How will the custom home market change in the next 10 years?

Around the year 500 B.C., the Greek philosopher Heraclitus said, “Nothing endures but change.” Over the centuries his wisdom has proven correct time and again-except, for the most part, in the field of custom home building. True, new developments have taken place in materials science, mechanical systems, and building products, but generally speaking, the way a custom home comes together hasn’t changed much in the past 100 years.

The home building industry has always moved very, very slowly,” says timber-frame guru Tedd Benson of Bensonwood Homes in Walpole, N.H., who for years has been calling on his fellow builders to evolve more quickly.  “Historically, it moved even more slowly.  It was the same for about a thousand years, and then there were many changes at the end of the 19th century and in the first part of the 20th century-mostly concerning the integration of various mechanical systems.”  Custom builders tend to be skeptical of anything new, and with good reason: Plenty of unproven products and techniques have bombed over the years, leaving unhappy homeowners in their wake. “The skepticism is justifiable,” says John Connell, an architect and builder in Warren, Vt. “Builders learn what they know through a slow process of doing it. If they make a mistake, they lose a lot of money.”

How long will the low mortgage rates last?

March 31 loomed for months as the day when the U.S. Treasury would stop purchasing $1.25 trillion worth of mortgage-backed securities and effectively remove a major support to the fragile housing market.

But now that the program has ended, economists interviewed by BUILDER suggest that builders-and others involved in the housing market-don’t need to panic. “This has been so well advertised,” says Scott J. Brown, chief economist for Raymond James & Associates in St. Petersburg, Fla. “Investors have had plenty of time to get used to it. The Fed has been gradually unwinding its liquidity programs. … This is just one more step toward getting back to equilibrium.”

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Home buyers want Green

Why is its new “green” product working? Home buyers are attracted to houses that offer energy savings, affordability, and sensible design choices. For the past four years, the nation’s largest study of home design conducted by AVID Ratings confirms this fact. In 2010, the “AVID Home Design Driver Report” was released at the International Builders’ Show and outlined the results of its latest survey. Following the show, the study was reported by Market Watch and MSN, and became a headline news article on Yahoo’s front page, making it one of the most read articles in the U.S. that week.

The study surveyed over 11,335 homeowners throughout the U.S. who built a new home in the last nine years or purchased a newly constructed home within that same time period. Since these people lived in a newly constructed home, they had a higher probability of buying new construction again. So, we asked them to rate various home features as “if they were in the market to buy a newly constructed home.” The study identified six buyer segments: first-timers, move-ups, displaced (moving due to death, divorce, or work), empty-nesters, second homes, and custom home buyers. Each buyer was then asked to categorize various home features into one of the following: must have, really want, tradable, or eliminate.

For homeowners in the 2010 study, home energy-efficiency features outshone all else. The questions in this research study focused on a number of areas including both renewable materials and energy-efficient features. Overall, the energy-efficient features were the highest-rated home design elements of the study. When compared to renewable materials, it is evident that the renewable aspect of “green” has not yet penetrated consumer demand to the same degree as energy efficiency.

Builders today should recognize the clear advantage of new, energy-efficient homes over the resale market. For the first time in many decades, buyers recognize that today’s new homes are built with distinct advantages over yesterday’s homes. Houses that help pay for themselves through energy cost savings are a clear winner in the eyes of the consumer and offer an unprecedented opportunity for builders able to meet this growing demand. If you compare responses about green design features to the other types of home features asked about in this study, it is clear that home buyers want efficient products in their homes.

From Builder Online –  http://www.builderonline.com

Inventory of homes for sale shrinks for first time since January

After rising for nine straight months, the number of homes listed for sale fell for the first time in October across many U.S. markets.

The supply of homes available for sale in 26 major metropolitan areas fell by an average 3.3% last month compared to the previous month, the first month-over-month decline since January, according to figures compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif.

Inventory fell on a monthly basis in 22 of those markets. The figures include all single-family homes, condominiums and townhouses listed on local multiple-listing services in markets where the firm operates.

