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NAHB Eye on the Economy

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Data for housing construction activity in November indicate the recovery continues as builder confidence remains positive.

According to NAHB analysis of data from the Census Bureau and HUD, the pace of total November housing starts was down slightly (1.6%) from an upwardly revised October number. The October housing starts estimate was revised up from the initial reading of 1.009 million units (on a seasonally adjusted annual pace) to 1.045 million, with increases for both single-family and multifamily construction.

On a three-month moving average basis, total housing starts recorded a post-recession high and have now been above a one million annual rate for three consecutive months.

The rate of single-family construction starts came in at 677,000 in November, down 5.4% from the elevated October reading (716,000). On a three-month moving average basis, the single-family starts rate stands at 685,000, which is also a post-recession high. Multifamily starts of properties with five or more units increased 7.6% to a 340,000 rate in November. The starts rate for 5+ unit construction has been in an approximate stable range of 300,000 to 350,000 since August.

The November starts data was consistent with the most recent reading of builder confidence. Following a four-point uptick last month, builder confidence fell one point in December to a level of 57, according to the NAHB/Wells Fargo Housing Market Index.

After a sluggish start to 2014, the HMI has stabilized in the mid-to-high 50s for the past six months, which is consistent with our assessment that we are in a slow march back to normal. Heading into 2015, the housing market should continue to recover at a steady, gradual pace. Home builders in many markets across the country have seen their businesses improve over the course of the year, and we expect builders to remain confident in 2015.

After months of uncertainty, Congress adopted legislation that would extend a number of housing policies that expired at the end of 2013, although only for 2014. While this offers help for the coming tax filing season, Congress will once again need to deal with a set of expiring tax rules during the 2015 session.

These provisions include extensions of the 45L $2,000 energy-efficient home credit, the 25C energy-efficient remodeling credit, the deduction mortgage insurance (including PMI and FHA premiums), the 9% fixed rate for the Low-Income Housing Tax Credit, and the mortgage forgiveness tax exclusion. Builders, remodelers and their clients are well advised to research whether these extended provisions can provide a tax benefit for qualified activities in 2014.

With respect to monetary policy, the Federal Reserve’s Federal Open Market Committee concluded its December meeting. The Fed is confident that the economy is improving and cumulative gains in economic conditions most likely warrant increasing the funds rate sometime in 2015. A mid-year increase seems to be a consensus forecast at this point.

Consumer and producer price data for November show positive impacts due to declining energy prices. The consumer price index was pushed down in November by falling gas prices.  However, inflation-adjusted residential rents have increased 1.7% over the last 12 months.

For producers, overall prices declined by 0.2% in November. Softwood lumber prices declined 2.1% for the month but have mostly moved sideways in 2014. OSB prices ticked up 0.7% in November but are down 9.9% from year ago levels. Gypsum prices inched up 0.3% in November and have increased 11.1% over the last 12 months, with 2015 increases expected.

In analysis news, recent data from the Federal Reserve’s Flow of Funds indicates that price gains for housing have boosted household net worth. During the third quarter, the market value of real estate held by U.S. households increased by $180 billion.  Household equity in real estate increased 1.6% for the quarter. Lastly, NAHB economists used American Housing Survey data to examine homeowners’ disaster preparedness.

Source: http://newsmanager.commpartners.com/nahbeye/issues/2014-12-23-email.html

What Home Do Millennials Buy?

New NAHB research shows that millennials tend to buy homes that are smaller, older and less expensive than homes bought by older generations. Being the youngest home buyers with little or no accumulated wealth also affects how millennials shop for and buy their homes.

(View a Dec. 10 Fox Business news report where NAHB CEO Jerry Howard discusses millennial home buyers and the housing landscape.)

The majority of millennials are buying homes for the first time in their lives. Three out of four millennials who purchased a home were first-time buyers, but a quarter traded their existing homes.

Compared to older generations, millennials are less likely to buy a new home. Less than 9% of millennial home buyers bought a new home. The share was close to 12% among older home buyers.

