There were no shanks or misses for the 2013 Golf Classic sponsored by Stock Building Supply and presented by Piedmont Natural Gas. The Preserve at Verdae golf course was full and so were the beverage carts. There was a great breeze, the sun was shining, and lunch was provided by Builders First Source- it was perfect weather to be out doors, especially to be playing golf. The afternoon ended with an Awards Dinner sponsored by Charter Business, in which there were lots of prizes and give aways and 1st, 2nd, and 3rd place winners received cash prizes. The 1st place winner of the tournament was Charter Business with a score of 57 and included team members Chris Robertson, Ernie Sallas, Phil Macowski, and Ken Mullins. 2nd place went to the Waste Industries Team with a score of 58 including Cody Hutmaker, Shawn Haines, Keith Dowling, and Mac Johnson. 3rd place was Greenville Carpet One with a score of 58 and included Michael Wilson, Chip Pringle, Tommy Dacus, and Matthew Porter.
The HBA of Greenville would like to thank all of the sponsors and participants who helped to make this event such a success and so much fun!
A special thanks to our volunteers who included:
Deana Long - GBS Building Supply
Mike Freeman- ACA/ Freewood Builders
Eddie Howard- Howard Custom Builders
Tim Joiner- Palmetto Exterminators
Andrew Woodford- ABW Construction
Mike Bell- The Cook's Station
Wayne Moore- Harold Moore Builders
If you missed out this time we are looking forward to next years Golf Classic and hope to see you then!
The HBA of Greenville office will be closed Monday, May 27th in observance of Memorial Day. The office will reopen on Tuesday, May 28th.
Thank you and have a GREAT weekend!
Greenville business owners and HBA members Thomas Dillard and Kathy Vass have formed a new Greenville-based real estate company. Blu-Sky Group LLC is a real estate development, marketing and sales firm that focuses on residential and commercial properties.
Dillard is president of Dillard-Jones Builders LLC. Vass is president of Vass Markets Inc., a marketing and public relations firm.
Blu-Sky Group is representing The Ridges at Paris Mountain, a new 18-residence master planned community on Altamont Road that features views of the city of Greenville on the development’s south side and the Blue Ridge Mountains on its north side. The Ridges at Paris Mountain has been selected as the site of the 2014 Southern Living Showcase Home by Dillard-Jones Builders, which will open next spring.
Dillard and Vass will serve as managing partners of Blu-Sky Group.
Jamie McCutchen, P.E., president of CCAD Engineering, represented the seller in multiple lots at The Reserve at Green Valley in Travelers Rest.
What: HBA of Greenville Appreciation Night at Downtown Alive
When: Thursday, May 30th, 5:30 p.m. until 8:00 p.m.
Where: Piedmont Natural Gas' VIP area on Main Street near the Hyatt Downtown Hotel
No registration necessary. Simply show up and enjoy the evening with great food and beverage.
In a victory for NAHB, the U.S. Court of Appeals for the District of Columbia on May 7 struck down a National Labor Relations Board (NLRB) rule that would have required millions of employers across the nation to place 11-inch by 17-inch posters in a prominent area in their workplace that informs employees of their right to form a union.
The court ruled that the NLRB overstepped its authority when it issued the poster rule, which deemed failure to display the required notice an unfair labor practice. The decision stated that the NLRB lacked authority to promulgate such a rule because Section 8(c) of the National Labor Relations Act provides that the dissemination (or non-dissemination) of non-threatening speech shall not be considered an unfair labor practice.
NAHB is a member of the Coalition for a Democratic Workplace, which was a party to the case. NAHB and other business organizations maintain that the poster rule violated free speech rights and amounted to little more than advertisements for union membership.
The number of U.S. housing markets showing sustained improvement in three key measures fell slightly to 258 in May from 273 in April, according to the NAHB/First American Improving Markets Index (IMI), released this week. This total includes entrants from all 50 states and the District of Columbia.
Greenville has been listed since June 2011 and continues to improve in all three categories measured by the index. Other Upstate markets on the list include Anderson, which joined the list in January 2012, and Spartanburg, which joined the list in July 2012.
The IMI identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Four new markets were added to the list and 19 were dropped from it this month. Newcomers included the geographically diverse metros of Dothan, Ala.; Elizabethtown, Ky.; Salisbury, Md.; and Salem, Ore.
“The fact that over 70 percent of all U.S. metros are holding onto their spots on the improving list is definitely good news, and representative of the generally brightening outlook for housing markets nationwide,” said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “That said, our industry’s progress on the road to recovery is being slowed by rising challenges related to the availability of credit, building materials, labor and lots for development.”
