Erin Brereton

Oct 162008
 

More homeowners are opting to rent, rather than buy, according to a recent Apartments.com survey.

As MHN reported last week, the survey found that a majority of U.S. renters are families who want to rent instead of owning a home.

The survey found that 11 percent have been renters for less than a year; 41 percent have been renters for less than five.

Renting offers consumers a number of options: Flexibility, lower overall cost, maintenance-free living and the chance to live affordably in popular neighborhoods.

But could the increase in apartment popularity be the result of more than just convenience?

It appears that many potential homeowners may be making the move–literally–to renting because they’re concerned about the uncertainty of the current housing market.

And with good reason.

  • Value can be hard to come by: The Wall Street Journal reported last week that nearly one in six U.S. homeowners was underwater—owing more on their mortgage than their home was actually worth.
  • Even California is less than sunny: Take, for example, California’s market. It experienced some of the biggest highs during the housing boom and some of the lowest lows during the bust.

Since values began falling nationwide, California home prices fell rapidly, along with sales.

Sacramento prices dropped 29.2 percent to $258,500 from last year; Riverside prices plummeted 27.7 percent to $287,100, according to the National Association of Realtors.

  • And in Miami, the condo market has taken a nosedive. Consider South Florida. During the housing boom, condos were easy to find–and fund–in the Miami area.

However, as the local and national housing market slowed, condo construction, at least initially, didn’t. The result: Miami-Dade County currently has a 41-month supply of condos, according to The Miami Herald.

The Rental Market is Ready to Go

Yet while the Miami area condo market may be overstocked and selling slowly, its apartment community is thriving.

Mixed-use projects like Sunny Plaza, which includes an apartment component, are getting approved.

The trend even rings true in markets that have not seen declines as sharp as California or Miami, like the Quad Cities, where some homeowners who found they couldn’t afford their mortgage payments have returned to renting.

The demand for rental property is related to the increase in home foreclosures and the difficulty many potential homeowners experience when trying to buy a home, according to the Quad City Times.

Is Ownership Worth the Effort?

As lending restrictions tighten–buyers in the Bay Area trying to take out jumbo loans, which are necessary to purchase many of the homes in the region, have to put down as much as 30 percent in many cases, according to the San Francisco Chronicle. And, it continues to be hard for even borrowers with good credit to get a loan.

High foreclosures and falling home values are causing more consumers to rent, either out of necessity or because of market apprehension. It may be a temporary trend linked to the economy–or a large paradigm shift in the American dream of homeownership.

Either way, it’s time to start funding and building more rental properties in areas where home values have declined dramatically. Those cities and regions will have the biggest need for non-permanent housing as the local market rebuilds itself.

Do you think the industry is ready to handle the influx of renters?Erincolumnpic_2

Sep 122008
 

According to recent National Association of Realtors (NAR) predictions, the level of overall home sales–including multi-housing–is forecast to show little movement in the coming months.

The NAR’s Pending Home Sales Index dropped 3.2 percent from June to July–even with June’s reading being revised to 89.4. (The original reading was thought to be 89.0.)

However, the anticipated calm period isn’t necessarily a bad thing.

Sales rise, and sales decline–but when considering the big picture, many in the industry feel home sales will soon increase.

NAR’s Managing Director of Quantitative Research Jed Smith told MHN that while sales fluctuate from month to month, the market in general has bottomed out, is stable–and ready to rise.

Multi-housing market results would seem to echo that sentiment.

  • Yes, sales in the overall U.S. housing market have fallen. In the multi-housing market, condo and co-op sales are down 18.6 percent from 2007 levels.
  • So have some multi-housing prices. And as of July 2008, pre-existing condo and co-op prices for the overall market are down 2.7 percent from last year.
  • But they haven’t fallen everywhere. In some areas where the market didn’t need to undergo a severe correction–like the Northeast and Midwest, where prices remained relatively steady during the housing boom–condo prices are actually up.

Despite overall market struggles, there continue to be bright spots.