More than two-thirds of millennials who bought homes purchased single-family detached properties. Nevertheless, compared to older home buyers, the millennial generation shows a slightly higher preference for multifamily condominiums. Close to 9% of millennial home buyers bought a multifamily property compared to less than 6% of older home buyers.

Consistent with being the youngest and largely first-time home buyers, millennials tend to buy homes that on average are smaller and concentrated in the lower price ranges compared to homes purchased by older generations. Half of all homes purchased by millennials averaged less than 1,650 square feet of living space and cost less than $148,500.

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The most common reason for moving reported by millennial home buyers is to establish their own household, followed by the desire to have a larger unit and own it.

When choosing a particular home, millennials are more likely to let financial reasons influence their choice, while older generations consider the right size most often.

When selecting a new neighborhood, the right house most often influences the decision for both millennial and older home buyers. However, millennials are more likely to also pay attention to proximity to work and having good schools.

Compared to older generations of home buyers, millennials are more likely to finance home purchases out of current income rather than out of accumulated wealth, and when taking out mortgages they are more likely to use unconventional zero-down mortgages.

 

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The research is based on the 2013 American Housing Survey (AHS), the most recent release of this ongoing biennial housing data collection. Only housing units purchased in the two years preceding the 2013 AHS interviews are considered. Housing unit characteristics are tabulated by the age of the household of head, a person in whose name the housing unit is owned. Millennial home buyers are householders that were 33 years old or younger in 2013 and bought homes within the two years prior to the AHS interviews.

The full report is available to the public as a courtesy of HousingEconomics.com.

Source:
http://nahbnow.com/2014/12/what-homes-do-millennials-buy/?utm_source=newsletter&utm_medium=email&utm_campaign=mmb1215

Douglas M. Hershman named 2014 Delaware Real Estate Lawyer of the Year

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HBADE member Douglas M. Hershman has been named Corporate LiveWire’s Global Awards 2014 Delaware Real Estate Lawyer Of The Year. Doug serves on the Mid-Atlantic 50+ Housing Council and as a Life Director of the HBADE. Please use this news in your The Daily Sticks and Bricks newsletter if you find it appropriate – and/or any other newsletter circulated by HBADE.

Doug is a director and chair of the Executive Committee at Bayard, P.A., a Meritas® member law firm based in Wilmington, Delaware. In its third year, the annual Global Awards Lawyer Of The Year recognition honors the achievements of those individuals that have consistently shown best practice and demonstrated general excellence in every endeavor on a global and national level. Doug leads Bayard’s diverse real estate practice, representing clients engaged in all aspects of the real estate industry throughout Delaware and surrounding states.

View the full story here.

2015 Kent County Profile

Profile Invitations 2015_Kent County

NAHB Joins EPA Wastewater Management MOU

A new agreement between NAHB and the Environmental Protection Agency gives rural and suburban home builders and developers a seat at the table when it comes to making rules for the 22% of new homes served by decentralized wastewater – or septic – systems.

NAHB has signed on to the Decentralized Wastewater Management Memorandum of Understanding (MOU) with EPA and other partners including the federalCenters for Disease Control and Prevention to work collaboratively with engineers, designers, installers and maintenance operators in the industry as well as state and local regulators to improve the systems’ overall performance and management.

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NAHB Environmental Issues Committee member Jim McCulley speaks at the EPA meeting.

 

It’s good news for builders who have been stymied by local regulators when they try to make plans in areas not served by municipal water systems. Lingering misconceptions about cost, liability, environmental impact and other issues, as well as outdated regulations that apply to older, less sophisticated septic systems, tend to hamper development.

An MOU renewal signing ceremony recently took place at EPA headquarters in Washington, D.C. NAHB was joined by two new signatories: the National Rural Water Association (NRWA) and the International Association of Plumbing and Mechanical Officials (IAPMO).

“Of our new partners, I’m particularly excited to have NAHB join this partnership,” said EPA Office of Water Deputy Assistant Administrator Ken Kopocis. “There is probably no other association with such a presence across the country who can help make a difference in decentralized wastewater system technology and education.”