“While seasonal trends in home prices resulted in an overall decline in the IMI this month, the index remains at a very strong level and continues to represent markets in every state,” noted NAHB Chief Economist David Crowe. “Some metropolitan areas that had previously charted marginal home-price gains dropped off the list this time as a result of typically softer prices seen in the winter months, which is similar to what the index showed in this same period last year.”
“Today’s report shows that the majority of U.S. metros are experiencing strengthening house prices, employment and permitting activity, which is a much more positive picture than the one we were seeing a year ago,” observed Kurt Pfotenhauer, vice chairman of First American Title Insurance Company. “That’s the big picture on which consumers need to focus.”
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metro area must see improvement in all three measures for at least six consecutive months following those measures’ respective troughs before being included on the improving markets list.
A complete list of all 258 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in May, is available at www.nahb.org/imi.
You may be aware that the American Lumber Standards Committee approved new design values for Southern Yellow Pine in all applications except #2 2x4. Their rationale is that the rapid-growth rate for modern southern yellow pine has reduced its load-carrying capacity.
The new standards reduce the distance spanned by the various lumber dimensions by as much as 15 percent and were set to take effect June 1. Click here to view the update conversion chart for Southern Yellow Pine.
However, your Home Builders Association learned today that the International Code Council has elected not to implement the new design values in the current code and will instead consider them for the 2015 building code. In addition, NAHB has continued its efforts to have the new design values reversed and is currently challenging the validity of the American Lumber Standards Committee's findings.
Note however that the 2012 International Residential Code is scheduled to take effect in South Carolina on July 1. You may be aware that a provision of the new code includes an increase in the dimension of floor trusses, when a gas appliance is placed in the basement or crawl space, in order to avoid fire-proofing the floor above the gas appliance. Your Home Builders Association is working with the South Carolina Building Officials Association to develop a solution to this expensive new requirement. Stay tuned.
Part of the reason employment growth is so weak is that despite sizable increases in residential construction spending, increases in construction employment have been MIA. From April 2012 to April 2013, residential construction put-in-place increased from $249 billion to $295 billion, an 18% rise. However, during the same period, the number of residential building employees and residential specialty trade contractors rose from 2,048,100 to 2,131,800 or by just 4%!
Elliot F. Eisenberg, Ph.D.
Low Mortgage Rates Contribute to HARP Success
The Federal Housing Finance Agency (FHFA) today released its February 2013 Refinance Report, which shows that refinance volumes remained high as mortgage rates hovered near historic low levels. More than 463,000 refinances took place in February, with 97,738 completed through the Home Affordable Refinance Program (HARP). This brings the number of total HARP refinances to more than 2.3 million since the program’s inception in April 2009.
FHFA recently announced it has extended HARP for two more years and will soon launch a nationwide campaign to educate and encourage homeowners to learn about HARP eligibility requirements. HARP was set to expire Dec. 31 of this year.
Also in the February 2013 report:
- Borrowers with loan-to-value (LTV) ratios greater than 105 percent accounted for 45percent of the volume of HARP loans.
- The number of completed HARP refinances for deeply underwater borrowers continued to represent a significant portion of total HARP volume. In February, 22 percent of the loans refinanced through HARP had a LTV ratio greater than 125 percent.
- Through February, underwater borrowers represented 65 percent or more of total HARP volume in Nevada, Arizona and Florida.
- Also in February, 18 percent of HARP refinances for underwater borrowers were for shorter-term 15- and 20-year mortgages, which build equity faster than traditional 30-year mortgages.
- The total number of HARP loans by state include: California (329,707), Florida (200,332), Illinois (158,822), Michigan (158,462), and Arizona (117,149).
Link to FHFA announcement: HARP Extended to 2015
Join fellow members of the HBA of Greater Columbia and NAHB members from around the state
and nation as we travel to Washington, DC for the NAHB Legislative Conference. We will meet with our elected officials in their Washington offices to talk about the issues that are important to our industry. This is quite possibly the most important meeting you will attend all year. We have made arrangements for transportation and lodging for our members.
The cost ranges from $399-$549 depending on occupancy of the hotel room (single or double)
For more information please contact the HBA of Greater Columbia, 625 Taylor St., Columbia, SC 29201 FAX: (803) 779-0635
OR ? Register on-line at www.columbiabuilders.com.
