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New Home Sales
Sales of newly built, single-family homes rose 6.6 percent in September to a seasonally adjusted annual rate of 307,000 units, their best pace since June, according to data released by the U.S. Commerce Department October 27, 2010.

"The fact that new-home sales are finally moving in the right direction, albeit slowly, is definitely good news following an exceptionally quiet summer at builders' sales offices and model homes," said Bob Jones, chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. "The road to recovery will be a long one, however, and a key hurdle that must be surpassed is the lack of available credit for new-home construction so that builders can meet improving demand for new homes moving forward."

"Beyond the higher sales figure, another positive piece of data provided by today's report was the number of newly built, unsold homes on the market, which has been steadily declining since spring of 2007 and fell again to a modest 205,000 units in September," said NAHB Chief Economist David Crowe. "This suggests that builders continue to prudently winnow down their inventories. That said, the concern is that builders' ongoing difficulty in accessing production credit will keep the razor-thin supply of new homes from being replenished as consumer demand revives, thereby hindering the positive momentum."

Sales of newly built homes rose in three out of four regions in September, with the Northeast posting a 3.4 percent gain, the South a 3.2 percent gain, and the Midwest a remarkable 60.6 percent gain following a big decline in August. The West posted a 9.9 percent decline in new-home sales for September.

Due to the improved sales pace, the month's supply of new homes for sale declined from 8.6 in August to 8.0 in September.

Local Governments and Builders Must Work to Reduce Home Building Costs
When Elliot Eisenberg, PhD, the National Association of Home Builders' senior economist, spoke before 50 Northeast Builders Association members in Boxboro, Mass. at the end of October, he told the audience why the state is not fairing so well economically.

He noted the population of Lowell, Mass. increased 10 fold between 1828 and 1850, a period when the textile factories were built.

Elliot Eisenberg, PhD, senior economist, National Association of Home Builders.

"You can't build factories like those today with all these new government regulations," he asserted. Eisenberg contended such regulations and rules are killing and stifling industries.

Eisenberg's area of interest is, of course, building new housing. He quoted a few numbers: According to the U.S. Census Bureau, 7,097 new housing units were built in Massachusetts in 2009, but as recently as 2007 there were twice as many homes built, and in 2004 there were 21,000 new housing units built.

"Starter home" homebuilder Brian Lussier, owner of Dracut-based Comfort Homes, pointed out his business has suffered since 2007, before the nationwide foreclosure crisis took hold. Lussier thinks complicated regulations and permitting are helping drive new homebuyers out of Massachusetts.

Eisenberg concurred, saying local state governments are standing in the way of building new homes, because the structure of the local governments have made those governing bodies to complicated and expensive.

Eisenberg won't predict the future of the housing market, but acknowledges it won't likely improve anytime soon.

Eisenberg compared housing costs in metro Atlanta--whose population grows by about a 100,000 people each year--versus those in metro Boston. Why, he asked, is the average house price in Atlanta a third of that in Boston?

He believes it's because of all the regulations and permits required for homebuilders in Massachusetts, and thinks now is the time for local governments and builders to work together to reduce the cost of home building.

Remodeling Index Remains Flat During Sluggish Economic Recovery
The latest National Association of Home Builders' (NAHB) Remodeling Market Index (RMI) remained essentially unchanged at 40.8 in the third quarter, compared to 40.7 in the second quarter. An RMI below 50 indicates more remodelers reporting declining remodeling activity, rather than increasing actitivy. The RMI has been running below 50 since the final quarter of 2005.

The overall RMI combines ratings of current remodeling activity with indicators of future activity, such as calls for bids. In the third quarter, the RMI component measuring current market conditions climbed to 43.4 from 42.6 in the previous quarter. The RMI component measuring future indicators of remodeling business declined marginally, to 38.1 from 38.9 in the last quarter.

Donna Shirey, chairperson for NAHB Remodelers and owner of Shirey Contracting in the Seattle area.

"Consumers remain cautious about spending due to uncertainty in the economy high unemployment and scarce credit," said Donna Shirey, chairperson for NAHB Remodelers and owner of Shirey Contracting in the Seattle area.

