Green building has grown exponentially in the past few years. Since 2003, the number of cities with green building programs has increased 418 percent, according to the American Institute of Architects.

And green building is about to grow even more: The green home market is forecast to increase from $2 billion to possibly $20 billion over the next five years, according to a recent report that was co-sponsored by the National Association of Home Builders.

Across the U.S., the frenzy is growing in states such as:

• North Carolina: Between June 2007 and January 2008, the number of certified and completed homes built in western North Carolina as part of the NC HealthyBuilt Homes program–a voluntary, statewide green building certification program–more than doubled, according to the Western North Carolina Green Building Council. Almost 668 are currently in development.

• Indiana: About 60 members of the Builders Association of Greater Indianapolis have joined its new green building committee, Indy Green Build, which is a local branch of the National Association of Home Builders’ National Green Building Program.

Roughly 141 Indiana residents have attended a two-day workshop and earned the programs’ new Certified Green Professional designation since February, according to the Indianapolis Star.

The Price Is Right

Feeling like the home you bought or built could help save the world is one thing. But there’s another reason green building is picking up steam: People are looking to cut costs.

"Everything [green] is going through the roof and shows no sign of stopping," Stephens Farrell of Stephens Smith Farrell Architecture in Asheville, N.C. told the Ashville Citizen-Times. "The thought of owning a 4,500-square-foot, poorly conceived and insulated house 45 minutes from work send shivers down people’s spines when they think about $4.50 gas."

Green building’s energy-saving advantage also has helped it gain industry approval.

• A National Association of Home Builders study found that 90 percent of homebuilders were using green ideas in 2007, according to an article in the Economist.

• Even banks are getting in on the action. As we discussed in September, lenders like Bank of America have created financing packages for green building.

Its popularity is growing in part because it is cheaper to build green these days. It used to cost 15 percent more at least, according to Christi Graham, president of West Coast Green. Now building green ads just 5 percent or less to a project, according to estimates from industry leaders like the World Business Council for Sustainable Development.

A Reason To Buy

As residential building continues to slow–according to the most recent government report, single-family home starts hit a 17-year low in May–homebuilders are finding that energy efficiency can be a big selling point because it can help homeowners save on housing expenses over time.

However, it’s important to distinguish between greater energy efficiency and green, says Phoenix-area remodeler Philip Beere, who owns the Ecofresh Planet cleaning business and formed eco-friendly development company Green Street Development in 2007.

"I think it’s great that the big builders are getting on board to make a better home," Beere told the Arizona Republic. "However, it should be advertised for what it is, which is an efficient home, not a green home."

Some builders-like Shea Homes, headquartered in San Diego–have made sweeping efforts to go green.

The company–which is one of the largest U.S. homebuilders–kicked off an initiative in January to cut the carbon footprint of each new home by 20 to 30 percent in its Trilogy communities, which have water conservation features and use less lumber, the Republic said.

And–even though the homes don’t quite meet LEED standards–it’s important not to get caught up in classification and remember that they’re helping the environment, right?

Shea’s Area President of Shea Homes Active Lifestyle Communities Hal Looney thinks so.

"We’re building a couple of thousand homes, so the [environmental] impact will be a lot greater than four or five custom homes," Looney said.

He has a point. The company predicts that its Shea Green Certified Home program will save it from using more than 8.5 million gallons of gasoline and have the same effect as planting 1.9 million trees over the next 10 years.

It’s Time To Build Green

However, even with noble efforts like Shea Homes’ program, we still have (green) work to do: According to a report by Bethesda, Md.-based investment company The Calvert Group that studied the 13 biggest publicly traded homebuilding companies, most still could add more green offerings, the Gazette reported earlier this month.

According to the report, "while every major homebuilder has incorporated some environmental and efficiency programs and products into some of their new homes, none has fully embraced the emerging market of sustainable building design and construction."

The economy is down, and green certification takes time and money; getting LEED certification on a project does, too.

But as new home sales continue to be rocky–the amount of signed contracts increased 6.3 percent in April, according to the National Association of Realtors, but the National Association of Home Builders/Wells Fargo builder confidence index reached a low point for the second time in the past 12 months in June–builders need to be looking for any sales hook they can find.

And the truth is, saving homeowners money is probably sustainable building’s biggest sales advantage.

Which is why, as energy costs rise, to developers, builders, real estate agents and–most importantly–buyers, green homes can look decidedly golden.

Isn’t that reason enough to go green?

The second largest homebuilder in the U.S., Lennar Corp., announced its fifth quarterly loss in a row today–which unfortunately wasn’t the only the only sign this week that building industry stress is mounting.

Miami-based Lennar has had to cut prices to draw buyers, and as a result, its fiscal second quarter results were low: The company had a net loss of $121 million.

Revenue fell 61 percent. And even though there were some glimmers of hope in Lennar’s report–its cancellation rate fell from 29 percent last year to 22 percent–Lennar’s future looks anything but rosy because new orders declined 45 percent to just 4,396.

"The remainder of 2008 will likely see further deterioration in overall market conditions," Chief Executive Officer Stuart Miller said in a statement.

