Home Building momentum - Decreased in Inventory, Rising Demand

While January is typically a slow month in the residential home building business, 2013 is showing encouraging signs of continued improvement over 2011 and 2012 same-month numbers.

Decreased inventory and rising demand for homes in Cobb County is stimulating new construction, but only in select areas. In unincorporated Cobb and its six cities, 133 permits to build single-family homes were issued; representing a 43 percent increase over the 93 permits issued in January 2012; and more than double the 65 permits issued in January 2011.

Unincorporated Cobb, which includes high demand east Cobb, had 100 permits issued — up 66 percent from the 60 issued in January 2012. Smyrna led the cities with 15 permits issued. Next in line was Acworth, where Kerley Family Homes pulled 11 permits for new homes.

The city of Marietta issued seven permits, and the cities of Austell, Kennesaw and Powder Springs all issued none.

Brenda Beshara, a real estate agent with Keller Williams Realty Atlanta North, said she has seen more activity than is typical for January. 

“There is a saturation of buyers right now,” Beshara said. “This is early for the buying season, and inventory is at an all-time low.”

She said that 2012 statistics show a 10.6 percent increase in home sales in Metro Atlanta as compared to 2011 and a 28.5 percent increase as compared to 2010. 

“This increase is being felt across all price points with the exception of the under $100,000 range that was (in the past) leading the market in sales,” said Beshara. “The increase of sales in the higher price points, compounded with the decrease of sales in the under $100,000 range, translates to a significant increase in median sales price for metro Atlanta.”

Ginny Bishop, director of marketing at Cobb-based Acadia Homes, said her company sold six homes in Cobb in January and sold out its Maner Street subdivision located off of Cooper Lake Road in Smyrna.

Acadia Homes Vice President Michael Rosenberg said that while sales are driving Acadia to build, lending remains tenuous. 

“We are seeing construction lending ease slightly, but banks are still extremely cautious in making lending decisions to builders,” Rosenberg said. 

Beshara says the number of days a property is on the market has decreased, and sellers are now able to get a price much closer to their list price than in the past.

“In some areas and price points, we have more buyers than inventory, causing multiple buyers to compete for the same property,” she said.

Read more: The Marietta Daily Journal - Building momentum — Decreased inventory rising demand increases home construction in Cobb 

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Home Building Market Showing Signs of Strength

When the housing boom went from its peak in July 2006 to the lowest lows of the bust in 2011, new home sales set record lows. Then, with single-family building permits on the rise in 2012, builders started hammering away again. New pre-sold and speculative (spec) homes were taking shape across the country.

According to a joint release from the US Census Bureau and US Department of Housing and Urban Development (HUD), an estimated 651,400 housing units were completed in 2012. This is 11.4 percent (±4.6%) above the 2011 figure of 584,900. For comparison, prior to the market peaking, 2.5 million housing units were built in 2005. It has been estimated that we need around 1.5 million new housing units per year to accommodate population growth, the desire for vacation homes and to replace those that are demolished.

Overall, home sales have been on a sustained upward trend since last year. Fueled by pent-up demand and a generally improving economy with job creation, the uptick in sales can also be attributed to favorable affordability with super low interest rates and rising rents. As a result, the dynamics of supply and demand have increased the need for new construction since the US population has been growing much faster than housing stock during the last five-plus years.

An estimated 367,000 new housing units were sold in 2012. This is 19.9 percent (±4.8%) above the 2011 figure of 306,000. The seasonally adjusted estimate of new housing units for sale at the end of December was 151,000, representing a supply of 4.9 months at the current sales rate, according to the joint report (a 6-month supply is considered normal).

While a part of the new construction slowdown was certainly due to the excess of houses built during the late boom years, it’s also important to consider the fact that some of it was also due to the fact that fewer households were being formed during the weak economy - multiple generations shared expenses under one roof.

Now, as the economy as a whole continues to improve, more people who have been “doubling-up” will have the opportunity to find new jobs and move out. These projections of increased housing demand mean more buyers in the market for builders to sell to, making them optimistic about the year ahead.

In their efforts to make every attempt to meet the needs of buyers today - whether they are looking to build from the ground up (presold) or find the new construction home of their dreams already built or nearing completion (spec homes) - builders know buyers typically choose new over existing homes for the same top reasons – energy efficiency, customization, modern elevations and floor plans, neighborhood planning and development plus builder incentives and warranties.

