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The US Census released the 2nd Quarter report on Housing Units completed. There is a fair amount of attention placed on this report from a National perspective. Calculated Risk did a good job on reporting on the national figures of this report.
I am more interested in our regional activity, this report does not break it down by State but they do break it down by the Midwest region. These figures are the US Census Midwest Region which includes Chicago area.
As you can see on the graph above, there is slight uptick in housing units completed in the Midwest primarily due to Detached Units. The region is still bouncing along the bottom and will likely remain bouncing along the bottom for at least another year. This will not pick up until the employment situation turns around, once the employment situation begins to turn around creating added demand for new housing – construction will pick up adding even more jobs.
Above is the Housing Starts graph. (I forgot to attach this when I originally posted this early today.) This also shows a slight uptick in housing starts, however also bouncing along the bottom… We will be seeing reports on how housing starts are falling, listen for “seasonally adjusted” figures – we are heading into the winter months and starts will naturally slow down. Locally I am anticipating an increase next year in new housing starts assuming our housing inventory stays down and we don’t get swamped with a wave of new foreclosures.
What I found interesting in this report is the Square Footage of the completed housing units. It appears that builders tried reducing the square footage of new homes to get the pricing down, yet it appears the market is still demanding larger homes. I don’t know if you remember hearing all the media attention saying the “era of mcmansions” is over, only in their dreams. The consumer still loves their “elbow room” and space…
There is a demographic shift taking place where household size is shrinking and the expectation is that this demographic will no longer want the large homes. I am not so sure about that… Certainly there will be a need for less expensive housing and that can be achieved through smaller homes, but overall “size matters” in housing.
Builders Association of the Twin Cities, BATC has the Twin Cities Building Permits for July.
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Saw this article from the Wall Street Journal. Apparently the Labor Department is going after Residential Homebuilders for overtime and minimum wage violations, which to me sounds like they are really targeting the sub-contractors and their status of sub-contractors.
Sounds like a political witch hunt to me. Most homebuilders use sub-contractors not employees to do the trades, I wonder if they are hoping to snare sub-contractors that do a large portion of their business with one home-builder as “employees” not sub-contractors.
The Leading Builders of America, an association of 19 major home builders, called the document demands overly broad and said the inquiry was “especially troubling given that no issues have been identified to warrant an investigation.”
“These demands could require significant resources and thousands of hours of work,” the association said in a statement.
The last line in the article I think sums the whole article up:
Many construction unions have urged the Labor Department to crack down on wage violations in part to embarrass nonunion contractors that unions hope to organize.
Read Full Article
I am really curious on how the Builders Association of the Twin Cities (BATC) and the National Association of Home Builders (NAHB) will respond to this.
If you have read the headlines today, you will see that New Construction sales are the worst in 50 years. These reports are based off of the US Census report issued this morning. Minneapolis Star Tribune covered this story as well.
Sales of new single-family houses in July 2011 were at a seasonally adjusted annual rate of 298,000 … This is 0.7 percent (±12.9%)* below the revised June rate of 300,000, but is 6.8 percent (±13.5%)* above the July 2010 estimate of 279,000.
The Twin Cities did a little better, we saw an increase of 23.5% in new construction sales from July 2010 to July 2011.
Here is a great graph from this report from Calculated Risk Blog:
New Homes Sales 07/2011 CalculatedRisk Blog
Looks pretty terrible. This is based on a National statistic, but how does it relate to our Twin Cities market? Below is a chart to compare, this chart only goes back to 2009 – but shows us the recent activity. We are in slightly better shape than this time last year. We are also tracking about right for New Construction inventory vs. Previously Owned Inventory, approx 1/5. However on the Sales, new construction is only accounting for about 6% of the sales – this should be closer to the 1/5 range.
