Spokane Home Builders Association

A Few Industry Rumblings

A Few Industry Snippets

Up With the Downpayment

Sen. John McCain of Arizona, the presumptive Republican nominee, proposed something that no other major presidential candidate has advocated in decades: raising minimum downpayment levels for home mortgages. Even the 3% minimum required by the FHA would be raised under his plan. McCain also said the giants of the mortgage industry, Fannie Mae and Freddie Mac, “should never insure loans when the home owner clearly does not have skin in the game.” His rationale for tightening up downpayments is that he thinks a key contributing factor to the national mortgage crisis was the tiny, or nonexistent, equity contributions required by lenders during the boom years. Whatever politicians decide to do, the private marketplace is heading back to more traditional standards, where equity up front was the rule. ( www.washingtonpost.com )
Washington Post (4/5/08); Kenneth R. Harney

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Housing Troubles Immobilize U.S. Labor

When housing is not an obstacle, more than five million Americans, nearly 4% of the U.S. workforce, move annually from one place to another. Now this mobility is increasingly restricted. Unable to sell their homes easily and move on, tens of thousands of people are making the labor force less flexible just as a weakening economy puts pressure on workers to move to wherever companies are still hiring. No government agency counts those who move for jobs, either across state lines or just from one town to another. The Census Bureau, however, calculates how many people move across state lines for all reasons, and that number fell by 27% last year, after climbing by almost that percentage for each of the previous three years. With homes changing hands easily in a booming market, interstate migration reached 2.2 million people in 2006, excluding moves that followed Hurricane Katrina. As the U.S. economy and home prices began to unravel in 2007, however, interstate migration plunged to 1.6 million people. Mark Zandi, chief economist at Moody's Economy.com, said he would not be surprised to see record low domestic migration this year. ( www.iht.com )
International Herald Tribune (4/3/08); Louis Uchitelle

Tech-Savvy Builders Expected to Lead in Housing Upturn

With the local market taking a momentary breath after years of record breaking growth, home builders should to be taking a hard look at how effectively they are using technology to run their business or risk being woefully unprepared for the marketplace that is shaping up on the other side of the downturn, according to panelists at an International Builders' Show educational program in Orlando last month.

The convention speakers emphasized that good software systems can add significantly to profits by cutting administrative and construction costs and coordinating the sales and building process more effectively with their customers. Cutting costs, they said, as prospective buyers will be taking a hard look at prices and may therefore confine their shopping to the existing home market unless builders can offer them something that's new and also affordable. And they said that good web sites will emerge as an essential component of successful sales and marketing once the current downturn ends.

“The market will look nothing like what we had in the heyday,” predicted Jerome Gray, of Comstock Home Building Companies in Reston, Va.

Gray said that builders should expect to be dealing a lot with younger, computer-savvy buyers. “The relocation market will be based almost entirely on the Internet,” he said, “and not on driving around with Realtors®.”

Another sizable market force, Gray said, will be baby boomers selling their existing homes to be close to their grandchildren and creating a “huge” resale market in the process that will require builders to reduce their costs and offer things that aren't available in resale in order to stay competitive.

<Keep Reading>

Spokane Continues to Defy National Trends - Ranked a Top-10 City by Forbes

The new issue of Forbes has just announced that Spokane ranks # 9 in its annual list of the best places for business and careers in 2008, up from #20 last year. Forbes ranks the 200 largest metro areas in the country.

The findings help to paint a picture of what is happening in the overall U.S. economy, as well as in specific metro areas across the country. Plus, the rankings offer a wide range of choices for the best places to launch a new business, consider for relocation, and much more. For details on the full rankings, visit: http://www.forbes.com/bestplaces.

Generation Y Is Ready to Buy, Technology Will Help Sell Them

With Generation Y (Born from 1977 - 1996) beginning to enter the home buying market, home builders must re-think how to market and sell to them or risk losing them to the competition.

Generation Y home buyers ―  whose leading edge is turning 27 this year — generally have more spending power than preceding generations at this stage in their lives because they are well-educated and have higher starting salaries out of college.

Generation Y consumers understand that this is a prime time for them to buy because of market conditions and that, potentially, they can have a mortgage payment that is less than what they would pay in rent. In addition, research indicates that more single females of this generation are buying homes because of optimal market conditions and their improved financial situation.

When shopping for a new home, Generation Y consumers want to live close to where they work and socialize but also be near friends and family. Most prefer living in the city or at least in close proximity.

Research also indicates that this generation of home buyers is willing to spend more money on a new home in order to get exactly what they want.

Generation Y Wants Quick, Personalized Answers

If home builders want to reach out to these potential customers, they must realize how important a role technology plays in their lives. Generation Y grew up with technology and rely on it to stay informed, especially when they’re making serious purchasing decisions.

Generation Y relies on e-mail, the Internet, PDAs, BlackBerrys and other electronic devices and, for many, these technologies are their preferred method of communication. In addition, studies show that eight out of 10 Generation Y home buyers use the Internet to research their home choices.

