Los Angeles Realty Blog
While the previous generation’s senior years were marked by a migration south, this group exhibits less of a desire to move to the Sun Belt, instead opting to move closer to their children and grandchildren. This move will be dramatic in numbers. A study by the National Association of Home Builders indicates that more than 1.2 million mature adults expect to move this coming year.
What these homebuyers are looking for.
While buyers in this demographic will most likely want to see home space that will permit customization for their specific needs, they will also expect space that allows them to maximize the value of the home’s square footage. They will view a space in multiple ways. For instance, one buyer may view a typical dining room as a potential home office space, while another buyer may see it as a sleepover place for the grandchildren which easily converts to a TV room between visits. An important design component would be doors for that room, which could be used to close it off for privacy.
These buyers are tech savvy and regularly use computers to work and communicate. Because of this, they will be most interested in homes that feature designated tech space. They will not necessarily want a large home office space, but will look for a nook fitted out with a desktop, chair and computer hookups. Creatively incorporating such space in an alcove under the stairs or an arched opening in a wider hallway meets the need.
Finally, these buyers are interested in homes that will cost less to maintain over time. The U.S. Department of Energy estimates that consumers spend an average $1,900 annually on utility bills. A home with energy-efficient upgrades will resonate with these buyers, and research suggests that the following are valued upgrades: high-performance windows, high-efficiency heating, ventilation and air-conditioning systems, insulation that exceeds code and water-saving plumbing fixtures and appliances.
Sources:
“Emerging Trends in Real Estate 2010.” The Urban Land Institute. October 2009.
“Trends and Insights on Boomers and Beyond.” National Association of Home Builders. April 2009.
“AIA Home Design Trend Survey.” American Institute of Architects. December 2009.
Forecasts & TrendsOctober Construction Advances 2%
New York, N.Y. – November 19, 2010 – The value of new construction starts edged up 2% in October to a seasonally adjusted annual rate of $413.8 billion, it was reported by McGraw-Hill Construction, a division of The McGraw-Hill Companies. Much of the upward push was provided by nonbuilding construction, comprised of public works and electric utilities, with an added lift coming from modest growth for housing. However, nonresidential building in October retreated following its improved contracting in September. Through the first ten months of 2010, total construction on an unadjusted basis came in at $350.4 billion, down 3% from a year ago.
The October data produced a reading of 88 for the Dodge Index (2000=100), up from September’s 86. Over the course of 2010, the Dodge Index has hovered between 82 and 94. “This year’s pattern shows activity fluctuating within a set range, consistent with the belief that construction starts have now stabilized at a low level,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. “At the same time, there’s yet to be evidence that renewed expansion on a sustained basis is about to take hold. The emerging recovery for housing has proven to be halting, and commercial building is still in the process of bottoming out. While public works in 2010 has moved at a decent clip, its prospects for 2011 are less favorable, given fading stimulus support and the fact that Congress has yet to pass the appropriations bills for fiscal 2011.”
Nonbuilding construction in October increased 14% to $145.8 billion (annual rate), making a partial rebound after the 27% decline reported for September. Electric utility construction was particularly strong in October, climbing 31%, helped by the start of five large wind power projects located in Ohio ($700 million), South Dakota ($363 million), Nebraska ($200 million), Utah ($153 million), and Washington state ($150 million). Also contributing was a $700 million modification to a coal-fired power plant in Alabama, as well as a $510 million power line project in Nevada. For the public works side of nonbuilding construction, the “miscellaneous” public works category jumped 44% in October, boosted by the start of large rail-related projects in New York ($343 million) and Utah ($191 million). Substantial gains were also reported in October for sewers and hazardous waste work (up 58%), as well as river/harbor development (up 22%), but water supply systems weakened (down 17%). Highway construction in October was unchanged from September, while bridge construction retreated 18%.
Residential building, at $120.1 billion (annual rate), improved 3% in October. Leading the way was a 10% advance for multifamily housing, which rose for the second straight month after losing momentum at midyear. Large multifamily projects that contributed to October’s gain were a $99 million condominium project in San Francisco CA, a $52 million mixed-use project in Marina Del Rey CA, and a $42 million apartment project in Washington DC. Through the first ten months of 2001, multifamily housing was up 4% in dollar volume compared to last year, with noteworthy increases in such metropolitan areas as San Francisco CA (up 101%), Boston MA (up 75%), Los Angeles CA (up 31%), and Washington DC (up 8%). Single family housing in October edged up 1%, providing more evidence that it has leveled off after the pullback reported during the second quarter. Through the first ten months of 2010, single family housing held onto a 9% gain over last year, reflecting this performance by region – the Northeast, up 13%; the South Atlantic, up 12%; the Midwest and West, each up 9%; and the South Central, up 3%.