In California and Nevada, home deliveries dropped 56 percent. The number of homes sold fell 61 percent in Arizona, Colorado and Texas–and by 65 percent in Maryland, Florida, New Jersey and Virginia.

Lennar’s situation is no isolated incident, which was clear at the Pacific Coast Builders Conference in San Francisco this week. The annual show–which drew 35,000 attendees two years ago–saw just 18,000 to 20,000 this year, according to the San Francisco Chronicle.

The lower attendance numbers aren’t exactly a huge surprise–the National Association of Home Builders’ International Builders’ Show in February had just over 92,000 attendees, a decline from last year’s more than 100,000, and building is slow in California–but that’s no vote of confidence for the industry, either.

Which is why the Chronicle article also outlined some of the things builders are calling for in order to salvage the housing market:

• Builders want a tax credit for buyers to perk up market activity.

• Builders also want Congress to permanently increase the conforming loan limit–which will expire at the end of 2008–to lower the price of mortgages in high-cost markets like California.

• And California builders want state legislators to expand the time for builders to finish already-approved projects and to postpone fees so developers can pay them when homes are sold instead of when new home construction projects are approved.

We know the market mood is low: Last year, the National Association of Home Builders/Wells Fargo builder confidence index averaged around 27; in June, it hit 18–the second time the index has reached that low point (the first was in December).

Some changes from the local and federal government could have a huge impact on homebuilders’ business; but do you think the changes the Chronicle mentioned are enough?

Will they be effective? As Bloomberg reported Tuesday, Freddie Mac is likely to purchase a much smaller amount of jumbo loans than had been originally predicted this year; Freddie Mac and Fannie Mae’s involvement in the market has been sort of underwhelming. So will keeping the higher loan limits really make that much of a difference?

And a tax credit be enough to encourage buyers still nervous about the state of the market to buy homes?

What do you think?

It’s Federal Reserve meeting day–and the world is waiting to see how heavily inflation will weigh on the central bank’s decisions.

Although the Fed won’t release a statement until the end of the meeting on Wednesday, anticipation is building that the central bank will leave interest rates alone, according to Forbes.

The Fed also is likely to comment on the issues facing the U.S. economy–including inflation; some forecasts suggest the Fed will hold its main short-term lending rate at 2 percent for the months to come.

Few sources are predicting the Fed will again cut rates this week.

For almost a year, the Fed has offered aggressive cuts. But all the while, the board voiced their concerns about the need to closely monitor inflation.

Although the cuts had a questionable effect on housing–from April to September the cuts pulled adjustable mortgage rates down by just a half a percentage point, and banks remained nervous to lend to each other–they may have helped prevent the slowing economy from slipping into a recession.

• Federal income tax rebates, strong exports and the Fed rate cuts helped the economy exceed expectations this year, according to USA Today.

• But it may not have grown enough: Unemployment increased from 5 percent in April to 5.5 percent in May, and the overall economy only grew by an 0.9 percent annual rate in the first quarter.

The IRS tax rebates–which are still on their way to consumers–are expected to give growth a push; however, once they’re spent, spending and business activity could slow down, USA Today says.

The Fed cuts also had a dark side. While the cuts gave the U.S. economy a shot in the arm, they also weakened the dollar. As imports grew more expensive, inflation grew, too.

And, it would seem, inflation has moved to the front of the concern line.

Inflation is increasing on a global level. Why? The dollar has less power–and the world is taking notice, according to The Wall Street Journal.

And let’s not forget about one of our largest domestic issues: Housing. Last week, 30-year mortgage rates hit their highest level since September, according to Freddie Mac.

Recent reports outlining higher consumer and wholesale prices in May also helped escalate the general concern about inflation, said Frank Nothaft, chief economist at Freddie Mac.

As inflation worries grew, so did speculation that the Fed would lift rates in September, according to the San Francisco Chronicle.

Earlier this month, Fed Chairman Ben Bernanke said the economy had escaped a "substantial" decline–but also said inflation was becoming a bigger concern.

Wages aren’t keeping up with higher food and gas costs; the overall economy may have fared well thus far, but many Americans haven’t.

According to Moody’s Economy.com chief economist Mark Zandi, the Fed has several pressing concerns–the unstable financial system, increasing job losses and inflation risks, USA Today says.

"In effect, they have three problems–but only one interest rate," Zandi said. "This makes for very tough policy decisions and leaves policymakers vulnerable to increasing criticism no matter what they do."

Well, the Fed’s no stranger to criticism (remember that New York Times article from January that essentially said Bernanke was a pushover?).

But with the increasing inflation, financial market and unemployment concerns, it’s hard to say exactly what the best course of action would be.

And it’s hard to guess what the Fed will do. We didn’t expect all those rate cuts at first, either.

Do you think the Fed will hold rates steady this week? Share your thoughts by posting below.

New York City’s rental market is legendary: Because buying a home within city limits is so expensive, the city has long been a renter’s market.

But now–thanks to new rent increases, which the board in charge of New York City’s rent-stabilized apartments passed yesterday–renters may find their cost of living is about to rise.

New York’s high housing demand has pushed apartment costs up to unbelievable levels in recent years–which renters are happy to pay.