Take, for example, the new, $350 million, seven-acre mixed-use Old Spanish Village development in Coral Gables, Fla.

Florida’s condo market hasn’t had it easy. According to the Florida Association of Realtors, Florida condo prices have dropped 13 percent in the past year alone, falling from $194,100  to $168,500 in July.

And yet, despite statewide condo price declines, interest–and faith–in the market is strong enough to make a condo-intensive project like Old Spanish Village a reality.

The community will feature three mid-rise condominium buildings and 38 villa residences, priced from $500,000 to $3 million. The village will also house 250,000 sq. ft. of commercial space.

The response thus far has been amazing: Half of the condos sold at the pre-construction stage, says Jorge L. Hernandez, founder of Jorge L. Hernandez Architect, the firm that is designing Old Spanish Village.

Projects of this scope–new developments that will create entire new communities upon completion–indicate an ongoing confidence in the multi-housing market.

Mhw_40th_2
Erincolumnpic

Aug 262008
 

In July, the monthly total for consumers looking into specific apartment unit availability online hit–and passed–the one million mark for the very first time, according to Realty DataTrust’s VaultWare reservation system.

It’s no secret that online apartment searching is becoming more popular; given the current high gas prices–currently still above $3 a gallon–expect that trend to continue. People want to do as much research as they can online before heading out to personally view a property.

But as Realty DataTrust Vice President of Marketing Gina Kilker told MHN, checking availability online is just the start of the leasing process. It’s crucial you list your property on a site that will get it maximum exposure–in the right way, for the right price.

But how do you determine which site works best for your property and budget?

According to VaultWare, renters viewed five listing sites most often in July: Rent.com, Apartments.com, ApartmentGuide.com, ForRent.com and Move.com.

We took a look at the various sites’ listing policies to give you an idea of what each offers.

1. Rent.com –It’s free to list on Rent.com; the site charges a success fee of $389 per lease when it fills your vacancies.

Owners who manage fewer than 20 units can sign up for updates on Rent.com’s soon-to-be-released enhanced self-service platform. If you manage more than 20, you can contact the company about listing a large portfolio of properties on a permanent basis.

2. Apartments.com–Apartments.com also offers different deals for smaller-building owners and larger companies.

Premium Advertising Packages–available in platinum, gold and silver varieties–are designed for larger companies with ongoing ad needs. The Platinum package offers a wealth of community information, 360-degree views of units, priority listing placement in search results and a hard-copy version of your online ad that features color photos and community floorplans.

The other options offer slightly less features. For example, the Silver package includes interior and exterior building, amenity and common area photos only–and the For Rent By Owner package, designed to help smaller building owners reach more than 1.8 million renters, offers 30, 60 or 180 day packages with up to 20 photos.

3. ApartmentGuide.com –The site offers some interesting
enhancements, like online property commercials and a video spokesmodel
to represent your property in the listing.

For actual listing information–such as price or time duration–you’ll have to fill out a brief form with your contact and property information and be connected with an ApartmentGuide.com representative.

4. ForRent.com –With two advertising packages for small
communities–the Intermediate and the Deluxe listing, which cost $100
and $150–ForRent.com offers owners and managers a cost-efficient way
to reach renters. Both include photos (the Deluxe offers three; the
standard package includes one), a floorplan and general community
information.

Larger apartment communities can also list their property on ForRent.com. The packages for larger communities include photos, floor plans, maps and access to ForRent’s online Management Console, which provides 24/7 real time updates. Pricing is determined when you call or e-mail for a quote.

5. Move.com –You have to sign up for a Move.com account before
getting any information about how to list your property–but
registration is quick.

You have two basic options: One is the Showcase Listing, which the site says gives you the potential to receive up to 72 percent more clicks to your property detail page and is sold at a flexible monthly contract. The other is the Featured Listing, which gives you priority placement and allows you to pay only when your listing is clicked on.

Having an online presence is important–whichever site you choose to list your property on.

What factors were at play when you selected your online listing site?