NAHB and the signatory organizations will work collaboratively to:

  • Develop effective mechanisms for information exchange on program activities, regulations and plans for engaging members in decentralized system activities.
  • Continue collaborative efforts to develop training, credentialing and certification programs to improve consistency and competency among practitioners.
  • Develop a public awareness effort to promote improved system performance and management.
  • Develop materials for organizations interested in considering, planning or implementing decentralized systems for community wastewater treatment.

HBA of Delaware members Jim McCulley and Bob Thornton came to the signing ceremony. “NAHB is proud to be one of the signatories to this MOU because we believe that a commitment to decentralized wastewater is important for rural and suburban development, but also because it is crucial to water quality and water quantity concerns as we move into the future,” said McCulley, an environmental scientist.

Thornton, a builder and a licensed wastewater operator, has worked with Delaware engineers to develop an innovative decentralized wastewater systems and treat wetlands. “It is my hope that through the NAHB endorsement of this MOU, we can educate the public, regulators, and local and state government officials about the environmental benefits of decentralized wastewater,” he said.

Source: http://nahbnow.com/2014/12/nahb-joins-epa-wastewater-management-mou/

Bottoms Up: Nine Ways to Boost Profits

Consultant Chuck Shinn estimates that the average home builder’s annual net profit ranges from 3.5% to 5%. But the Littleton, Colo.–based founder of Builder Partnerships and Shinn Consulting contends builders need to earn at least 8% — and that they can net 20% more. “It doesn’t make any difference whether they’re [building] starter homes or move-up or whether the builder is urban or rural. It’s all based on how they run their business,” says Shinn, who has been collecting data on builder profitability for 40 years.

155329299Here are nine tips from Shinn and home building professionals that can help you boost your company’s profitability.

Maximize the Site

Balance Supers’ Schedules: Profitable builders are successful in striking the right workload balance for superintendents. When supers have too many homes to oversee, new communities can quickly spin out of control. But when they have too few, trades can run out of work and go looking for it elsewhere. “I don’t want my key trades to roll up their tools and go work for another builder,” Shinn says. “Once that happens, the super has lost control of his construction schedule.” Shinn recommends assigning 16 to 20 houses per super per community, and five to eight houses for scattered lots “because 50% of the super’s schedule is spent driving from one site to the next.” MJ Farzaneh, construction director at Home Creations in Moore, Okla., adds that a super’s experience is also a major factor. “If you have a smart guy who gets it, he can handle 30 houses at a time. But you don’t want to drown the new guy.”

Keep It Clean: Jobsite cleanliness “is our No. 1 focus,” says Brad Mooney, COO at Grand Rapids, Mich.–based Eastbrook Homes. “A clean jobsite runs so much more efficiently.” Shinn agrees, noting that when subs “don’t have to work around other people’s mess, their attitude changes, their performance changes, and they’re faster.” Eastbrook has also resumed jobsite inspections—which it halted during the downturn—at all stages of construction.

Partner with Subcontractors

Make Time for Face Time: When the home building market turned south, Eastbrook Homes met with its subs to figure out ways to shave costs while maintaining quality. Those face-to-face meetings yielded cost-saving methods that helped both the builder and its subs weather the recession. Now, Eastbrook’s Mooney divides subs into three groups—based on which contractors work most closely during each phase of construction—and meets with one group per month to discuss processes and how they can be improved. “Once you have subs embrace the culture of your company, that’s when it really starts working,” he says.

Be the Employer of Choice: With subcontractors, improving profitability hinges on one thing, according to Shinn: being the number one employer. “When I talk to trades, there’s normally one builder who is the builder of choice in that marketplace,” he says. “And it’s not that the builder pays more; in fact, it’s usually the opposite.” Why? Because employers of choice have tidy jobsites stocked with materials and have work ready when subs arrive. “Subs can get on the job, do the work, and get off the job—and not have to come back,” Shinn says. “Repeat and dry runs are a killer for subs.” And while payment doesn’t need to be the highest, it does have to be consistent.

