Desire for New Amenities Remains Top Reason to Remodel

According to remodelers polled in National Association of Home Builder’s Remodeling Market Index (RMI), the number one reason customers remodeled their homes in 2014 was a  “desire for better/newer amenities.” On a scale of 1 to 5 (where 1 indicates never or almost never, and 5 is very often), the average rating on desire for newer amenities was 4.4 in 2014.

In second place with an average rating of 4.2 was a “Need to repair/replace old components”.  A “desire for more space,”  another fairly traditional reason, came in third with an average rating of 3.8;   “To avoid moving or buying another home” was fourth at 3.3.

Desire to be able to age in place” (3.0),  “increasing the value of the home as an investment” (2.8), and “energy efficiency/environmental concerns” (2.6) while significant factors in the remodeling market, were less powerful than the simple desire for new things and need to replace old things.

Do you fall into any of these categories? If so, Chuck Miller Construction Inc. can assist you. Contact us at (208) 229-2553 or by email to chuck@chuckmillerconstruction.com

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What Is Keeping You from Buying A Home?

A recent survey conducted by John Burns Real Estate Consulting, LLC offered some insight into why prospective shoppers are reluctant to purchase.  Of the more than 20,000 people who had recently visited a new home community and responded to the survey questions, 75% were current homeowners, 20% were renters, and 3% were living with their parents.

98% prefer ownership over renting for their next home. Although 20% of those who took the survey are currently renting, only 2% of them prefer to rent today.  2% said they wanted to rent for their next move but 68% of that 2% want to buy a home in the future.

Young couples and families were the most likely to choose homeownership over renting for next move.

75% said they would move for the right opportunity, 32% expect to move in the next year, and 25% do not know when they will move.  Only 24% said they are very satisfied with their current home and have no desire to move.

64% responded “yes” or “maybe” to “What obstacles? It’s a great time to buy!”

When asked about the obstacles to buying a home today, the top three obstacles cited were:

  1. Bad time to sell
  2. Down payment
  3. Lack of confidence in the market

Only 23% said qualifying for a home was a potential obstacle.  50% cited some lack of confidence in the market and, although lack of confidence in the market was most common among the older, more mature buyers; the more mature, experienced buyers were also the ones most likely to recognize that now is the right time to buy a home.

The economic impact of foreclosures

It was no surprise that one of National Association of Home Builders (NAHB) major advocacy issues discussed at the Board of Directors meetings last week in Orlando was home foreclosures and their continuing significant negative impact on the housing market and economy.  We are all well aware of the impact of short sales and foreclosures on property values.  But there’s more to the story.

At one of the meetings I attended, NAHB’s Chief Economist, David Crowe, noted that for every $100 loss in the value of their property, consumers spend an average of $3 to $5 less.  The estimated loss in property value in theU.S.as a result of the housing crash is $6.5 trillion dollars.  That’s $6,500,000,000,000. If my math is correct (I’m not use to working with such large numbers), the loss in property value has resulted in a drop in consumer spending of between $195 billion ($195,000,000,000) and $325 billion ($325,000,000,000).

The U.S. Department of Commerce Bureau of Economic Analysis recently reported thatU.S. current-dollar GDP increased 3.9 percent, or $561.2 billion, in 2011 to a total of $15,294.3 billion.  So the drop in consumer spending equates to a decrease of between 1.3% and 2.1% in U.S. GDP.

According to Andrew Abel and Ben Bernanke, every 2% decrease in GDP results in a 1% increase in unemployment.

So home foreclosures and short sales impact much more than property values.

Are you a savvy homeowner?

Your home is an investment, and the value of that investment is determined by the housing market.  According to the latest American Express Spending & Saving Tracker, nearly two-thirds of homeowners say they will invest in renovation projects this year. You can increase the value of your home as an investment by increasing its energy efficiency. Energy efficiency equates to lower operating costs. Lower operating costs mean savings and that savings makes a home more desirable to potential buyers.