What processes do you have in place to handle the leads being generated?

Erincolumnpic

Aug 142008
 

This week, MHN reported that New York-based residential firm Metro Loft Management will be waiving security deposits for renters with strong credit histories at its 20 Exchange Place building.

Condo and co-op sales have been strong in New York in the past year, despite a national housing slump.

The average condo price increased 36 percent from a year ago to $1,663,533, according to Halstead Property’s second quarter Manhattan sales report.

In some markets, strong home sales can weaken the rental market. That’s not the case in New York, however.

  • Yes, selling prices have remained fairly high through the housing slump. As prices fell throughout the rest of the country, the New York condo and co-op market stayed strong.

As standard single-family owners struggled to hold on to their declining equity–many of them discovering that they suddenly owed more on their home than it was worth–the New York market was so robust that buyers were eager to purchase luxury condos.

In fact, sales of units in two luxury developments–The Plaza and 15 Central Park West–alone pushed average Manhattan condo prices up.

Even without those numbers factored in, the average condo price would still be a respectable $1,656,210–which is 16 percent higher than 2007 levels.

  • The weak dollar attracted foreign buyers–which also helped fuel demand in New York. We can thank foreign investors, who the New York Times said "have helped keep apartment prices at stratospheric levels."

Yet, as the for-sale market increased, the rental market also remained highly competitive.

As of June, the Upper East Side showed the highest vacancy rate in Manhattan–which was just 1.45 percent. Overall, Manhattan’s vacancy rate was a scant 1.21 percent, according to Citi Habitats’ June rental market report.

It’s still expensive to buy a place in New York–$1,663,533, according to Halstead.

And, according to MSNBC, the average rent for a two-bedroom, unfurnished luxury apartment is $4,500 a month–which landed New York City the top spot on Forbes’ list of America’s most expensive cities.

Expensive rental markets can sometimes give the for-sale market a boost. Renters figure if they’re spending that much to rent, buying can’t be too much more.

The result: The rental market can falter.

That hasn’t happened yet in New York, however, which means rental property owners are still facing fierce competition to land renters. Which makes Metro Loft Management’s marketing idea a brilliant one.

A recent New York magazine article outlined how developers are decorating models to make it appear a very specific person lives there–one buyers might like to be–to help sell units.

Developers in the city are also marketing units with big bonuses like Gianni Versace SpA-designed luxury condos, which will be located in the clock tower of the former MetLife Inc. headquarters in Manhattan, Bloomberg reports.

According to a recent Canadian Press article, other residential builders are including resort-like amenities such as turndown service and pet sitting to make units more attractive.

In a tight market, creative marketing is crucial. What unique approaches have you seen recently in the multifamily industry?

Share your picks by posting below.

Mhw_40th

Aug 072008
 

Last week, the president signed a housing bill that gave the Treasury Department the authority to safeguard Fannie Mae and Freddie Mac and offered foreclosure prevention help for hundreds of thousands of homeowners.

Passed just a week ago by the House and sent to the president over the weekend by the Senate, the bill had been in the works for a long time.

Many members of the single-family industry hoped the new law, which includes a $7,500 buyer tax credit, would spur home sales.

But some multifamily industry members had expressed concern about parts of the bill–the tax credit in particular.

The National Multi Housing Council was against the $7,500 first-time homebuyer tax credit and questioned "using taxpayer dollars to encourage Americans to buy an asset that is likely to lose value in the coming months," Senior Vice President of Government for NMHC and the National Apartment Association Jim Arbury told the Philadelphia Business Journal.

Given that just last week the S&P/Case-Shiller index said home values are still falling–the index fell a record 16.9 percent in May compared to 2007 levels, and each of the 20 metropolitan regions had annual drops–that’s a fair assessment.

However, the tax credit isn’t so much of a concern anymore, according to the Business Journal, for a few reasons.

  • The credit’s income standards and repayment rules will reduce the amount of people who will use the credit. Those restrictions are considerable: The tax credit is $7,500 at most; if your adjusted gross income is more than $150,000 (or $75,000 if you’re single), the credit will be less.