Nonresidential building in October fell 9% to $147.8 billion (annual rate). Several structure types which had experienced large gains in September pulled back in October. Office construction dropped 47%, after a 26% increase in September which included the start of a $290 million corporate headquarters. The largest office project reported as an October start was a $35 million federal government office building in Phoenix AZ. The manufacturing plant category in October dropped 60%, after a 70% increase in September that included $1.6 billion for the resumption of work on an oil refinery in Port Arthur TX. October did see a few large manufacturing projects reach groundbreaking, including the start of a $325 million steel pipe mill in Youngstown OH. Transportation terminal work in October dropped 50%, after a 75% increase in September that included a $300 million airline terminal project. Other nonresidential categories that reported diminished activity in October were dormitories, down 9%; stores and shopping centers, down 6%; and amusement-related facilities, down 4%. Warehouse construction in October was unchanged from the previous month.
On the plus side, educational facilities climbed 26% in October, in a departure from the generally downward trend that has been present during 2010. Large projects that helped to lift the educational category in October included a $156 million neuroscience research building in Bethesda MD, a $100 million school of medicine in Richmond VA, and a $60 million high school in Natick MA. Healthcare facilities in October climbed 7%, boosted by the $381 million expansion to a university hospital in Columbus OH and a $90 million hospital in Goldsboro NC. Other institutional categories posting gains in October were public buildings, up 9%; and religious buildings, up 51%; with both rising from weak September amounts. The depressed hotel category also registered a gain in October from a weak September, climbing 43% with support coming from groundbreaking for a $96 million hotel in Columbus OH.
The 3% slide for total construction on an unadjusted basis during the January-October period of 2010 was due to a mixed performance by major sector. Nonresidential building dropped 12% year-to-date, with commercial building down 21%, manufacturing building down 18%, and institutional building down 8%. Nonbuilding construction during the first ten months of 2010 slipped 2%, with public works down 2% and electric utilities down 1%. Residential building continued to be the one major sector able to show year-to-date growth, climbing 8%. By geography, total construction during the January-October period of 2010 showed an increase for one region – the Northeast, up 5%. Total construction in the Midwest was unchanged from a year ago, while total construction declines were registered by the South Central, down 4%; the West, down 5%; and the South Atlantic, down 11%.
October 2010 Construction Starts
OCTOBER 2010 CONSTRUCTION STARTS
MONTHLY SUMMARY OF CONSTRUCTION STARTS
Prepared by McGraw-Hill Construction Research & AnalyticsMonthly Construction Starts
Seasonally Adjusted Annual Rates, In Millions of Dollars
October 2010 September 2010 % Change Nonresidential Building $147,809 $162,005 -9 Residential Building 120,125 116,650 3 Nonbuilding Construction 145,841 127,906 14 Total Construction $413,775 $406,561 2
The Dodge Index
(2000=100, Seasonally Adjusted)October 2010.........................................88
September 2010...................................86YEAR-TO-DATE CONSTRUCTION STARTS
Unadjusted Totals, In Millions of Dollars
10 Mo. 2010 10 Mo. 2009 % Change Nonresidential Building $129,011 $146,617 -12 Residential Building 102,019 94,567 8 Nonbuilding Construction 119,326 121,818 -2 Total Construction $350,356 $363,002 -3
About McGraw-Hill Construction
McGraw-Hill Construction connects people, projects, and products across the design and construction industry. From project and product information to industry news, trends and forecasts, the company provides industry players the tools, resources, and applications that help them save time, money, and energy. Backed by the power of Dodge, Sweets, Architectural Record, Engineering News-Record (ENR), and its Regional Publications, McGraw-Hill Construction serves more than one million customers within the $5.6 trillion global construction community. For more information, visit www.construction.com
- Mary Umberger
On Real Estate
5:55 p.m. CDT, October 15, 2010
Years ago, I went through a period when I visited a lot, and I mean a lot, of builders' model homes. I wish I had a dollar for every time I opened the door and was greeted by the bleat of Kenny G's saxophone.
The builders, one after another, seemed fond of piping the "smooth jazz" tones of Kenneth Gorelick through every room, in the apparent belief that would-be buyers would feel relaxed and uplifted by it.
I was neither relaxed nor uplifted by it. However, I wasn't there to shop, I was there to write about them, so my reaction probably shouldn't count.