Questions? Call (803) 256-6238.
Registration and payment is requested by May 13, 2013.
NAHB/Wells Fargo Housing Market Index (HMI), released last Monday.
Commenting on the latest data, NAHB Chief Economist David Crowe explained that “Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues." However, he also noted that builders’ outlook for the next six months has improved "due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence."
While the HMI component gauging current sales conditions declined two points to 45 and the component gauging buyer traffic declined four points to 30 in April, the component gauging sales expectations in the next six months posted a three-point gain to 53 ? its highest level since February of 2007.
Looking at three-month moving averages for regional HMI scores, the Northeast was unchanged at 38 in April while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42 and the West posted a three-point decline to 55.
government data released April 16.
While single-family production slipped 4.8% to a seasonally adjusted annual rate of 619,000 units, a 31.1% gain to 417,000 units on the multifamily side provided the boost needed to raise the overall production pace by 7% to 1.036 million units. Importantly, the decline on the single-family side was entirely due to a substantial upward revision to the previous month’s data, without which virtually no change would have been recorded this time around.
Meanwhile, the pace of multifamily production was the best seen since January of 2006. Three out of four regions posted gains in combined single- and multifamily housing production in March, with the Midwest registering a 9.6% increase, the South posting a 10.9% gain and the West noting a 2.7% rise. The Northeast was the lone exception to the rule, with a 5.8% decline. Meanwhile, permit issuance for all new housing units fell 3.9% to a 902,000-unit rate in March after recording a big gain in the previous month. That decline reflected a 0.5% reduction to 595,000 units on the single-family side and a 10% reduction to 307,000 units on the multifamily side.
In contrast to the regional starts report, the Northeast was the only part of the country to post a gain in permitting activity in March, with a 24.7% increase. The Midwest, South and West posted declines of 2.1%, 6.2% and 10.4%, respectively.
Calling the latest data a “mixed bag” due to the opposite direction of single- and multifamily starts and the somewhat weaker permit issuance, NAHB Chief Economist David Crowe said the numbers still indicate “a continuation of the slow, methodical march forward” that characterizes the housing recovery. He also noted that “The three-month moving average for single-family starts remained unchanged at 628,000 units in March ? which is right on pace with NAHB’s forecast for a 25% gain in new-home production in 2013.”
U.S. house prices rose 0.7 percent on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index (HPI). For the 12 months ending in February, U.S. house prices rose 7.1 percent. The U.S. index is 13.6 percent below its April 2007 peak and is roughly the same as the October 2004 index level. U.S. house prices have not declined on a monthly basis since January 2012.
For the nine census divisions, seasonally adjusted monthly price changes from January to February ranged from -0.6 percent in the Middle Atlantic division to +1.7 percent in the South Atlantic division, while the 12-month changes ranged from +1.9 percent in the Middle Atlantic division to +15.3 percent in the Pacific division.
FHFA uses the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index. Monthly index values and appreciation rate estimates for recent periods are provided in the table and graphs on the following pages. To see the complete historical data at FHFA.gov, click here.
The Federal Housing Finance Agency (FHFA) today reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some adjustable-rate mortgage (ARM) contracts, was 3.54 percent based on loans closed in March. There was an increase of 0.11 from the previous month. The complete contract rate series can be found at FHFA.gov by clicking here.
The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased 12 basis points to 3.74 in March. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages (see technical note). These results reflect loans closed during the March 25 - 31 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-February.
The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 3.53 percent in March, up 11 basis points from 3.42 percent in February. The effective interest rate, which reflects the amortization of initial fees and charges, was 3.65 percent in March, up 10 basis points from 3.55 percent in February.
This report contains no data on adjustable-rate mortgages due to insufficient sample size. Initial fees and charges were 0.93 percent of the loan balance in March, down 6 basis points from February. Twenty-three percent of the purchase-money mortgage loans originated in March were “no-point” mortgages, up from twenty percent in February. The average term was 27.4 years in March, up 0.3 years from February. The average loan-toprice ratio in March was 77.3 percent, up 0.1 percent from 77.2 percent in February. The average loan amount was $263,400 in March up $4,700 from $258,700 in February.
The Federal Housing Finance Agency (FHFA) today released reports prepared by Fannie Mae and Freddie Mac (the Enterprises) on their multifamily businesses. The reports were conducted at the direction of FHFA pursuant to its goal of contracting Fannie Mae and Freddie Mac’s overall market footprint and generating potential value for taxpayers. As part of the 2012 Conservatorship Scorecard, the Enterprises were directed to analyze the viability of their multifamily businesses absent a government guarantee and review the likelihood of these models operating on a stand-alone basis after attracting private capital and making any adjustments for pricing if needed.