If you financed the property with a state or local housing agency tax-exempt bond mortgage or don’t use it as your main residence, you also don’t qualify, according to the San Diego Union-Tribune.

And you’re not going to get a big check for the credit. It really works more as an interest-free loan, and buyers need to make pro-rata repayments on their annual tax filings for an up to 15-year period.

  • It’s also unclear how the law will affect single-family purchases because it eliminates seller-funded down payment programs for FHA-backed loans. According to The Wall Street Journal, they were used by as many as one in 10 buyers.

Down payment help programs make it easier for people to buy homes with no money down–given today’s tight economy, scraping together a decent down payment is no easy task.

But buyers who use FHA loans can’t take down payment assistance from the home seller (which is often funneled through a nonprofit group but really comes from a builder trying to sell a new home) starting in October. 

  • And of course, there’s always the question of whether or not the lending industry will embrace the new law. Some builders already have embraced the new provisions. Pulte Homes, for one, is offering a matching discount to the $7,500 tax credit being offered to buyers to spur home sales, according to BusinessWeek.

But no one is sure how enthusiastic lenders will be.

The program is voluntary, and lenders who participate must agree to take a sizeable loss and shrink the principal of each loan before refinancing. Also, Dan Gorczycki, managing director, Savills Granite, told MHN that servicers will have to pay taxes on delinquent loans.

Smooth Selling

As a result, the law really doesn’t appear to pose any kind of threat to the multifamily market.

In fact, the National Multi Housing Council (NMHC) praised Congress for working to add liquidity to the federal tax credit program to help production of affordable rental housing through the Low Income Housing Tax Credit (LIHTC) program. The National Apartment Association (NAA) and the National Association of Home Builders (NAHB) also expressed support.

The NMHC also noted that the continuing problems in the single-family market will only increase need for multifamily housing–rental properties and also condos which, as we’ve previously reported, have retained their value much better than single-family units in the past year.

The council is also likely to be pleased with what the legislation may do for apartment developers; it increases low-income housing tax credits that have prompted the building and conservation of almost 2 million affordable rental housing units, according to Business Journal.

And, as Gorczycki says, even if the new law helps 400,000 people sidestep foreclosure, there could still be 6 million who can’t avoid losing their home.

The truth of that number is that those 6 million people will need new housing–and many will opt for rental units because they are unable or unwilling to obtain financing to buy again.

No one wants people to lose their homes. But we need to make sure we’re being realistic about giving them incentives to buy new ones–and that our industry is prepared for the influx of renters who are due to hit it.

Hopefully, the new housing law will help both multifamily and single-family. Do you think that it will?

Mhw_40th

Jul 302008
 

On Thursday, the National Association of Realtors reported overall existing-home sales–including single-family, townhomes, condominiums and co-ops–declined 2.6 percent.

However, as MHN wrote, not all real estate sectors showed a decline.

  • Single-family sales fell 3.2 percent.
  • But condominium and co-op sales increased 1.7 percent.

Yes, condo and co-op sales are still below last year’s level. But the fact that they rose at all–as sales of other property types continued to decline–is good news.

As the single-family market continues to navigate through rocky waters, multifamily units are still moving for a number of reasons.

  • Lower prices are making condos an even bigger value. Single-family and multifamily prices have already plummeted a fair amount due to slow sales and a growing amount of foreclosures.

That’s not to say multifamily units with lower prices are worth less: It’s just a result of what’s been going on in the market for months.

As lenders who are eager to unload properties they’ve foreclosed upon put them up for sale at drastically reduced prices, median prices in the area often decline. (It is, after all, a competitive market.)

And there are plenty of foreclosures to alter the market: Just last week, RealtyTrac said foreclosure filings rose 14 percent over the past quarter.

As a result, prices have fallen in many areas of the U.S. In some areas where prices have already fallen a significant amount–such as condo-friendly Palm Beach, Fla.–condos are selling extremely well.