One of the reasons for this disconnect is financing. Builders have almost no option on financing new inventory on a spec basis, so a good portion of the “actives” are listed as “To Be Built” (just a proposal). Buyers are reluctant to buy a house that can only be seen on paper…
On a side note, when the market comes back it is going to feel like it happened overnight. With the lending restrictions, it is going to be extremely difficult for Builders to gear production back up when our market will need additional inventory. This is not a problem yet, but I am predicting it will be.
Twin Cities New Construction Solds July 2011
One of the key components we need for a healthy real estate market recovery is Jobs. If you don’t have a job, it is rather difficult to buy a home. Unfortunately this report is bad news. We are back up to 7.2% unemployment rate in Minnesota.
For your property values to recover, we need people working. If this trend of higher unemployment continues in Minnesota, we will continue to see the housing prices fall.
August 19, 2011 Minnesota Unemployment Rate
There is a ratio used when we calculate housing units needed in an area. This number is general number used from NAHB
, and it can vary depending on the type of jobs created.
But for general purposes, for every 1.1 job created there is need for 1 housing unit.
Instead of adding 1.1 job, we are taking away 1.1 jobs. What do you suppose will happen to the price of the homes?
No more Location, Location, Location. Now it is Jobs, Jobs, Jobs!
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Pulte has received preliminary plat approval from Rosemount for a new 182 lot sub-division called the Marshes of Bloomfield.
The plans may change slightly as Pulte tabled the approval process while they work on some revisions. Check back with the City of Rosemount to see when they get back on the agenda.
- Marshes of Bloomfield location map
- Marshes of Bloomfield Preliminary Plat
Looks like a nice project for Pulte. There is no pricing information available as this project is not through the approval process yet. I will keep you posted.
Although it looks like a nice project, they may have some tough competition depending on their price point.
Currently Lennar appears to be in the final phase of the Glendalough of Evermoor neighborhood of 155 home sites.
Rottlund is still working on their Harmony neighborhood of 519 mixed use units.
RMLS data shows an 8 month supply of homes, or 194 actives, in Rosemount for month ending July 2011. This is on the higher end of what you should be adding inventory to. I would venture to guess the Pulte is well aware of this and phase their project accordingly.
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This is a great story about a local builder helping out a local hero. You can visit James Barton Design Build and say Thanks. To Donate time, material, or money for worthy causes like this, go to the Builders Association of the Twin Cities Foundation.
James Madsen, owner of James Barton Design Build in Apple Valley, is a U.S. Army veteran. Some of his employees served in Iraq. So when he was asked to help remodel the home of a decorated U.S. Army soldier, Madsen said he couldnâ€™t say no.
â€œI knew immediately this was something our company wanted to be involved in,â€ Madsen said.
The recipients are Susan and Staff Sgt. Wesley Cureton of Minneapolis. Wesley has 23 years of military service, and was awarded two Purple Hearts and several other honors.
During Wesleyâ€™s second tour with Operation Enduring Freedom in Afghanistan, a mortar shell exploded on the other side of a door as he tried to retrieve wounded soldiers in his unit. The door hit his face, crushing it. He suffered permanent blindness and neurological damage. His face was reconstructed and his jaw had to be wired shut.
Due to his injuries, Wesley is unable to control his body temperature, so going outdoors is difficult, Susan said.
â€œThe Curetons are such a deserving family and have given up so much for this country,â€ Madsen said. â€œWesley served for all of us, now itâ€™s our time to give back to Wesley and his family.â€
Madsen has a seat on the Builderâ€™s Association of the Twin Cities Foundation committee, which chooses projects to sponsor. Choosing the Curetons as recipients was an easy decision, Madsen said.
Read Full Article from the Apple Valley Patch
The National Association of Home Builders reports Builder Confidence still depressed. The Wells Fargo/NAHB HMI (Housing Market Index) remains unchanged as reported today August 15, 2011.
Wells Fargo/NAHB HMI August 15, 2011
Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He noted that 41 percent of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers’ inability to sell their current homes.
“The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time,” said NAHB Chief Economist David Crowe. “While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey.”
NAHB: Builder Confidence Unchanged in August.