Plus, in today’s competitive marketplace, builders also need to deliver the latest trends and products at the best possible prices.

Perhaps that’s why last month’s International Builders’ Show (IBS) in Las Vegas exceeded the expectations of the National Association of Home Builders (NAHB) attendance-wise. The year’s biggest event for builders, remodelers, developers, architects, designers and other industry professionals, IBS attendance soared past 62,000, well above NAHB’s estimate of 50,000 – another good sign for home building.

Among all the cutting-edge products on display from manufacturers across the globe, the growing demand for safer, healthier and more sustainable homes was a common thread. The NAHB’s official IBS home demonstrated this with solar hot water, photovoltaic roof panels, closed spray foam insulation, water sensitive irrigation, tankless hot water heaters, hydronic air handlers, intelligent fireplaces, sustainable building materials, energy star appliances and low E energy efficient windows. Plus, the homeowner can monitor, manage and control security systems, climate, TVs, music, lighting, shades and more from an iPhone, iPad or laptop.

This particular home exceeded the standards for “Emerald” certification, the highest rating under the National Green Building Standard and boasts a HERS Index of 33 (consuming 67% less energy than if it were built to Indiana’s current code, earning “Platinum” certification, the highest under the US Green Building Council LEED for Homes program).

Another key trend highlighted throughout the IBS included an overall shift toward simpler living. Look for low-maintenance design paired with clean, contemporary looks that blend classic textures with pops of bold color and elements of sparkle.

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Things to Consider When Planning for Home Renovation

Building an addition onto your home is a small remodeling project. There are several things that have to take place before and during the process to make sure that everything runs smoothly. Here are some tips for adding to your home and making sure you don't have to double back and do it twice.

1. Make sure you have some good plans drawn up. Successful remodeling projects include careful planning and a realistic budget. Remodeling cheap and fast will only cause problems down the road so take your time to plan things out. Hire a builder that is one the same page as you are and you will save time and money.

2. Consider other homes in the neighborhood. Whether your neighbors are close or a few miles you need to consider how your addition will affect the value of your home. What are the homes around you appraising for or worth. Will the addition to your home bring the value of their homes up as well as your own? A general rule of thumb to follow when building additions onto a house is not to overbuild the neighborhood.

3. Consider the design that is being added onto your home. Any good remodel will be consistent with the original structure of the home so that it complements it; not takes away from it. I'm sure you've seen them; the additions that have been built onto an older home that don't look anything like the original one. Pay attention to the small details; windows, trim styles, and types of materials you use.

4. Permissions. You need to make sure that you acquire all the necessary legal and building permissions prior to beginning your remodeling project. This would include, but not be limited to any service providers that are involved, building restrictions, and any neighborhood stipulations. If you neglect to do it you're going to be charged more money to do it right again and it could mean having to demolish all your hard work.

5. Building up to code. When you build a home from the ground up there are certain codes that have to be met. It is usually the same when you are remodeling or adding onto the home as well. Electrical and plumbing are just two of the things that have specific codes you have to meet before you can continue finishing your addition. If you have a licensed contractor they should take care of this part for you.

6. Come up with a reasonable budget. We've already mentioned this a little, but it's important to be realistic with your budget. Sometimes we tend to get carried away with just adding something here or there without realizing that you've gone way over your budget. When you draw up the plans stick to the budget and the original plan.

7. Don't skimp on what you build. Whether you're adding on to stay in the home or if you're adding on to sell, don't be a cheap skate. Potential home buyers are pickier than ever and they want to see quality work. So spend a little extra on a good design, durable and quality materials, and good craftsmanship. It can really pay off in the end.

These tips for adding to your home should help you get your project off on the right foot.

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Permits for Home Construction in Wisconsin Jump 38% in January

Home building permits in Wisconsin's biggest metro areas rose almost 38% in January, the best start for new-home construction since 2008.

A total of 201 permits were issued in the greater Milwaukee area, Dane County, Green Bay-Door County area, Fox Valley and the Racine-Kenosha area in January, according to MTD Marketing Services of Wisconsin Inc., of Oshkosh.

That compares with 146 in January of last year, and is the first time in five years the total has topped 200.

Dane County led the way, nearly doubling the number of January permits to 63 from 33 in 2012.

"January is off to a great start in most areas of the state," said MTD's Dominic Collar. "This is a very good sign for Wisconsin's homebuilders and consumers."

Even though 2013 weather started out colder than in 2012, it hasn't seemed to have hurt housing starts.

"We were pleasantly surprised and expected Wisconsin's weather to affect starts in the first quarter," Collar said. "More snow and cold adds challenges to a new-home project in the winter. Keep in mind that last year was a very warm first quarter, which made it easier to build."

In addition, he said, there is increased interest in land development by builders planning for 2013 and beyond.

New-home construction remains far below levels from the early 2000s, but the increase suggests a slow recovery in the housing industry is continuing.

In 2012, permits to build new homes rose almost 22% in Wisconsin's most populated metro areas.

Along with Dane County, the metropolitan Milwaukee area had a big pickup in permits to construct single-family houses and duplexes in January, rising to 71 from 49 a year earlier. Permits to build also rose in the Fox Valley, going to 37 from 22 in 2012.

Permits fell to 17 from 28 in the Green Bay-Door County area, and slipped by one - to 13 from 14 in January - in the Racine-Kenosha area.

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A 'Walk Through' With Your Home Builder

When your brand new home is almost complete and ready to move into, your excitement can often lead you to overlook or miss problems with the construction. Before hand over, you will be required to conduct a 'walk through' with your home builder to ensure that everything is according to your plan and the contract you have signed.

• Check that windows are square and tightly fitting. They should have weather stripping and flawless glass.

• Use a pair of binoculars to scan the roof for flat, tight shingles. You should also check out the gutters and downspouts.

• Check that the ground has proper grading; it should slope away from the foundations with no serious erosion.

• Turn on all of the faucets to determine that hot and cold are on the correct sides. Also check that water drains quickly.

• Test all of the electrical outlets (a hairdryer is handy for this), garage door openers and doorbells to see that they work.

• Check the carpet in each room for matching seams and check for ridges in vinyl or laminate flooring.

• Open and close all windows and doors; they should provide a good seal when closed and not bind.

Whilst conducting a walk through with your home builder may seem a little stressful - they will be watching you like a hawk to make sure that there are no issues - it is an important part of the hand over process. If you are wary or nervous about missing something, take along a checklist with you to ensure that you scrutinize every aspect.

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Low Demand for Home Loans Despite of Lower Mortgage Rates.

Demand for home loans from first time buyers has sunk to the lowest level in eight and a half years, despite the benefits of lower mortgage rates.

However, lower rates are having a positive effect in other parts of the building industry, by encouraging demand for loans for the construction and purchase of new dwellings.

The proportion of first buyers among those taking up home loans in December was just 14.9 per cent, the smallest since June 2004, Australian Bureau of Statistics (ABS) data shows.

"The decline in first home buyers that continued in December is a concern, given the various incentives across several states to entice them into the market," Master Builders Australia chief economist Peter Jones said.

"With consumers still reluctant to commit to large investments, the Reserve Bank should give urgent consideration to a rate cut at its March board meeting."

Overall, mortgage demand fell for a third straight month, declining 1.5 per cent in December to 45,335 loans.

However, loans for construction rose 1.2 per cent and those for the purchase of new homes rose 1.9 per cent.

The Reserve Bank of Australia (RBA) has identified home building as one of the sectors the economy will need to lean on to maintain overall growth, once the mining investment boom peaks toward the end of this year.

But Macquarie Research senior economist Brian Redican said the ABS figures didn't support that expectation.

"More than a year after the RBA commenced its current rate cutting cycle ... there are still few signs that those rate cuts have gained traction," he said in a client note.

The central bank cut the cash rate by 25 basis points in December to three per cent, its lowest level since the 2008-2009 global financial crisis. It has made 175 basis points worth of reduction since November 2011.

"The RBA will have to continue cutting rates if it still believes that stronger housing construction can help fill the growth hole left once mining investment stops rising," Mr Redican said.

At this stage, financial markets point to a less than a 50/50 chance of a rate reduction to 2.75 per cent at the central bank's March board meeting.

In its quarterly monetary policy statement on Friday, the RBA said given the subdued outlook for inflation, there was scope to ease interest rates further if necessary, to support demand.

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