The reports conclude that without government guarantees, the multifamily businesses of Fannie Mae and Freddie Mac have little inherent value. The reports further conclude that the sale of these businesses would return little or no value to the U.S. Treasury and to taxpayers. The reports also highlight the fundamental tensions inherent in the government sponsored enterprise model that policymakers will have to consider as part of housing finance reform.
2012 Conservatorship Scorecard:
The Enterprises’ Reports on a Multifamily Future StateWithout a U.S. Government Guarantee
One of the goals in the Federal Housing Finance Agency’s (FHFA) 2012 Strategic Plan for Enterprise Conservatorshipsis to gradually contract the overall market footprint of Fannie Mae and Freddie Mac (the “Enterprises”). The basic premise is that with an uncertain future and a general desire for more private capital to re-enter the market, the presence of Fannie Mae and Freddie Mac in both the multifamily and single-family housing markets should be reduced gradually over time.
The multifamily lending businesses of Fannie Mae and Freddie Mac are fundamentally different from their single-family businesslines. Multifamily loans are generally much larger than singlefamily loans, they are collateralized by income-producing properties of five or more units, and multifamily lending occupies a much smaller segment of the overall housing market. Moreover, unlike in the single-family market where Fannie Mae and Freddie Mac share risk only on certain loan types, most of the multifamily loans that the Enterprises buy involve some type of risksharing with private capital. Fannie Mae and Freddie Mac’s multifamily businesses are also much less dominant in the marketplace than their single-family businesses and they generally weathered the housing crisis better, generating positive cash flow. New multifamily originations at the Enterprises increased during the financial crisis but have since returned to more normal levels.
Given these differences, FHFA determined that the goal of contracting Fannie Mae and Freddie Mac’s overall market footprint should be approached differently with respect to their multifamily businesses, and it may be accomplished using a much different and more direct method. To evaluate how to accomplish this goal and generate potential value for taxpayers, in the 2012 Conservatorship Scorecard FHFA directed the Enterprises to undertake a market analysis of the viability of their multifamily operations without the government guarantee. Fannie Mae and Freddie Mac were asked to include in their reviews the likely viability of their multifamily business models operating on a stand-alone basis after attracting private capital and adjusting pricing if needed.
The reports from Fannie Mae and Freddie Mac (see attached) conclude that there is little inherent value in their current multifamily businesses without the government guarantee, and that the sale of these businesses without the guarantee would return little or no value to the U.S. Treasury and to taxpayers. In the early years after the sale, the new “stand-alone” businesses would primarily depend on the portfolio asset management fees as a primary source of revenue until their loan production activities were established. Without a government guarantee backing the securities they issue, Fannie Mae and Freddie Mac project that their multi-family businesses would likely occupy a much smaller footprint in the multifamily finance market, with reduced production volume. The businesses would likely be monoline niche specialty finance companies with a focus on non-prime lending and secondary and tertiary market transactions. Their cost of funds and lending rates would be higher and the businesses would rely on the private securitization market or the participation of equity investors to be viable.
While the magnitude of the market impacts cited in the reports deserve further study, the reports highlight a fundamental tension that policymakers will have to consider as part of housing finance reform. Without a government guarantee a fully private company may not provide the same level and scope of services in the marketplace, at least at current prices. For example, Fannie Mae and Freddie Mac conclude that lending on affordable multifamily housing properties, in particular those that satisfy the housing goals, or providing loans to small multifamily properties, may not be practical due to the high cost, relatively low profitability and difficulties with securitization. In addition, without a government guarantee, there may be additional volatility in funding availability under certain economic conditions,similar to other commercial real estate markets.
The reports themselves represent the analysis and views of the Enterprises’ current management teams as reported to FHFA as conservator. FHFA is releasing the reports to enhance public policy discussion of the role of the government in multifamily housing finance, not as an endorsement of the reports’ conclusions.
Without a clear policy path on the future of housing finance reform, including Fannie Mae and Freddie Mac’srole in the multifamily market, and given the limited availability of economically viable disposition options highlighted in the reports, FHFA must still provide direction as conservator and overseer of the Enterprises’ multifamily businesses.Consistent with the goal of contracting Fannie Mae and Freddie Mac’s dominant market presence, FHFA’s 2013 Conservatorship Scorecard put in place a 10 percent volume reduction for the Enterprises’ new multifamily business in 2013. Going forward, FHFA will evaluate how this process worked in 2013, and intends to consider options to continue a path of gradual contraction while awaiting a legislative resolution of the conservatorships.