In June, existing condo sales in Palm Beach grew 9 percent–that’s compared to 2007 levels. June was the third month in a row the area saw an increase in sales compared to last year.

Part of the reason the condos are selling so well is that they’re cheaper than they were a year ago. The median price has fallen 24 percent, dropping from $201,500 to $153,200.

  • Cautious buyers could be multifamily buyers. Lower prices haven’t sparked sales everywhere in the U.S. In the past few months, experts have speculated that the bulk of potential buyers are waiting for prices to fall even further.

A recent NAR survey found about a quarter of potential home buyers are holding off on purchasing a home.

But buyer profit concern, along with tighter lending restrictions–especially for bigger loans needed to buy pricey properties–is good news for the multifamily market.

Buyers looking to spend less and secure a bigger return on their investment (for the most part, that’s everybody) are wise to consider a condo or co-op.

As the NAR numbers indicate, their resale value is stronger. According to the NAR, the national median existing sales price for single-family structures was $213,800 in June; the average condo sold for $224,200.

A Bright Multifamily Future

The increased demand for new multifamily units also indicates that their popularity with buyers–as well as with investors who are backing the projects–is on the rise.

Led by a 242 percent jump in the Northeast, construction of multifamily units increased 43 percent to an annual rate of 419,000 in June, according to the Commerce Department.

At the same time, single-family construction fell 5.3 percent, hitting its lowest level since 1991.

Why such a difference? There are a number of possible reasons: The investment potential a condo offers; a growing concern about buying large, expensive single-family properties that may not resell well down the line; higher gas prices that are prompting consumers to look downtown to avoid long commutes.

We many never isolate a single reason why multifamily properties have remained strong throughout the housing slump–but we do know that the strength of the multifamily market could help us get out of it.

Some, including NAR chief economist Lawrence Yun, are hoping first-time buyers will reinvigorate the market. Yun recently noted that roughly four in 10 properties are bought by first-time buyers, allowing pre-existing homeowners to trade up into a new property.

Because condos are a popular choice for first-time homebuyers due to their size, price and amenities, it’s entirely possible that the high demand for new condos and strong sales of pre-existing units could give the overall housing market a big boost.

Why do you think condos are still selling well? And what role do you think they will play in the future of the housing market?

Tell us what you think by posting below.

Mhw_40th

Jul 242008
 

Last week, California became the first U.S. state to issue a mandatory green building code that will require energy efficiency and less water consumption. Regulations for single-family, multifamily and commercial structures are also part of the new code.

It was a big move for the golden state, and a popular one–the California Building Standards Commission voted unanimously for the green building code, which was designed to reduce greenhouse gas emissions.

As MHN reported Monday, the new code will improve water usage in both commercial and residential plumbing fixtures and aim for a 50 percent landscape water conservation reduction.

  • Builders will also be encouraged to reduce energy use by 15 percent more than today’s current standards.
  • The code also emphasizes using recycled content in building materials and carpets and suggests site improvements like hybrid vehicle parking and stronger storm water plans.
  • Until 2010, the code regulations are optional; after 2010, they’re mandatory.

(Other areas are embracing green building, too. In Seattle, the mayor recently suggested changes to the multifamily building code that included adding green roofs and less–or no–parking in developments that are close to mass-transit, according to the Seattle Times.)   

California Building Standards Commission Chair Rosario Marin praised the commission for uniting construction and building industry representatives, environmental groups and labor organizations. 

It’s certainly something to be proud of—by taking a decidedly sustainable stand, California is working to reduce the environmental impact of new construction.

And it’s a decision that the multifamily market can feel good about.

  • It’s a strong marketing technique. It’s true, green building can produce some higher upfront costs–but it also offers long-term savings for owner/investors, and provides leasing agents with an added-value for renters.   

And–according to news on the single-home front–in a recent article about builders attempting to move unsold homes, the San Jose Mercury News pointed out that one major technique builders were using included "trying to woo customers with green building techniques and energy-saving features."