Once they have narrowed their choices, they expect their requests for more information to be answered quickly and for those answers to be personalized ― they don’t want to wait a week or two for a generic response. Generation Y consumers will lose interest quickly if those trying to reach them don’t value quick communication.

Customer Relationship Management Levels the Playing Field

So how does a home builder level the playing field with Generation Y?

Home builders looking to sell to this generation should utilize a customer relationship management (CRM) system with a strong marketing automation suite that can deliver detailed, personalized information in a timely fashion, nurture prospects until they turn into hot leads and collect data to build customer profiles.

Generation Y consumers will appreciate getting a tailored response to their inquiries. This will also make them more likely to provide additional information about their buying preferences.

Armed with this type of information — especially the buying timeframe — a home builder’s sales team can be instantly alerted to hot leads, allowing them to launch follow-up programs to get these prospects into the office.

Marketing Automation Builds Rapport

Responding quickly can be an important differentiator when reaching out to buyers, especially those using Web sites like Move.com or NewHomeSource.com that feature multiple home builders.

Using marketing automation and collecting buyer data are effective ways to build rapport, but it doesn’t end there. Time is very valuable to Generation Y and they want to use technology to create wish lists for the communities they are interested in and also for the design of their dream home.

Builders can use the Web and surveying to educate buyers about communities and assist them in identifying a home that meets their needs. Providing a list of communities that fit their needs lets home buyers narrow down their wish list and spend more time checking out the communities that are right for them.

By the time they actually visit the community, they already have a good idea of what they want in their home. The sales associate also has a much better understanding of their customers’ needs because of the information gleaned online and is much better prepared to offer effective recommendations.

Home builders can also use Web-based technology to provide convenience and personalization in the design process via a virtual design center. The center is accessible via a Web browser so home buyers can actually start looking at the available options for their homes. Enabling them to start designing their dream home also gives them more ownership and a connection to the home, sometimes even before they walk into the community.

Through a deeper knowledge and use of  Web-based technology so central to this generation’s buying habits, home builders can provide a better, more personalized customer experience, achieve a faster sales cycle, gain a deeper understanding of customers’ needs, sell more options and build stronger, more profitable relationships.

Steve Lewkowitz is the home building and real estate professional services director for CDC Software’s Pivotal CRM, a leading line of customer relationship management solutions.

Seattle Times: Regulations add $200,000.00 to Home Prices in Seattle

Here is a great story from today's Seattle Times that might make local elected think twice before pursuing further regulatory controls on new construction. If our elected leaders honestly care about housing affordability, they would learn from what has happened in Seattle.

UW study: Rules add $200,000 to Seattle house price

By Elizabeth Rhodes Seattle Times business reporter

Backed by studies showing that middle-class Seattle residents can no longer afford the city's middle-class homes, consensus is growing that prices are too darned high. But why are they so high?

An intriguing new analysis by a University of Washington economics professor argues that home prices have, perhaps inadvertently, been driven up $200,000 by good intentions.

Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.

"In a nationwide study, it can be shown that Seattle is one of the most regulated cities and a city whose housing prices are profoundly influenced by regulations," he says.

A key regulation is the state's Growth Management Act, enacted in 1990 in response to widespread public concern that sprawl could destroy the area's unique character. To preserve it, the act promoted restrictions on where housing can be built. The result is artificial density that has driven up home prices by limiting supply, Eicher says.

Long building-permit approval times and municipal land-use restrictions upheld by courts also have played significant roles in increasing Seattle's housing costs, he adds.

<Keep Reading...>

And for more on how regulations affect affordability, read the story from the Atlantic Monthly here.

 

Strong Fundamentals Differentiate Spokane from Others - Now is a Great Time to Buy!

And more predictions for 2008 that show Spokane and the NW in general as strong performers in an otherwise soft national market. As they say, "All markets are local" and our fundamentals continue to be positive.

Top 25 U.S. Markets Feature E. Wash/N. Idaho.
*Anticipated Market Appreciation in 2008

Rank	Real Estate Market	2008 Forecast
1.	Yakima, WA	7.1%
2.	Honolulu, HI	6.8%
3.	Salem, OR	6.5%
4.	Maui, HI	5.6%
5.	Bismarck, ND	5.6%
6.	Manhattan, NY	5.2%
7.	Sun Valley, ID	5.1%
8.	Biloxi, MS	5.1%
9.	Kauai, HI	4.9%
10.	Austin, TX	4.8%
11.	Grand Junction, CO	4.5%
12.	Fargo, ND	4.5%
13.	Mobile, AL	4.4%
14.	McAllen, TX	4.3%
15.	Idaho Falls , ID	4.2%
16.	Spokane, WA	4.2%
17.	Glen Falls,NY	4.0%
18.	Salt Lake City, UT	3.9%
19.	Grand Forks,ND	3.9%
20.	San Antonio, TX	3.9%
21.	Seattle, WA	3.8%
22.	Pascagoula, MS	3.8%
23.	Hattiesburg, MS	3.7%
24.	Albuquerque, NM	3.5%
25.	Kellogg, ID	3.5%

Courtesy of HousingPredictor.com. Click here for more analysis.

