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News
for Product Manufacturers from Hanley Wood CEO Frank
Anton
Please consider: Fannie Mae; Lehman
Brothers; deflation.
Which makes you more nervous when
you consider its impact on the housing market? I'd understand if you said Fannie
Mae or Lehman Brothers, but I'd argue with you. As it is, I'd guess the typical
homeowner or home buyer (of a certain age) thinks Fannie Mae was a character in
the old 'Lil Abner comic strip and couldn't really tell you the difference
between an investment bank and a piggy bank.
Believe me, my intention is not to
insult the typical homeowner or home buyer, nor is it to downplay the big role
Fannie Mae and Lehman Brothers (and other investment banks) played in the happy
drama that was the housing industry from 2001 through 2005 and the unhappy drama
since then. On the contrary, it is to give consumers credit. Just as most of them
knew that housing was as close to a sure thing as any investment could be from
1950 until 2005—and they acted accordingly, buying bigger and bigger and more
expensive houses throughout that period—today they know with almost as much
certainty that buying a house is a very risky business. Buy a house today and
it could be worth considerably less tomorrow; that's what most consumers now
think.
That fear of ongoing deflation in
housing prices, more than anything else, is what has caused new and existing
home sales to stay in their tailspin, even as mortgage interest rates and
housing prices drop, making housing ostensibly more affordable. This problem is
particularly acute in the existing home market, where so many homeowners are
still living in 2005. They're clinging to unrealistic notions, often reinforced
by real estate agents, about what their houses are worth. And therein lays the
opportunity for builders and building product manufacturers.
Let me explain. Not only is much of
the for-sale inventory of existing homes overpriced, so is much of the inventory
of unsold new homes, which were built on incredibly expensive land. Now, land
prices in most markets have fallen as much as 50 percent from their peak. That
means brave builders can buy land and build truly reasonably priced and
affordably priced housing. In fact, built right and priced right it will seem
bargain priced, and it will take bargain prices to bring buyers back. Therein lies the opportunity for builders. The opportunity for suppliers is this:
develop new products that help builders lower costs and homeowners lower
maintenance and energy costs.
That's the way to let air out of the
deflationary bubble.
Send e-mail to Frank Anton |
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News and Trends from
Hanley Wood Magazines
Visit the new REMODELING Online
Completely redesigned, the Web site for REMODELING magazine is more vital than ever to its core audience.
Special Report: Industry in Crisis
The home building industry clearly faces a
market meltdown that threatens the very survival of many companies. With this
special report, BUILDER aggregates stories on recent failures, along with
information on how to survive these most troubling of times. (BUILDER Online)
Supply Side: Making the Grade
David Weekley Homes announces its 2008 Partners of Choice awards, and its trades
chime in on why the builder's evaluative quarterly reports work for them. (BIG BUILDER, September 2008)
Special Report: The Future of Wood
Getting an accurate picture of wood's future requires you travel across the
continent visiting logging sites, mills, industry groups, research institutions,
and lumberyards. Here's what ProSales has
learned, and what pro dealers can expect. (ProSales, September 2008)
The Replacement 100
The industry's best and biggest companies adjust to a slow-growth economy. (REPLACEMENT CONTRACTOR, September-October 2008)
New Products from The Remodeling Show 2008
Check out new products straight from the floor of The Remodeling Show, including
winners of the Best New Products awards. (REMODELING, September 2008)
Within Reach
Universal design standards call for spacious, accessible cabinets.
(MULTIFAMILY EXECUTIVE, September 2008)
Case Study: Leading by Example
Community Housing Partners’ award-winning neighborhood brings community education and sustainable performance to affordable housing. (EcoHome, Summer 2008)
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Housing Statistics
and Analysis from Hanley Wood Market Intelligence
- Analysis for the Housing Market: The total number of homes started for the purpose of residential construction fell again in August to just 895,000 units, a 6% drop from the level seen in July, and a 33% decline from the level seen in August 2007. Single-family starts were down 2% from the level seen last month, 35% below the year-ago level, and 54% below the August 2006 peak. Multifamily housing starts decreased sharply in August, falling by 17% from the level seen last month, but were 2% above the level seen in August 2006. The June figure for multifamily activity was inflated due to changes in permit issuance procedures that became law on July 1 in New York City. Builders rushed to get their projects permitted in June in order to avoid having to abide by the new regulations on July 1st.
- Non-seasonally adjusted data reflected decreases in all of the nation's four regions, for all time periods tracked, except for in the Northeast region, which was affected by the law changes in New York City.
- Multifamily construction activity remains high due to continued strong migration patterns to areas in the South and West. Even though buyers are either unwilling or unable to purchase a home, they are still moving in record numbers and renting until the housing situation improves. This trend has increased demand for rental units in the multifamily segment. Home builders should monitor local conditions carefully, especially employment and mortgage rates, as housing demand will vary depending on economic factors at the local level.
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