Streamline the Schedule: “One challenge is a shortage of skilled workers in the field,” says Keith Porterfield, COO at Nashville, Tenn.–based Goodall Homes. “There are plenty of companies, but not enough actual framers swinging a hammer.” To ensure it has the labor it needs, Goodall streamlined its scheduling process. The builder now starts precisely eight homes per week and keeps a web-based master schedule that details which days each group of subs will be on site, with some wiggle room built in to avoid the plans from getting thrown off-track. “The plumber knows, before the home even starts, what days he’ll be doing a rough in, what day he’ll be doing a trim out,” Porterfield says. “Our trades are able to plan how much manpower they’ll need weeks in advance.”

Design for Efficiency

Let Data Rule: “Fall out of love with your houses,” Shinn advises, and instead hone in on potential customers’ needs and wants. Shinn encourages builders to sort local Census data by ZIP code to find out the population’s average age and education level and the area’s average rents and home values.

Standardize Options: Adopting an “all-inclusive strategy” helped Southlake, Texas-based Bloomfield Homes gain better control of its construction process, says Don Dykstra, the company’s president and owner. Most of Bloomfield’s features are standard, which leaves construction managers with fewer decisions to make and reduces mistakes. Eastbrook also cut back on options after years “where we would do anything” for buyers to get a sale, Mooney says. Eastbrook now offers more standard features and sticks to the plans sold. Shinn recommends polling prospective buyers to see what features they most value.

Optimize Systems: “Everything behind the walls, nobody sees,” says Ed Hauck, a consultant with Builder Partnerships who specializes in design efficiencies. But even out of sight, it’s still important. When builders don’t optimize I-joist systems or other wood products, they’re “leaving a couple thousand dollars on the table that nobody appreciates,” he notes.

Rethink the Box: Five percent to 6% of the cost of a home is “lost in an inefficient box,” Hauck says. And when inefficiencies are built into the design process, builders are forced to sacrifice the high-profile amenities that help make a sale. To make its boxes cost-efficient, Goodall Homes is putting together a team of engineers that will evaluate all new plans to optimize framing, room widths and lengths, and house widths and lengths. Goodall has also simplified side and rear elevations, freeing up funds to spruce up front elevations.

This article was originally published by Builder magazine, NAHB’s official member publication, and is made available courtesy of Hanley Wood.
© 2013 Hanley Wood, LLC. All rights reserved.

Source: http://nahbnow.com/2014/12/bottoms-up-nine-ways-to-boost-profits/ 

Douglas M. Hershman named 2014 Delaware Real Estate Lawyer of the Year

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HBADE member Douglas M. Hershman has been named Corporate LiveWire’s Global Awards 2014 Delaware Real Estate Lawyer Of The Year. Doug serves on the Mid-Atlantic 50+ Housing Council and as a Life Director of the HBADE. Please use this news in your The Daily Sticks and Bricks newsletter if you find it appropriate – and/or any other newsletter circulated by HBADE.

Doug is a director and chair of the Executive Committee at Bayard, P.A., a Meritas® member law firm based in Wilmington, Delaware. In its third year, the annual Global Awards Lawyer Of The Year recognition honors the achievements of those individuals that have consistently shown best practice and demonstrated general excellence in every endeavor on a global and national level. Doug leads Bayard’s diverse real estate practice, representing clients engaged in all aspects of the real estate industry throughout Delaware and surrounding states.

View the full story here.

New Castle County Workforce Housing is in Place

As you have probably heard, New Castle County (NCC) Council recently approved Substitute #2 to Ordinance 14—109 to enact their new Traditional Neighborhood Housing program.  This replaces the previous workforce housing program.

The new ordinance mandates that most new residential rezonings (greater than 25 homes) must contain at least 10-20% moderately priced dwelling units (MPDUs).  It also allows a density bonus for subdivision plans that voluntarily contain MPDUs.