  • Green urban areas—designed to negate car usage—are more popular. Energy costs are also persuading buyers to look in urban rather than suburban areas.

As gas stubbornly remains above the $4 mark—with little sign of dropping–they’re eager to avoid long commutes and trips to stores, restaurants and other locations.

"People are now saying affirmatively they want to live closer to town centers and have a shorter commute," Lawrence Yun, National Realtors Association economist, told U.S. News & World Report. "And smaller homes mean less energy consumption."

That’s more good news for the multifamily market.

It’s good news, too, for urban planners who have been trying for decades to get Americans to embrace a more compact geographical pattern, according to U.S. News & World Report.

"To be honest, I feel that rising gas prices…are going to do more for good, sustainable urban planning than the entire urban planning profession," says Thomas Campanella, an associate professor of city and regional planning at the University of North Carolina—Chapel Hill.

Space constraints in urban areas have typically meant multifamily buildings were the best, or only choice for development.

If more buyers are looking in downtown areas because high gas prices are making them reconsider long commutes and car-intensive lifestyles, it could be a huge boon for multifamily building.

(Sort of makes the hefty cost of filling your car up seem a little less painful, doesn’t it?)

Cost remains a concern, but the evidence is overwhelming: Green fever is spreading, and going green is becoming increasingly popular in the multifamily market.

And one day, apartment renters and buyers will simply expect it.

Mhw_40th

Jul 172008
 

This week, the U.S. government said it would step in to help bolster Fannie Mae and Freddie Mac.

Despite the fact they each have access to a $2 billion line of credit from the government, the two mortgage companies are, for the most part, private firms. 

On Sunday, Treasury Secretary Henry Paulson suggested increasing that line of credit significantly. The Fed also said it would let the agencies borrow money at a special rate.

Déjà vu Rescue

This isn’t the first time the government has stepped in to assist a company this year.

Four months ago, the government–with no official congressional approval–utilized emergency rights to stop investment firm Bear Stearns from collapsing, a move that was most likely justified to prevent a global economic fallout, the Washington Post says.

And because the effect of the ongoing credit crisis is being felt on a global scale, government intervention isn’t limited to the U.S.

In September, the Bank of England stepped in to save U.K.-based lender Northern Rock, which had asked for help, creating the first run on a U.K. bank since Victorian Times, according to the Independent.

And–because no one is sure the global credit issues are close to over–the U.S. isn’t ruling out further intervention in its investment banks’ affairs, including:

  • Additional funding. Last week, Fed Chairman Ben Bernanke said that the Fed might continue to provide emergency funding to other investment banks past the original September expiration date.
  • Oversight rights. He also said that the Fed and the Securities and Exchange Commission have worked out an agreement that will allow the Fed to access investment banks’ private data.

A Friend to Fannie and Freddie

And now, the U.S. government is lending Fannie Mae and Freddie Mac a hand.

The agencies own or guarantee almost half of the $12 trillion in U.S. residential mortgage debt, according to Bloomberg.

For years, they’ve been an integral part of the housing market. And recently, in an effort to help correct the housing slump, they’ve been given greater access to it by being allowed to enter the jumbo loan market.

"The GSEs now touch 70 percent of new mortgages and represent the only functioning secondary mortgage market," Paulson told senators. "The GSEs are central to the availability of housing finance, which will determine the pace at which we emerge from this housing correction."

The government has quite a bit invested in their success–and good reason to make sure they don’t go away.

"Shares of Freddie have fallen and things are bad for them on paper, but in day-to-day life, it has not affected them at all," Susan Blumberg, senior vice president of NorthMarq’s Chicago office, told MHN. "We have a very strong working relationship with Freddie. The way we see it, the multifamily aspect of these companies has been very strong with low delinquencies. This is a knee-jerk reaction toward their single-family business."

And, if the government can help with some extra capital, the agencies should look even stronger soon.