In any case, the presentation of model homes isn't a haphazard thing.
Marketers work hard to furnish these houses in ways that help their target buyers envision themselves living some kind of perfect existence there. And the musical choices are a cog in that machine.
Meg Kimmel said there's no reason why sellers of existing homes shouldn't think that way too.
"When someone is going into a home, potentially to buy it, you want it to feel inviting, welcoming, warm, comfortable, and there are ways to do that with music," she said.
Kimmel is an "audio architect" for Muzak LLC, the Fort Mill, S.C., company that originally was known as the source of countless bland tunes piped into elevators, but over the years has specialized in developing playlists for retail businesses.
Psychological research long ago made a connection between background music and how it activates, or primes, certain thoughts.
The most obvious example is the link between a given song and a sense of nostalgia. Retailers hope background music will help customers connect their merchandise with, say, a perception of quality or a sense of well-being.
But can it also encourage them to buy a split-level in a cul-de-sac?
Kimmel said homeowners ought to give it a shot.
"In this economy, it's a great way to be creative and think outside the box," she said. "Maybe you will have people stay longer. It may capture that emotion that will make the house stand out in (buyers') minds."
But, as I wrote last week in a column about how sellers might lasso scent as a way to endear a house to a buyer, there are do's and don'ts with music, Kimmel said. As with scent, the songs have to fit.
"When I'm going to program music for a business, I ask who's their target demographic, what do they read, what kind of car do they drive?" she said. "You take that into consideration when you think about a playlist.
That's not terribly practical for homeowners, Kimmel agreed, but she had some suggestions:
Selling a loft in downtown Chicago: "What would someone like to hear? Maybe lounge music, maybe a mix of instrumental jazz and vocals, music with sophistication and some sex appeal," she said.
A farmhouse: "Something organic, folksy," she said, speaking in terms that perhaps only audio architects grasp immediately. "Maybe Norah Jones or Ray La Montagne."
If the buyer might be a stay-at-home mom, "go with something uplifting, songs that would appeal to the female buyer," Kimmel said. "I program a lot for women's retail, and I'm always thinking about that category. It always goes back to uplifting, happy. I'd consider Colbie Caillat."
A good generic choice, overall, she said, would be classical.
"Just be sensitive with your selections," she said. "Even if kids are along, you probably shouldn't play Barney. Or hard rock or heavy metal. Not everyone likes country, not everyone likes rap."
And delivery is critical, she said. In an ideal world, home sellers would have high-quality speakers wafting room-to-room sound. But she knows that's not likely. Consider music in a single room for a particular effect, she said.
"Maybe you could set up your iPod in your kitchen," she said. "Somebody walks in and they can envision themselves cooking and listening to music."
Mind the volume, she said. Though she said some retail stores purposely blast their customers because music "pumps them up to shop" homebuyers usually are talking and asking questions. The music shouldn't dominate, she said. After all, it's called "background music."
And think of how to play up specific home features that might tug on a buyer's heartstrings, she suggested.
"One of my own dreams," Kimmel added, "is to have a home with a big porch and ceiling fans and speakers installed already."
Again, she said, in choosing music, think about who might check out that porch: "Use some sort of jazz — but not smooth jazz or Kenny G. "That's just, like, annoying," said Kimmel, who is 32.
If you could live in any state, except the one you live in now, what state would you choose to live in?The Harris Poll has asked this question every year since 1997. While California tops the list of most popular states to live in among Echo Boomers (now ages 18 to 33) and Gen Xers (ages 34 to 45), Hawaii is the top pick for Baby Boomers (ages 46 to 64) and Matures (ages 65 and over). Among Echo Boomers, Hawaii drops out of the top five.Here are the top-10 states across the age groups:1. California
2. Hawaii
3. Florida
4. Colorado
5. Arizona
6. North Carolina
7. Oregon
8. Texas
9. New York
10. WashingtonSource: Harris Interactive (10/19/2010)
By Inman News, Tuesday, October 26, 2010.
Home sales will rise modestly next year but won't really take off until 2012, economists with the Mortgage Bankers Association predict in their latest forecast.
Existing-home sales, which are expected to be about 8 percent lower this year than last, are expected to grow by less than 2 percent next year before increasing by 16 percent in 2012.
New-home sales, which will probably drop 13 percent this year from last, are expected to bottom out in the third quarter of this year and grow by 20 percent in 2011 and 40 percent in 2012.
That, along with price stabilization and an uptick in sales of high-end properties, should drive purchase mortgage originations up 30 percent in 2011, the MBA said.