Links to Reports:
Fannie Mae Report
Freddie Mac Report
The Federal Housing Finance Agency (FHFA) announced today that it is directing Fannie Mae and Freddie Mac to limit their future mortgage acquisitions to loans that meet the requirements for a qualified mortgage, including those that meet the special or temporary qualified mortgage definition, and loans that are exempt from the “ability to repay” requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank). In January, the Consumer Financial Protection Bureau (CFPB) issued a final rule implementing the “ability to repay” provisions of Dodd-Frank, including certain protections from liability for loans that meet the criteria of a qualified mortgage as outlined in the rule.
Beginning January 10, 2014, Fannie Mae and Freddie Mac will no longer purchase a loan that is subject to the “ability to repay” rule if the loan:
- is not fully amortizing,
- has a term of longer than 30 years, or
- includes points and fees in excess of three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.
Fannie Mae and Freddie Mac will continue to purchase loans that meet the underwriting and delivery eligibility requirements stated in their respective selling guides. This includes loans that are processed through their automated underwriting systems and loans with a debt-toincome ratio of greater than 43 percent. Loans with a debt-to-income ratio of more than 43 percent are not eligible for protection as qualified mortgages under the CFPB’s final rule unless they are eligible for purchase by Fannie Mae and Freddie Mac under the special or temporary qualified mortgage definition.
Adoption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers.
Link to Fannie Mae’s Lender Letter
Link to Freddie Mac’s Lender Letter
In a newly published special study on NAHB's HousingEconomics.com website, our economists take a close look at key findings from a recently completed, comprehensive association survey called "What Home Buyers Really Want." Below are some important highlights of what they found.
- Just over half of all home buyers surveyed said they would like to buy a brand new home --28% directly from a builder and 27% custom built on their own land -- while 45% say an existing home is their first preference.
- Buyers expect to pay about $203,900 for their next home.
- Buyers want a home with a median of 2,226 square feet, which is about 17% larger than what they have now.
- Approximately 25% of buyers say the size of the lot is not important when choosing a home.
- Almost half (47%) want three bedrooms, while 32% want four bedrooms. Most (65%) prefer either 2 or 2.5 bathrooms.
- Most (57%) prefer a single-story home; 31% prefer two stories.
- A full or partial basement is something that 66% of buyers say they want.
- About half (48%) of buyers who want a 2-story home want the master bedroom on the second floor, while 70% prefer to have the washer and dryer on the first floor.
- Most buyers want a 2-car garage (53%), while 1 out of 5 buyers wants a 3+ car garage.
- For 65% of buyers, the most influential characteristic when buying a home is "living space and number of rooms that meet their needs."
To read the entire report on the study at HousingEconomics.com, click here.
The 2013 Golf Classic scheduled for Monday, May 6th and sponsored by Stock Building Supply has been postponed due to the weather making the course unplayable at this time especially with more rain expected tonight.
The HBA of Greenville will reschedule this event and will let every one know this week of the newly scheduled date.
Please contact Crystal Yanes at the HBA office with questions or concerns. email@example.com
|Leigh Ann DeYoung|
Your HBA of Greenville is pleased to announce a new sales and marketing team for the Southern Home and Garden Show. N-tegrate, a Greenville-based sales and marketing solution firm, will assist in the production of the Fall Southern Home and Garden Show.
Sales for the Fall Southern Home and Garden Show are under way, with nearly 50 exhibitors reserving their booth during the seniority period which ends today. Contact Michelle and Leigh Ann today to reserve your booth for the Fall show.
The HBA of Greenville would like to welcome our newest members!
John Montgomery of IBI Builders
Matt Shouse of LS Homes
Bill Owens of Palmetto Commercial Refrigeration, LLC
Andrea Powell of EZ Home Search
Tim Wilson of Wilson Gutters
Craig Wright of Wright Electrical, LLC
Sharon Hannel of Prime Lending
T.L. Bivens of Glenco Insulation, Fireplaces, & Foam
Amanda McCall of Prime Lending
James Roberson of Stock Building Supply
James Speer of Carson Speer Builders
Warren Watson of The Window Gal
Thank you for your membership and support of the HBA of Greenville.