Nationally, inventories typically increase in October as sellers make one last push before the seasonal downturn in sales hits. Zelman & Associates, a research firm, says October listings have typically increased by 0.8% from September over the past 28 years.

Compared to one year ago, the October inventory in the 26 markets covered by ZipRealty was up 13%. Home sales have been at very low levels since buyer tax credits expired in the spring, and that led inventories to pile up this summer.

The decline could reflect the fact that some frustrated sellers are throwing in the towel and deciding to wait until next year in hopes that demand will firm up. Some banks have also stopped selling foreclosed properties in certain states, including Florida, as they take steps to correct document-handling errors.

In Orlando, for example, inventory fell by 6.4% in October, after five straight months of increases. Other large decreases came in Austin, Texas (down 7.6%); Denver (6.5%); and Seattle (6%).

Inventories increased in Southwestern markets, led by Las Vegas (up 3.7%); Tucson, Ariz. (1.7%); Los Angeles (1.6%) and Phoenix (1.4%).

California metros also posted the largest annual increases in housing inventory: San Diego was up 62% for the year, followed by San Francisco, up 53%.

Inventories are down for the year in three Florida markets—Orlando, Jacksonville, Miami—as well as Chicago and Charlotte.

Several cities have seen more than half of all homes listed for sale have had their prices cut at the end of October, including Jacksonville, Phoenix, Chicago, Baltimore, Boston, Tuscon and California’s Orange County.

From http://blogs.wsj.com/developments/2010/11/19/housing-inventory-declines/

Ups and downs continue for residential construction

Signs of strengthening conditions in the housing industry emerged in the final months of 2010. November’s new-home construction and sales data released by the U.S. Census Bureau—while a mixed bag of declines and increases—were mostly positive, reflecting on-going economic volatility within the broader recovery along with housing’s slow return to health. Existing-home sales and pending home sales also increased, according to the National Association of Realtors (NAR).

Overall residential construction permits and completions declined in November by 4 percent and 14.1 percent, respectively, while overall housing starts increased by 3.9 percent to a seasonally adjusted annual rate of 444,000. Single-family permits rose by 3.0 percent, and starts of single-family residences jumped by 6.9 percent to a rate of 465,000. Completions of single-family homes dropped by 10 percent, however, to a rate of 436,000.

New single-family home sales rose 5.5 percent in November to a rate of 290,000, but this is still 21.2 percent below the same period last year.

Multifamily construction remains depressed across the board, registering a 24.2 percent drop in permits for units in buildings of five or more units since October; this is 11.3 percent lower than in November 2009. Starts of multifamily units declined 18.2 percent in November, while completions plunged 30.5 percent since October—more than 73 percent lower than the same period last year.

However, according to the American Institute of Architects’ most recent Architecture Billings Index (ABI), the multifamily design sector led the way in November in terms of improving health, scoring an ABI of 54.3. Any score above 50 indicates an increase in billings by architecture firms.

When compared with November 2009, this November’s new and existing residential activity lagged significantly. But late 2009’s high levels were a result of the new home buyer tax credit, which had builders and customers bent on securing contracts and completing projects in time for the original Nov. 30 deadline.

Due in part to improved home affordability, existing-home sales rose 5.6 percent in November, according to the NAR, and Pending Home Sales increased 3.5 percent. Although there is still a 9 1/2-month supply of existing homes on the market, NAR’s chief economist, Lawrence Yun, predicts the excess inventory will be worked off gradually as unemployment declines, mortgage rates remain favorable, and lenders return to more normal lending standards. Yun expects the market will trend up to healthy, sustainable levels during 2011.

> From Custom Home Online 

The new car smell

With the average cost return of green building (8 years) being about the same duration as home ownership (7 years) – how do you sell it?  With the economy in the dumps and the main concern of buyers being cost, where is the benefit to build green, let alone quality finishes and fixtures within the building package?

Looking forward to your responses.