"Homeowners may be looking at remodeling but they are scared to take the leap."

The current conditions indices for the remodeling market remained stable in three regions: Northeast 41.6 (from 41.4 in the second quarter); Midwest 44.9 (from 44.7); and South 42.3 (from 42.4). The West showed more improvement with a jump to 49.3 (up from 42.0). Major additions increased modestly to 45.8 (from 44.2), as did minor additions to 46.4 (from 45.8) and maintenance and repair to 37.1 (from 36.6).

The indices for future remodeling business stayed mostly level. Calls for bids slipped to 42.9 (from 46.2). Work committed for the next three months grew to 30.3 (from 27.9). The backlog of remodeling jobs dipped to 37.2 (from 37.7), and appointments for proposals declined to 41.9 (from 43.7).

"The remodeling market hit the same mid-year stall that the rest of the housing market and the economy hit. Remodeling continues to remain weak as consumers hold off on investing in their home until they feel more confident about the overall economy," said NAHB Chief Economist David Crowe. "The economy is growing, but at a rate well below the level needed to reduce unemployment and ignite consumer confidence. For now, professional remodelers are concentrating on consumers' requests for smaller home improvements until the economic recovery strengthens."

Standard Pacific Turns Small Profit in 2010's 3Q--Average home sales price moves up 14% to $302,000

During a Standard Pacific third-quarter conference call on Oct. 27, 2010, company CEO Ken Campbell readjusted his prediction for when the home building market will return to a semblance of normality. He now believes it won't be until 2015.

Standard Pacific's orders were down year-over-year by 38% to 555 homes in the third quarter, which ended Sept. 30. Closings were down 33%, to 599 homes. The company's backlog slid to 605 homes, a 39% drop compared to the same quarter last year.

Despite these negative numbers, Standard Pacific turned a slight profit for the second quarter ($4.5 million), or 2 cents per share, compared to a 10-cent loss-per-share in the same quarter of last year.

Standard Pacific can make a profit by selling just 1.5 homes a month on average in each of its communities. The company expects to increase its net community count by seven by the end of the year and boost its total count to an average of 150 compared to 130 this year. Standard builds homes in Texas (Austin, Dallas and Fort Worth), in 12 areas of California, six cities in Florida, two areas in the Carolinas, and in the Denver and Las Vegas metro areas.

The major reason for its modest profitability is that third-quarter expenses were down $7.4 million, a 17.6% reduction.

Meritage Homes--More Small Profits
More Small Profits-- Meritage Homes of Scottsdale, Ariz. reported net income of $1.2 million for its third quarter ended Sept. 30, compared to a net loss of $17.8 million in the same quarter in 2009.

Meritage, which has built more than 60,000 homes across the southern and western United States, verifies plans to start construction within the next year in an unbuilt subdivision with more than 130 homes sites in Santa Rosa, Calif.

Alan Jones, president of Lennar Arizona, notes that while new-home development had slowed in the months following the expiration of the home tax credit, the company is looking to maintain, and even increase, its activity in Southern Arizona.

"In Tucson a year ago, we dropped down to where we only had three or four communities," Jones said. "A year later we have nine communities."

Lennar recently opened two new communities--Rancho Del Lago and Oasis Santa Rita--and construction is moving forward at a KB Home development called Sycamore Vista. The subdivisions are in the Vail area southeast of Tucson.

KB Home
Los Angeles-based KB Home plans to build 272 houses and townhomes at the south end of Petaluma, Calif. in summer 2011. KB Home has developments in California, Nevada, Arizona, New Mexico, Colorado, Texas, Florida, North and South Carolina, Georgia and Washington, DC.

Ryland Group
The Ryland Group, Calabasas, Calif., reported a consolidated net loss of $29.9 million for the third quarter ended Sept. 30, compared to a consolidated net loss of $52.5 million for the same period in 2009. Home-building revenues fell 34.6% to $206.5 million for the third quarter of 2010, compared to $315.8 million for the same period in 2009.

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December 14, 2019, 8:37 am PDT

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