With rents averaging $2,922, Forbes selected New York as the most expensive city in the country, noting that its 2.8 percent vacancy rate should keep the market moving.

There’s no question about it: New York is expensive. Its average rent is $1,000 more than America’s second most expensive city–San Francisco–where typical renters pay $1,904 a month.

Because the city’s rental market is so costly, the state of New York has taken steps over the years to ensure some affordable living is available.

• Some of New York’s buildings are rent controlled, mostly residential ones built before 1947. Renters must have been living there since before 1971 to take advantage of the cheaper rents, which are determined by the Maximum Base Rent system.

A maximum base is set for each unit and is altered every two years to make up for operating costs. Rents can only be raised 7.5 percent each year until the set limit is reached, according to the New York City Rent Guidelines Board.

• Other units in the city are rent-stabilized. Stabilized buildings typically include at least six units and were built before 1974.

The system may be helpful to some renters, but it certainly isn’t simple–even the board’s Web site describing the characteristics of a rent-stabilized apartment doesn’t fully say what the classification entails.

Because some buildings can have a few–but not all–rent-stabilized apartments, the board says to be rent-stabilized, an apartment must have had a rent of less than $2,000 for someone who moved in during 1993 or later.

However, it cautions, "there are many exceptions to these rules." To make things more convoluted, new buildings can be rent-stabilized because of a 421-a or J-51 tax exemption–even if the rent is more than $2,000.

Sound confusing? Things just got a whole lot more complex.

On Thursday night, the Rent Guidelines Board approved a maximum increase of 4.5 percent for one-year leases and 8.5 percent for two-year leases.

In addition, the board also voted to allow a rent increase option for any buildings that have had the same renters for six years or more–they can be charged either the new increases or a $45 or $85 monthly increase, depending on whether they have a one- or two-year lease.

The increases were the board’s biggest since 1989–and didn’t sit well with renters at the meeting, who the New York Times said shouted and booed.

Understandably, no one wants higher rents. The economy is tough right now: Unemployment is down, food costs have grown and many people have less to spend or save.

And the New York housing programs were established to help keep poor and working-class Americans in the city by giving them more affordable rent–keep raising that monthly amount, and they’ll be priced out, fast.

But some consideration needs to be given to the property owners, too, who–as energy and other costs rise–are also struggling.

The higher oil prices are making heating large buildings astronomically expensive. (Which is probably why, as Newsday reports, renters who pay for heat could see their rent increase less–4 percent for one-year leases and 8 percent for two-year ones).

Which is why some said that the increases weren’t enough, according to the Times; others said it would at least help some of the small-property owners who have had renters paying as little as $500 a month for years.

But who should get the bigger break? Renters who are trying to find a way to live in the country’s most expensive city? Or property owners who are getting squeezed by rising energy and maintenance costs?

Is there a compromise that might make both groups happier? What do you think? Tell us by posting below.

California has given us many wonderful things–Hollywood. Disneyland. A gold rush.

And now, it may be about to give the housing market a huge gift: Hope.

That comes courtesy of a quarterly report from the University of California, Los Angeles–released today–which says that while California home prices are still low, the number of condos and single-family homes being sold is rising in some areas.

Why should we care about home sales in one state? Because it’s California, which is:

• The most populous U.S. state;

• One of the regions that saw the biggest price increases during the housing boom and, during the following housing bust, saw prices plummet–early on-more than many states;

• An area where subprime mortgage issues were especially prevalent, increasing foreclosures and causing home price declines. Mortgage defaults grew 143 percent to the highest level in 15 years in the first quarter of 2008,
  according to DataQuick Information
  Systems;

• A state that has helped highlight the ripple effect of the housing slump. When Home Depot sales dropped, they dropped most in California and Florida; when the big spring moving season started off slow, the Los Angeles Times was one of the first to report in May that movers were struggling;

• And because California could be the first state to indicate the housing slump is beginning to turn around.

According to the Times, the lower home prices have increased first-time buyer activity, opening up homes to a group that couldn’t previously afford to buy in the pricey California market.

That’s not to say the housing market in California is going to radically improve soon. The UCLA Anderson Forecast said that the effect housing will have on the economy could be the worst since the Great Depression.

But although the report said the state’s economy won’t fully recover until 2010, it said California will avoid a recession.

"The witch’s brew of the popping of the housing bubble, a wounded
financial system and increasing inflationary pressures coming from
rising commodity prices will keep the economy on a sub-prime growth
path for the next several quarters," David Shulman, a senior UCLA economist, told the Los Angeles Times.

According to the Anderson Forecast UCLA report, foreclosures will still be an issue in California–and the housing market isn’t out of the woods yet.

But the sales gain in parts of the state is a good sign, Bloomberg said. It indicates that–unlike the 1990s recession–California’s pain will be severe, but quick (Well, quicker.)

When aerospace and defense and other workers lost their jobs in the 1990s, foreclosures rose. But they didn’t hit their high point until the decade was close to over–in 1997–after employment had already risen.

In the current housing slump, the falls were fast and furious–but hopefully won’t outlast the next two years.

In which case, California could be a sign that the entire market is on the mend.

What do you think?