There’s been a lot of news involving Fannie and Freddie lately; but many in the industry think most of the hype is unfounded, including Jerry Howard, executive vice president and CEO of the National Association of Home Builders (NAHB).

"Fundamental analysis and statements from top federal government officials point out that the hysteria in the markets regarding the viability of Fannie Mae and Freddie Mac is unfounded," Howard said.

And–government assistance or no government assistance–Freddie Mac is confident about the future.

"We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets," Daniel H. Mudd, president and CEO of Fannie Mae, said in a statement.  "Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market. We will continue to do our part to provide liquidity, stability and affordability to the housing market now and in the future."

Which poses an interesting question: Should the government intervene more often in private financial company problems, like it did with Bear Stearns, or should it have a hands-off policy?

Some analysts say that as the U.S. economy continues to struggle and the global economy works its way through the current credit issues, government help will become more and more necessary to contain any fallout.

Others argue the government has no place monitoring private companies–or helping them with monetary infusions.

What do you think? Is it a good idea for the government to intervene in private company affairs?

Share your thoughts by posting below.

Mhw_40th

Jun 302008
 

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?

21152mhw

Jun 272008
 

Higher gas costs are driving up prices for a number of things–airfare, pharmaceuticals, even golf balls–and they’re taking a toll on builders, too.

Soaring energy prices have raised construction material prices for both commercial and residential builders, the Dallas Morning News said Friday.

In fact, construction costs are rising at more than twice the level of overall consumer prices, according to the Associated General Contractors of America–and costs for some building materials, like steel, concrete and roofing materials, have increased even faster.

The higher energy costs translate into higher production prices for building materials, Federal Reserve Bank of Dallas economist D’Ann Petersen told the Morning News.

Raw material prices are also on the rise, which doesn’t help.

Unfortunately, higher concrete costs aren’t the only price challenges homebuilders are dealing with.
Suppliers–who are also struggling–are in some cases trying to make up for losses by adding fuel surcharges onto delivery costs.

Andy Haymaker, president and co-owner of HM Homebuilders in Lexington, Ky., told Business Lexington he has been getting three or more notifications of new surcharges each week from his suppliers.

"All my deliveries from lumber companies are now charging, and they never used to. The cost is being passed on to the consumer," Peter Oakley, owner of Oakley Construction in East Bridgewater, Mass., told the East Bridgewater Express.

The charges can add $25 to $50 per delivery; for a construction project averaging 10 deliveries of essential building materials like brick, lumber and shingles, that can add up, Haymaker said.

Which is something to be aware of when calculating–and quoting–job estimates.

  • Confirming whether or not fuel surcharges will be added to delivery costs before you place orders can help.
  • Locking in prices for building materials with suppliers as early as possible when you start a project is also a good idea.

Passing the increase on to buyers is one way of buffering the cost.

But it’s also important to recognize that homeowners and prospective buyers–who we are all hoping will stop thinking about buying, and start buying in big numbers–are concerned about rising energy costs, too. 

According to Chicago Tribune columnist Mary Umberger, energy discounts are one of the hottest new builder incentives.

Forget flat-screen TVs; free gas may sell your unsold homes.

That’s what some builders–like Kimball Hill Homes, which is offering $50 gas cards to buyers who pre-qualify for a loan with its mortgage subsidiary–are banking on. Kimball Hill is also offering agents gas cards for bringing in clients.

New York-based Crescenzo Construction Inc. is offering free electricity to buyers at its Benck’s Farm development. The developer will pay your electric bill–up to $150 a month–for 10 years.

Dealing with higher energy costs may be a challenge to your business–but it may also be a way to push unsold homes.

Incentives can be a great selling tool; but the economy is down, and frankly, people are less concerned with getting a luxury item than they are with being able to afford heat.

Provide potential buyers with a way to reduce their energy cost concerns–via a gas card or electricity discount–and the decision to purchase a home may seem a little bit easier. 

After all, if we’re going to have to pay more because of increased energy costs, shouldn’t we also be able to use them to make money?

21152mhw