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.
![[roiA0915]](http://si.wsj.net/public/resources/images/OB-JZ603_roiA09_DV_20100914164033.jpg)
The Sept. 6 cover of Time magazine: This is what capitulation looks like.
After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"
But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.
1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.
Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.
For more information, contact:
Walter Molony 202/383-1177 202/383-1177 wmolony@realtors.orgPending Home Sales Rise
Washington, September 02, 2010
Following a sharp drop in the months immediately after expiration of the home buyer tax credit, pending home sales have modestly risen, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator, rose 5.2 percent to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1 percent below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”
Yun added, “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.”
The PHSI in the Northeast rose 6.3 percent to 62.5 in July but is 21.1 percent below a year ago. In the Midwest the index increased 4.1 percent to 66.7 but remains 25.7 percent below July 2009. Pending home sales in the South rose 1.2 percent to an index of 86.3, but are 15.6 percent lower than a year ago. In the West the index jumped 11.6 percent to 95.0 but is 17.6 percent below July 2009.
The national index had fallen 29.9 percent in May and another 2.8 percent in June.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.Existing-home sales for August will be reported September 23 and the next Pending Home Sales Index will be on October 4; release times are 10 a.m. EDT.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data, tables and surveys also may be found by clicking on Research.
Despite continued discouraging data from the real estate sector, a few bullish arguments are beginning to emerge. One MIT economist even believes that demand for new homes exceeds residential construction.
At a time of slumping home sales and a glut of unsold inventory, it's hard to imagine how anyone could form a bullish take on the troubled U.S. housing market. Even though home prices have risen slightly in recent months, experts in charge of Standard & Poor's Case-Shiller index, a crucial indicator of the health of the housing market, warned as recently as last month that the market remains weak. And some analysts think home prices could fall further by 15% to 20%.
But talk about real estate has shifted somewhat lately. It looks as if the contrarian view of the housing market is beginning to gain traction, if ever so slightly.
Credit Suisse says the worst is behind us and that fear of another hit on the housing market is just overreaction. The bank offers a few factors that could help home prices from here on out, including government support of about 70% of home mortgages that will likely keep prices from revisiting the nerve-wracking plunges seen in 2007 and 2008. Also, The Wall Street Journal's Brett Arends earlier this week listed 10 reasons to buy a home, countering a recent Time Magazine cover story earlier this month that questioned the pros of homeownership. Arends lists everything from record low mortgage rates to savings on taxes to guarding against inflation.
All are worth noting, but one of the more striking bullish arguments come from an economist at Massachusetts Institute of Technology's Center for Real Estate. Bill Wheaton, who thinks the housing market is poised to make a strong comeback, calls home construction "a sleeping giant that is about to wake up."
Wheaton thinks much of the excess home inventory would either be sold, occupied or otherwise absorbed by 2013. But from 2011 onward, demand should return to pre-recession levels. What's more, he says, the recovery of home construction could boost overall GDP at levels unseen during recoveries after previous recessions, with the exception of the massive building that happened right after World War II.
Not just a comeback, but a strong one
"Housing construction will not only rise, but it will stay high for a while, which didn't happen in previous recoveries," Wheaton says, commenting on a paper he wrote for the center in 2009. "It won't just be a one or two year blip."
So is Wheaton really onto something, especially at a time when so many people are jobless and housing units sit empty -- an unknown number of which could eventually fall to foreclosure?
The crux of Wheaton's argument lies in the rate of residential construction today. It's been historically low – so low that he believes demand is actually exceeding the level of building going on. This helps set the grooves for a relatively large comeback in residential investment.
Here's how Wheaton backs the imbalance of demand for housing units and residential construction.
He estimates that housing demand in 2009 was at about 1.1 million units – more than twice construction at the time. At this rate, the excess inventory will eventually be absorbed. "It's going to be a long time before construction picks up with demand," Wheaton says, adding that this should help housing prices. Foreclosures won't stop anytime soon, he says, but demand will return to a more normal level, clearing out the inventory and eventually sparking more new construction.
Housing construction could hugely drive America's economic growth over the next few years, Wheaton says. Residential investment as a share of GDP is relatively small, averaging about 3% to 4%. But given that there's so little building going on today, it's plausible housing construction could add an average of 0.7% to GDP growth per year over five years – a level far greater than what has been seen during recoveries of previous downturns.
Some might think Wheaton sounds way too bullish given what most experts are saying about America's housing rut. He could be wrong. He might only be half-right. But the bull's side is worth hearing as much as the bear's.
See also:
