as the Millennial generation moving home after college, it’s much more than that. In a growing number of family’s, the older generation is moving in with their ‘kids’. These homes typically were the primary home and may have kids off in college and now the grandparent(s) are living with the family. Again this becomes a financial, but also a great emotional, challenge for the entire family. Creating homes and products that work, in some cases, for three generations will be key.
  5. Millennials are in no rush to buy a home. For most of us, buying a home was something you wanted to do. It meant you had arrived. You were an adult. We need to understand that’s not at all how the Millennial generation approaches home ownership. That’s part of their contentment with living at home into their mid 20s. As an industry we need to realize that constant stream of new buyers may take a hit for a few years. Although there are plenty of hard working, financially stable 26-32 year olds, they simply don’t feel the need to buy a home right away.

So the housing market is really coming back, but it will be different and we all must learn from the past, and be prepared for the future.

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The Housing Trend—Where Does Your Market Stand?

22 May

Image courtesy thedailygreen.com

Every month, we get the new housing stats. Stats about everything: starts, permits, vacancies, ownership levels, mortgage rates, foreclosures, and of course, inventory levels.

It seems there’s an entire segment of the industry, and especially the government, responsible for reporting all these statistics.  And those are the factual statistics. Just as often we hear ‘experts’ talking about all the trends and forecasting for the future. I heard someone talking about the expected housing starts in Canada for 2015. Really? Who cares? Aren’t we all trying to ensure that 2012 is actually the recovery year?

There are some interesting facts that we should pay attention to. The NAHB/Wells Fargo Housing Opportunity Index (HOI) seems like a reasonable indicator to how your market is doing. According to the HOI, nationwide housing affordability is at a record high. But tight lending conditions continue to create a significant roadblock for many homebuyers.

  • 77.5 percent of all new and existing homes sold in this year’s first quarter were affordable to families earning the national median income of $65,000.  This beats the previous record set in the final quarter of 2011, when 75.9 percent of homes sold were affordable to median-income earners.

“Homes in this year’s first quarter were more affordable than they have been at any time in more than 20 years, yet many potential sales are not happening because of overly tight lending conditions that are keeping hardworking families from obtaining a suitable mortgage,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “Without this significant hurdle, the housing and economic recovery could be proceeding at a much stronger pace.”

The most affordable major housing market was Indianapolis-Carmel, Ind., where 95.8 percent of homes sold during the period were affordable to households earning the area’s median family income of $66,900.

Also ranking among the most affordable major housing markets were:

  • Dayton, Ohio
  • Lakeland-Winter Haven, Fla.
  • Modesto, Calif.
  • Grand Rapids, Mich.
  • Buffalo-Niagara Falls, N.Y

Among smaller housing markets, Cumberland, Md.-W.Va. topped the affordability chart. There, 99 percent of homes sold during the first quarter were affordable to families earning the area’s median income of $53,000.

Other smaller housing markets at the top of the index include:

  • Fairbanks, Alaska
  • Wheeling, W.Va.
  • Kokomo, Ind.
  • Davenport-Moline-Rock Island, Iowa-Ill.

In New York-White Plains-Wayne, N.Y.-N.J., which retained the title of the least affordable major housing market for a 16th consecutive quarter, just 31.5 percent of homes sold in the first three months of this year were affordable to those earning the area’s median income of $68,200.

Other major metros at the bottom of the affordability chart included:

  • San Francisco-San Mateo-Redwood City, Calif.
  • Honolulu
  • Los Angeles-Long Beach-Glendale, Calif.
  • Santa Ana-Anaheim-Irvine, Calif.

Ocean City, N.J., was the least affordable smaller housing market on the list, with 45.9 percent of homes sold in the first quarter affordable to families earning the median income of $71,100.

Other small metros at the bottom of the list included

  • Santa Cruz-Watsonville, Calif.
  • San Luis Obispo-Paso Robles, Calif.
  • Santa Barbara-Santa Maria-Goleta, Calif.
  • Laredo, Texas

So what does this mean to a building industry marketer? Focus on a few items that make sense.  This study looks at houses being built and their relative affordability in that specific market.  This tightly focused look at housing in a market is helpful.  Don’t get sidetracked on issues that you can’t impact or change.