While a portion of your HBA of Greenville membership dues go to support the PAC we would like to thank several members of the HBA of Greenville who have recently donated additional monies to the PAC fund.
Teri Coulson of The Window Gal
Matt Vaughn of Brand Mortgage
Joe Hoover of Hoover Custom Construction
Did you know the PAC fund helps to create and pay for legislation in South Carolina that works for the common good of the building industry and those that work in it? This helps to keep costs down for the building industry and it's consumers.
Thank you for your support!
In response to the prolonged housing downturn, many building materials companies cut back on production and capacity. Prices for some items also declined. Over the past year as residential construction showed signs of a sustained recovery, certain materials prices began to move up.
For example, prices of oriented strand board (OSB), an engineered wood product, have doubled since April 2012 and framing lumber prices have gone up by 40% over the past six months. However, the overall increase in the cost of residential construction materials has been more moderate.
Materials Production is Lagging Demand
Producers of wood products and gypsum have pointed to productive capacity that was idled or eliminated during the housing downturn, resulting in higher production costs and higher prices. Lumber and OSB producers have indicated that returning or replacing that capacity to production has been conditional on confidence that the current recovery in housing would continue.
But returning that capacity to production is not as simple as flipping a switch: Labor, materials and distribution channels for both inputs and outputs need to be re-established. OSB producers have identified rebuilding supplies of raw materials (wood, waxes, resins, etc.), recruiting and retraining a labor force, as well as transportation networks (trucks and drivers) as impediments that are inhibiting a faster return of idled capacity.
The current high prices are already bringing productive capacity back online, but supply is expected to lag demand into 2014.
Expect High Prices for Lumber and OSB in Near Term
The outlook for lumber is for continuing high prices. The two driving factors will be strong global demand and limited supply. The U.S. housing market recovery plus strong demand from China and Asia will keep upward pressure on prices.
Meanwhile, the supply of available logs will be constrained by two important developments. First, the logs made available due to the mountain pine beetle infestation are reaching the end of their useful life. The harvest peaked in 2004-05, and the logs have a usable life of 8 to 10 years, so this supply is becoming unusable. Increased dust from these older, more brittle logs has been blamed for recent mill fires in Canada, and the beetle epidemic will result in a permanent reduction in lumber production in British Columbia.
The second development is ongoing forestry management regulations in eastern Canada where Quebec has reduced timber harvesting by 30% in the last 10 years.
The outlook for OSB is similar to lumber: idled capacity and expectations for continued high prices in the near term. But with some companies bringing production back online, prices could come down in the second half of the year and in 2014.
However, competing factors are at play. Strong housing demand is keeping prices elevated while a wave of new capacity in the coming months is expected to put downward pressure on prices. Buyers are taking a cautious approach, fearing overbuying just before the decline.
Gypsum producers have also pointed to productive capacity that was idled or eliminated during the housing downturn, resulting in higher production costs and higher prices. Figures from the Gypsum Association show that U.S. shipments of gypsum board rose from 23 billion square feet (bsf) in 1995 to a peak of 36 bsf in 2005 before dropping to a low of 17 bsf in 2010. Shipments rose to 19 bsf by 2012.
The long drought in housing not only took its toll on home builders, but also on the network of suppliers and contractors that builders rely on. It will also take time to rebuild that infrastructure.
To ensure a sufficient supply of building materials and expedite the housing sector's return to operating at full capacity, NAHB is acting along several fronts.
- Testifying before Congress. Legislation requiring the government to implement active forest management plans would benefit rural communities and boost timber harvesting on federal lands, NAHB member Justin Wood told Congress earlier this month. Testifying on behalf of the nation's home builders before the House Natural Resources Subcommittee on Public Lands and Environmental Regulation on April 11, Wood, vice president of construction for Fish Construction NW Inc. in Portland, Ore., registered NAHB's support for the "Restoring Healthy Forests for Healthy Communities Act" (H.R. 1526). The legislation was introduced by House Resources Committee Chairman Doc Hastings (R-Wash.) and would also encourage increased production on federal timber lands, Wood said.
- The Washington Examiner reported on the congressional hearing and cited Wood's testimony in support of the forest bill. "This legislation will go a long way toward helping rebuild the supply chain and reviving local mills and timber companies, while ensuring the continued recovery of the housing industry," Wood said.
- Meanwhile, NAHB lobbyists continue to press the issue with lawmakers, and builder members are also meeting with their members of Congress. Montana builder Eugene Graf recently broached the topic with Senate Finance Committee Chairman Max Baucus, who has been a housing supporter, during an economic roundtable with local business leaders hosted by the senator earlier this month in Bozeman, Mont. Graf told the senator that regulations and building product costs are making it more difficult to provide affordable housing.
