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News for Product Manufacturers from Hanley Wood CEO Frank Anton
A Glimmer of Light
Everywhere I go it seems that
somebody, be it a friend or a business associate, asks me if I can see any light
at the end of tunnel. Previously I didn’t pretend to ponder; I just said, “No.” But, after
seeing the latest information on housing affordability, it seems I should give
the question more careful consideration.
So here goes.
Thanks to depreciation in housing prices and record low mortgage rates, housing at this point is more affordable than it has been in at least a generation. Prove it, you say. Well, the median-income household needs to spend only 27 percent of its income—an all-time low—to qualify for a median-priced house. And the price of the house is equivalent to just 3.3 times that income, barely higher than the all-time low of 3.1. And there’s more evidence that housing affordability is skyrocketing. Except in New York, the ratio of average housing cost to income is at or well below the historical average in each of the top 20 housing resale markets in the United States. Collectively the current ratio is 27 percent; the historical average is 35 percent. The average gap of 8 percent is widely exceeded in Los Angeles (14 percent), Phoenix and Denver (13 percent) and Atlanta, Houston and Charlotte (12 percent).
Is that a light at the end of the tunnel?
I’m not so sure, because there are countervailing forces at play. For example, there’s the flip side to lower housing prices—namely, that because of the lower prices, homeowners lost a cumulative $3.3 trillion in home value during 2008. Ouch. That dampens demand and makes potential home buyers ask themselves this question: Why would I borrow at any rate to buy a rapidly depreciating asset? Couple that with their concerns about the economy and jobs, and their fear that they won’t be able to sell their current home, and you can understand how and why Detroit is at once the most affordable, and the most depressed, housing market in the United States.
But let me end on a positive note about affordability. In the first quarter of this year, Los Angeles-based KB Homes, one of the nation’s largest home builders, reported its first year-over-year increase in new orders since Q4 2005. Orders were up 26 percent, thanks in large part to the rollout of a new line of smaller, more affordable homes. So affordability does make a difference, even if it isn’t quite the bright beacon we’re all looking for.
Send e-mail to Frank Anton |
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News and Trends from Hanley Wood Magazines
ProSales 2009 Editors' Choice
ProSales editors saw thousands of new products this past year, but these 26 impressed them the most—from tools that protect workers from injury to items that protect the earth. (ProSales, March 2009)
2009 America's Best Builders
Conservative fiscal policies, strong architecture and air-tight quality control make the difference for these three builders. (BUILDER, March 2009)
Extreme Caution
Where the markets for roofing, windows, siding and decks are at and how contractors are responding. (REPLACEMENT CONTRACTOR, Winter 2009)
Land's Evil Twin
When will land prices reset? When will paying anything not be too high a price? Here are some telltale signs amid uncertainty. (BIG BUILDER, March 2009)
Hot Kitchen and Bath Trends
In a buyer’s market, small details can create impact. (BUILDER, March 2009)
Waste Not
By retrofitting units with water-efficient faucets, toilets, and fixtures, apartment operators can save gallons and cents. (MULTIFAMILY EXECUTIVE, March 2009)
Urban Renewal
The Obama stimulus plan promises billions to transform the American city. A new generation of urban designers is ready to spend it. (ARCHITECT, March 2009)
Pursuing the New Deal
How do pro dealers sell hard-to-convnice builders something new? Dealers from around the country told us their secrets. (ProSales, March 2009) |
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Top Developments Affecting the Nation's Biggest Public Builders
Revealed: The Top 10 Builders for 2008
Early returns from our Builder 100 survey identify the top 10 builders in America last year.
Pending Home Sales Index Rises 2.1%
The NAR's Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 2.1% to 82.1 from a reading of 80.4 in January. It remains, however, 1.4% below February 2008 when it was 83.3.
New-Home Sales Post 4.7% Monthly Jump in February
But the sales pace remains more than 40% below sales activity one year ago. And pricing remains under pressure; the median sales price for a new home in February dipped to $200,900, according to the Census Bureau.
Nine Hot Design Ideas on a Budget
You don't need a big budget to win style points. Want proof? See the pictures.
TOUSA to Wind Down Operations
The wind-down represents the largest single business failure in the history of the home-building business.
Lennar Does Not Yet See Bottom
Lennar Corp.'s February-end first quarter results did little to bolster hope that a spring selling season had emerged. In fact, the company logged a 28% drop in new orders from a year ago.
Lumber Demand to Shrink 30% in '09--Forecast
Trade group's prediction assumes just 432,000 housing starts this year.
Fireplace Industry Eyes Energy Issues, Tax Cuts, and Design to Lift Slumping Shipments
Product manufacturers—like everyone associated with the real estate market—remain on edge as the housing slump has affected their shipments.
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Housing Statistics and Analysis from Hanley Wood Market Intelligence
- A Few Bits of Good News Lighten the Mood: Some preliminary signs that housing may be reaching a bottom have been warmly welcomed in recent days, with building permits, housing starts, existing home sales and new home sales all posting increases in February. While the improvements were encouraging, trends remain well off year-ago levels, and should be taken in that context with all due caution. Efforts by the government to help stabilize the housing market may be helping to encourage home buyers coming off the sidelines to take advantage of record high affordability and the new home buyer tax credit. February was the first time since July 2008 that both new and existing home sales recorded increases in the same month. With home sales already ticking up ahead of the spring home buying season, there is an opportunity for a sustained increase in sales activity—welcome news for a beleaguered home building industry.
- Positive momentum continued on Wall Street, which has been buoyed by positive housing data and plans to remove toxic assets off bank balance sheets. The Fed’s efforts to spark economic activity by freeing up the credit markets and keeping interest rates low have sparked market enthusiasm. According to Freddie Mac’s Primary Mortgage Market Survey, Fed purchases of long-term Treasury bonds have driven average fixed mortgage rates to their lowest levels since they started keeping record in 1971. While it is too early to assume the worst is over, the recent rebound in the equity markets indicate that at least some confidence has re-emerged.
More from Hanley Wood Market Intelligence |
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