Please visit www.nahb.org/hoi for tables, historic data and details.

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Signs of Life for Building Products Marketers

19 Apr

We are constantly adapting to the ebbs and flow of the housing and building industry.  DIY customers are reportedly buying more and remodelers are getting their hands dirty again. As a CMO, we need to consider how these changes affect our marketing strategy and spending.

Strong spending on gardening equipment, furniture, and building materials in March could mean homeowners are busily preparing to make their homes more attractive to buyers. Retail and food service sales rose 0.8% from February to a seasonally adjusted $411.07 billion, the Commerce Department reported. But while overall sales were up 6.5% year-over-year, building material and garden equipment jumped over 14%. That bodes well for the housing market, says Susan M. Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania on a recent SmartMoney post. “These retail sales are another an indicator of better home sales ahead,” she says.

Lowe’s recently announced a 13% spike in sales to $11.63 billion helped by an unusually mild winter and better cost control, while Home Depot’s fourth-quarter earnings rose 32% to $774 million. Wachter says the double-digit sales increase in Lowe’s other items like kitchen and bathroom cabinets – typically a big consideration for house-hunters — and new flooring further shows that homeowners may be preparing to increase the appeal of their homes.

Others say home improvers may be biding their time. From the same mentioned SmartMoney post mentioned above, “Lawn care and showcasing nice furniture are always an important aspect of trying to sell a home,” says David Abuaf, chief investment officer at Hefty Wealth Partners in Auburn, Ind. “But I think the March retail figures are driven more by maintenance and upkeep rather than a desire to sell immediately.”

But there have been several other encouraging signs that the housing market may be regaining its pep. Existing home sales recorded the strongest February in five years, according to the National Association of Realtors and, according to the most recent Commerce Department figures, the number of new single-unit houses authorized for construction rose nearly 5% in February. “We expect to see gains through the all-important summer months,” he says. And for homeowners, Wachter says, “It’s better to fluff now to attract buyers.”

Our industry is contingent on the economy and the fickle supply and demand of our customers. We have to make sure we are prepared from season to season, and with the increase of sales at two of the largest building product retailers in our country, we can expect demand to rise as well.


Curb Appeal Splurging

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Debt and Other Economic Factors Affecting the Building Product Industry

23 Dec

Keeping an eye on the recovery of the economy is important for building product CMOs to consider as they make long-term strategic marketing plans.

As you know, building products and the housing market have easily been the segment most effected by the economic problems of the past couple of years. Recently released statistics and news from across the industry show a promising yet realistic view of the slow recovery.

Consumer Debt Decreasing

Consumer debt is decreasing, according to the Federal Reserve Bank of New York’s article, Consumer Debt Falls in Third Quarter, “ household debt in the July to September period fell by .6% from the previous quarter to $11.66 trillion.” This is especially relevant for the building products industry as the main decrease was in mortgage balances, according to the article. Excluding mortgage balances, household debt actually increased by 1.3%. This means that households are decreasing their home-related debts and spending more as their finances stabilize. Home buyers enhanced caution to ensure they don’t go further in depth on their homes is an important factor to consider in your marketing plans. Making sure that your consumer-facing sales team is aware of this price and debt sensitivity can help them to understand the customers and how best to sell to them without pushing them further into debt.

New Mortgage Debt Decreasing

Also according to Consumer Debt Falls in Third Quarter, new mortgage debt is “…at it’s lowest level since [the year] 2000″ which is due to:

  • Depressed home values – Lower home values means consumers mortgage value is also lower
  • Tighter lending standards – As set by the major financial institutions
  • High unemployment and stagnant wages –  These reduce the level of home buyers

Home Equity Increasing

When looking at the history of home ownership and mortgages, it’s important to note that as the recent recession progressed, the average homeowner owned less and less of their house due to higher mortgages. As you can see from this chart, used in a speech by William C. Dudley, President and CEO of The Federal Reserve Bank of New York, equity levels have been starting to work their way back up from a low of below 40%.

As shown here, "the average homeowner still is substantially more leveraged than before the crisis and has lower net worth".


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