- In a related area, NAHB on April 16 sent letters to members of the Senate Energy and Natural Resources Committee and the House Natural Resources Committee in support of the Lyon County Economic Development and Conservation Act. The bill would increase the production of copper, which can add up to 4.4% to the cost of building a new home. "As the housing recovery gains momentum, builders are seeing price increases and shortages in many building supplies, including copper," the letter stated. "By allowing for increased domestic development of copper, this legislation will provide American home builders and consumers with more affordable building material options."
- Interacting with policymakers and producers. In recent months, NAHB has met with Canadian government and U.S. Commerce Department officials on the need to ensure an adequate supply of lumber and other building materials and sent letters to Acting U.S. Commerce Secretary Rebecca Blank and former Interior Secretary Ken Salazar (who resigned recently) urging the Cabinet officials to ensure "there are no regulatory barriers or supply-chain interruptions that would increase prices or impede availability" of building materials in the market.
- Getting the message out to the media. Through print, broadcast, nahb.org. social media and the blogosphere, NAHB continues to hammer home the message that higher costs for building materials are hurting consumers and builders and impeding the recovery. "Rising costs put squeeze on builder confidence in April," read the headline from the latestNAHB/Wells Fargo Housing Market Index released on April 15. "Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values," said NAHB Chairman Rick Judson. "While sales conditions are generally improving, these challenges are holding back new building and job creation."
- USA Today, The Washington Post, Bloomberg, The Hill, CNBC, the Chicago Tribune, Forbes and U.S. News & World Report were among the major media outlets to report on the HMI data and quote Judson and/or Chief Economist David Crowe. The CNBC headline read: "Home Builder Confidence Hammered by Rising Costs," while the lead sentence in anAssociated Press story that ran in hundreds of outlets throughout the nation stated: "U.S. home builders are concerned that limited land and rising costs for building materials and labor will slow sales in the short term."
- Providing price escalation language. To help members limit the damage of unpredictable price hikes for building materials, NAHB is providing price escalation language that can be included in home sales contracts. For more information about NAHB's escalation clause and to download it, click here. Or email David Crump at NAHB or call him at 800-368-5242 x8491.
It will take some time for supply chains to re-establish themselves following the recession. NAHB continues to monitor conditions in building materials markets and to work with government leaders and producers to encourage suppliers to move product to the market quickly. As the industry recovers, this will help to maintain a healthy housing market.
While the problems with drywall imported from China had little impact on the Upstate, we thought you might be interested in the latest news regarding a settlement in the legal dispute.
On February 7, 2013, Judge Eldon Fallon of the U.S. District for the Eastern District of Louisiana, entered an Order and Judgment approving five class?action settlements that will make available millions of dollars to remediate homes built with Chinese drywall. According to published reports the settlements will benefit more than 10,000 property owners. The order and judgment effectively end the Chinese Drywall Multidistrict Litigation. Judge Fallon’s decision stems from a hearing in November held to help him gauge the fairness of five separate but related settlement agreements between plaintiffs' lawyers and companies that made, supplied or installed the defective Chinese drywall. The settlements were certified for: Interior/Exterior Building Supply, LP; Banner; L&W Supply Corp.; Knauf and Global participating builders, suppliers, and installers. They resolve all claims, counterclaims, and third?party claims among the settling parties.
The manufacturers of the drywall in question generally fell into two groups: the Knauf entities and the Taishan entities. The Taishan entities are not settling and continue to argue that the court has no personal jurisdiction over them. That issue is currently the subject of an appeal pending before the Fifth Circuit Court of Appeals.
The “InEx” Settlement
This agreement provides for the tendering of all of InEx’s primary insurance proceeds, in the amount of $8,000,000, for the benefit of a national class with claims against InEx involving Chinese drywall.
The Banner Settlements
The Settlement agreement provides that Banner and its insurers will provide $54,475,558.30 for the benefit of a nationwide class consisting of all persons or entities with claims against Banner arising from or otherwise related to Chinese drywall.
The L&W Settlement
The L&W Settlement is a component of the plan for global resolution of the Knauf/KPT supply chain. Financial details were not revealed in the Order.