Spokane Continues to Shine Nationally

The Spokane-area real-estate market continues to buck the national trends, maintaining positive value appreciation and only a modest softening in sales volume over previous years record highs. But don't just believe us, read what national reporting agencies are saying.

Spokane gets shout-out from Zillow CFO

By: Parker Howell
Spokesman Review

Single-family home values nationwide decreased 5.5 percent last year over 2006, as estimated by real estate data Web site Zillow.com , according to a recent company report.

But with roughly 3 percent year-over-year appreciation by Zillow's estimation, Spokane was one of the bright spots, company CFO Spencer Rascoff told the Wall Street Journal in a recent online video .

Rascoff also mentioned Tulsa, Oklahoma, with 11 percent appreciation, and Oklahoma City, with 8 percent.

As we've reported before, markets that were the hottest before the housing slump have been hit the most, including Los Vegas, Los Angeles and Fort Myers, Fla.

Launched in 2006, Zillow gives “Zestimates,” its term for estimates, on millions of U.S. homes using a what it calls a proprietary formula. It bases its Zindex on its median estimates of all homes in an area, not just ones that recently sold.

Spokane had a Zindex of $171,500 Wednesday night, a 3.6 percent increase from a year prior.

2008 Real Estate Market Forum

'08 Real Estate Market Forum

The 2008 Real Estate Market Forum is coming up, and this features presentations made by SHBA President Brett Sullivan and Executive Officer Joel White. Be sure to attend this informative event, held at the Spokane Convention Center on Thursday, February 21st, from 8:00 am to 2:00 pm.

To view the Forum Agenda, to register, or for more information, click here.

Five Real Estate Trends Drive Market in Uncertain Economy

Green building and design is one of today’s top five real estate and development trends, according to Giffels-Webster Engineers, a civil engineering firm based in Michigan.

“Although real estate as a whole continues to struggle, developers, civil engineers and architects can remain healthy by working diligently and creatively to stay on top of new market drivers,” which go beyond single-family homes in the suburbs, said Keith Meyer, president and CEO of Giffels-Webster.

As reported in the Winter 2008 edition of NAHB’s Land Development magazine, the trends expected to produce the most industry growth moving forward are:

Green Building and Design. Increased pressure on communities and businesses to promote more environmentally sound designs has led developers to incorporate more green elements into their projects. A plan to develop a parcel of land for retail might include green roofs, rain gardens or gutter water retention and irrigations systems. A "Built Green" Certification will soon become a “must-have” for buyers.

Assisted Living Centers. These are on the rise due to higher life expectancies and the influx of aging baby boomers. To help seniors lead independent lives in non-institutionalized environments, these projects are designed to incorporate nature trails, community dining areas, exercise facilities, music rooms, libraries, salons and billiard game rooms. Opportunities exist to work with both private developers and public government-funded projects.

Hospital Expansions and Education Campus Additions. The hospital and education expansion trend is fueled by institutional projects funded through corporate gifts and endowments. These “recession-proof” resources mean these projects go on even during economic downturns. While single-family home building has slowed, this market segment moves forward with plentiful building and capital improvement.

Mixed-Use Developments. Mixed-use developments are popular today because they reduce risk for the developer during an uncertain economy. Retail and residential can adjoin each other, and it’s common to see large, national retailers combined with smaller, boutique-type stores, as well as housing varying by size, budget and amenities. With this approach, the developer’s investment is spread across the spectrum so that it remains viable even if one segment does not perform as expected.

Urban Revitalization. In an effort to attract and keep people in their communities, municipalities and townships are working to make downtowns, retail hubs and central business districts more inviting and accessible to pedestrians. The City of Spokane Valley and the City of Spokane are both activly encouraging this, largely through infill of open spaces and redevelopment of underutilized land.

Builders: Today’s Rate Cut Is Tomorrow’s Sale

Home builders have an exceptional sales opportunity following the today's three-quarters of a percentage point interest rate cut by the Federal Reserve. Mortgage rates are already near historic lows, and the largest rate cut since October 1984 makes buying a new home a not-to-be-missed decision for consumers right now.

Home builders should use the cut to send a critical message to potential buyers: Those who commit to a new home today will get extraordinary value for their dollar.

Whether they choose to add more features or upgrades, or help their budget with lower monthly payments, the power is in their hands to purchase a home that meets their needs.

“Today’s rate cuts by the Federal Reserve had an immediate effect on prime mortgage rates,” said David Seiders, NAHB’s chief economist. “Fixed-rate conventional conforming mortgages now are available around 5.3%, which is extremely low by historical standards.”

Builders can make a positive, immediate impact on their sales by coaching their sales teams to show potential buyers how the rate cuts benefit them.

Demonstrate to potential buyers that a rate cut almost always provides a significantly greater cost savings over the life of the loan than a drop in price. Buyers who wait for prices to go down will most likely end up losing money overall if rates go up even one-half of a percent. Trying to time the market is a dangerous gamble that could end up costing them thousands of dollars.

For example, a buyer who gets a 30-year fixed rate mortgage for $400,000 at 5.3% today will spend $20,520 less overall than someone who got a better price — say $380,000 — but with a rate at 6%.