We applaud the sponsor Councilman Hollins for his efforts and focus to create more housing for low and moderate housing.  During this process, HBADE testified at the Planning Board hearing, worked with Councilman Hollins and NCC officials in meetings and correspondence, and testified at the County Council meeting prior to the vote.

In the end, HBADE remained neutral toward the ordinance.  We believed that although the ordinance that passed was an improvement over the originally drafted bill, we asked Council to consider several other provisions, most notably that the mandatory provision in rezonings be made voluntary.  The ordinance received a great deal of debate among Council members and ultimately passed as written in Substitute #2 by a vote of 9 in favor and 4 opposed.

For existing communities or subdivision plans approved under the original workforce housing laws, they are not impacted by this ordinance and operate under the original stipulations, conditions and sun-setting provisions.

Thanks to our members Kevin Whittaker, Dev Sitaram, and Kevin Kelly for their help during our interactions with the County to help improve the ordinance. One major improvement we encouraged was that the affordability period for a home to remain an MPDU was lowered from 15 years to 10 years.

The major provisions of the new bill are these:

  1. In new residential rezonings, it is mandatory that 10-20% of the total number of homes must be MPDU’s.
  2. The MPDUs must remain afford-ably priced (sales and resales) for moderate income buyers for a period of 10 years.
  3. Developers that voluntarily include MPDUs in subdivision plans can achieve up to 20% density bonus in exchange for half of the density bonus increase dedicated to MPDUs.
  4. A contribution shall be made for all dwelling units that are not designated as MPDUs on all Traditional Neighborhood Housing Program plans. The contribution is $12 per $1000 building permit construction valuation which is deposited into the County Housing Trust Fund.  The original ordinance was written such that all subdivision plans appeared to be subject to this additional cost but the substitute #2 approved ordinance made clear this is not the case.
  5. MPDUs must remain afford-ably priced for 10 years.
  6. If builders are unable to sell their new homes to an MPDU qualified buyer for a period of one year, they may rent the home.
  7. In the case of resales to subsequent buyers of MPDUs, if the seller during the 10 year period is not able to resell the home to an MPDU qualified buyer with the home on the market for 180 days, they may then sell it at a market rate.
  8. There are other provisions governing payments-in-lieu of MPDU’s, providing MPDUs offsite, and provisions to address buyer income eligibility and pricing and qualifications.

This is a very broad overview.  Anyone with questions should contact NCC Land Use department or NCC Council website for a copy of the approved ordinance for complete details.

Happy Holidays from the Home Builder’s Association of Delaware

HBADE Holiday Post

HBA/DE Members in the News at National Level

HBADE Members in the News at the National Level

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We are proud to recently learn that several HBADE members have been appointed / reappointed to serve various national committees at NAHB.  This provides them the unique exposure to interact and learn from their peers across the Country, while helping to serve all of our interests at the National Association of Homebuilders.  As appointments, these are non-elected positions at NAHB and are in addition to numerous HBADE members serving as NAHB Senior Officers, and NAHB Directors.

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Steve Bomberger of Benchmark Builders, Inc. is busy at the state and national levels. Having served HBADE as a Past President, HBADE Life Director, and various committees, Steve was appointed to the NAHB Budget & Finance Committee, the Public Affairs & Association Communications Committee, and the NAHB 50+ Housing Council Board of Trustees as immediate past chairman.  Steve also represents Delaware on the NAHB Board as an NAHB Life Director, Delaware State Representative, and is the Delaware BUILD-PAC Trustee.

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Debra Young of EmpowerAbility LLC, just re-elected to HBADE Executive Committee as Associate Vice President, was reappointed a member of the NAHB 50+ Housing Board of Trustees.  This will be Debra’s second term on the Board. The new term begins at the conclusion of the International Builders Show next month and expires at the conclusion of the 2016 International Builder Show.  Debra also represents Delaware as the Associate State Director on the NAHB Board of Directors and is an invited Consultant Governor for the NAHB CAPS Board of Governors.

Congratulations to Debra and Steve for these appointments and we thank you for helping us serve the interests of the housing industry!

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