The Knauf Settlement
The agreement creates two funds from which plaintiffs may recover: the Remediation Fund and the Other Loss Fund. The Remediation Fund is uncapped and will pay to repair roughly 5,200 properties, mostly in Florida, Louisiana, Mississippi and Alabama. The Other Loss Fund, reported to be capped at $30 million, will reimburse for certain provable economic loss and provide a review process for individuals who believe they have bodily injury claims. In addition, attorneys' fees and costs will be paid. This settlement is intended to resolve claims made in filed actions which arose out of KPT Chinese drywall installed in properties in the United States. Importantly, only those who filed a lawsuit in the litigation as of December 9, 2011 are eligible as class members.
The Global Settlement
The Global Settlement involves various builders, suppliers, and installers and provides for a total payment of $70,570,000.00 for class members regardless of the type or brand of Chinese drywall in their properties and regardless of whether they filed their claims in the MDL or another forum. The settlement does not include any properties located in Virginia (those properties are the subject of a separate class action).
During the 2013 International Builders’ Show in Las Vegas, Tom Stephani, MIRM, president of Custom Construction Concepts Inc. based in Crystal Lake, Ill., outlined the following 10 business mistakes builders typically make and how to avoid them:
1. Fail to see a collapse coming. All markets are local, and they all go through an up-and-down cycle, Stephani said. He said builders need to keep tabs of warning signs by monitoring the number of starts in their area, being prudent with their specs and examining fluctuations in the cost of land.
2. Don’t ask for help. Too often, builders stubbornly cling to the notion that they have all the answers and that the competition is their enemy, said Stephani. The best way for builders to find answers to improve their business is to become actively involved in their local and national builders associations. Some of the benefits of membership include advocacy, education, networking and joint marketing resources, he said. “Through NAHB, I have a network of hundreds of people I’ve met over the past years,” said Stephani. “That knowledge sharing is immense. The 20 Clubs provide that opportunity as well.”
3. Alienate Realtors. The purpose of Realtors is to sell home, and builders are being penny wise and pound foolish when they try to work around them and avoid the commission fee because Realtors will often bypass the builder’s properties when showing prospective clients homes to sell. Stephani said it is wise to use Realtors because they are professional at marketing and sales, provide better access to pre-qualified clients and can help to manage client expectations.
4. Fail to set realistic expectations. To remedy this, Stephani said that the builder must make it clear to their clients that they are in charge of the project. The customer must make selections on time, be able to afford what they want, and must not attempt to supervise subcontractors or suppliers. The builder must communicate to the client that changes to the job require time and money, that delays during construction are common and that workers will not necessarily be on the job eight hours every day. “Let the client know there could be bumps in the road but that they will be happy in their home when they move in,” he said.
5. Ignore customer service. Those who ignore this item because there is no money in it, or because they are too busy, do so at their own peril. Good customer service is essential, Stephani said, and the best way to provide it is to see issues from the customer’s perspective. Builders who have a willingness to exceed customer expectations and to do what is promised often reap great rewards through word-of-mouth referrals.
6. Fail to price for profit. Builders often fail to price their homes properly due to competition, market conditions, inaccurate appraisals and pressure from Realtors. As a result, their cash flow becomes critical and they try to compensate by increasing volume. To fix this problem, Stephani suggests that builders better manage their specs, tighten financial controls and reporting, and develop a pricing approach based not just on cost but also on location.
7. Don’t update the business plan. “If you don’t put a plan in writing it can guarantee you won’t reach your goals,” he said. Builders should update their business plans on an annual basis, he added.
8. Fail to manage conflict effectively. Too often, builders do not recognize the emotional state of owners during construction and are not committed to win-win agreements with them, Stephani said. Most builder/client conflicts arise from disagreements about what was promised and what was delivered. Clear and concise wording of the contract; a complete set of plans and specifications; and good documentation of all communication are essential.
9. Don’t manage design and budget. Too often, builders fail to properly manage their clients’ expectations, fail to control the architect and let clients take control over their subcontractors and suppliers. Builders need to be up front with their clients, let them know what to expect during the building process and work in tandem with the architect.
10. Take on the client from hell. A true client from hell often displays wild mood swings; obsesses over minor details; invites conflict; demands perfection but is not willing to pay for it; creates problems for subcontractors and employees; berates, belittles and badmouths the builder; refuses to pay until sued; and is never happy. To avoid this situation, Stephani recommends that builders go with their gut feeling when interviewing a client, evaluate their personalities and traits, take note of their occupation and observe whether a husband and wife are openly arguing ? which can be a warning sign.
Source: National Sales and Marketing Council eNews