Research shows that eco-friendly homes are selling faster and for more money than traditional homes. In 2010, certified green homes spent an average of 97 days on the market, compared with 123 for traditionally remodeled homes. And although the numbers vary, in general they sell for 8% to 30% more.

Despite the sluggish economy and anxiety about price, “savvy” homeowners that are aware of the benefits of sustainable building solutions are willing to pay for them. Who are the “savvy” homeowners?  Savvy homeowners are the ones who know how to protect their investment. Whether purchasing or improving a home, you should realize you are making an investment with the objective of making a profit — at some point.

In an economy that’s made money a little tighter for everyone, are green improvements really necessary?  The answer to this question is “Yes.”  Homeowners should take note of the International Energy Conservation Code (IECC) and the impending 2012 residential changes to that code because it is about to have a substantial impact on the value of your investment.

You might have heard of Bill H.R.2454 – American Clean Energy and Security Act of 2009.  H.R.2454 contained a provision that would have mandated energy audits and labeling before any home – new or used – was sold. The bill passed in the House of Representatives but stalled in the Senate because it was viewed as too stringent.  Since the “powers that be” cannot agree on how and where to build new energy plants to increase supply or even what types of plants to build, their only option is to decrease consumption.  So predictions are that mandated energy audits and labeling of homes will  eventually pass because of the International Energy Conservation Code and the 30 percent Energy Savings Goal changes to be enacted in 2012.

Regardless of what the federal government might mandate, the Idaho Building Code Act (Title 39 Chapter 41) requires all local governments in the State that issue building permits to adopt the most recent version of the International Building Code by January 1st of the year following its adoption by the Idaho Building Code Board.  And the adoption of the IECC 2012 code changes will eventually force you and other homeowners to incorporate green into your remodel projects or take a loss on your investment.

If you’re like most consumers, you are spending smart and looking for a greater ROI when it comes to home renovation.  Right now, it makes more sense to invest in your home than it does an IRA.  As a National Association of Home Builders Certified Green Professional, a U.S. Department of Energy Building America Builder’s Challenge Partner, and an Energy-Star 100% Builder Partner, I can help you protect your investment.   Call me at (208) 571-0755 or email me at chuck@chuckmillerconstruction.com.

Are you ready to buy or build a new home?

Are you ready to buy or build a new home?  If so, you probably read all the news stories and predictions that the market has a long way to go before it starts to recover and that home prices will continue to fall for months or years to come.  If you waiting for the market to improve before you buy or build your Dream home, remember that, despite all their claims to the contrary, no one can predict precisely where the market is going.  Trying to time your home purchase with the bottom of the market is futile. If you’re financially and emotionally ready to be a homeowner, it’s always a good time to buy.   All the time you spend procrastinating on purchasing or building a home, you could be building equity, getting tax deductions and enjoying the many other benefits of homeownership!

Or maybe you’re just not sure if you are financially ready.  Here’s a little quiz that might help.

Which one of the following do you NOT need to purchase a home:

  1. A decent credit record.
  2. A big down payment.
  3. Enough money to make monthly mortgage payments.
  4. Enough income to pay property taxes and homeowner’s insurance.
  5. The ability to maintain the property.

Check back in a few days for the answer.

Chuck Miller

Are we doing our young people a disservice?

A recent article in Financial Times by Hal Weitzman in Chicago and Robin Harding titled “Skills gap hobbles US employers”  reinforces what I have been saying for years.  The article quoted Ben Bernanke, chairman of the US Federal Reserve, who told an audience in Jackson Hole, Wyoming, in August that the US had to “foster the development of a skilled workforce” if it was to enjoy good longer-term prospects. The US education system “despite considerable strengths, poorly serves a substantial portion of our population,” he said.  US manufacturers have 600,000 unfilled positions because of a lack of qualified skilled workers.

We need to stop promoting a college education as the only path to a good paying job.  How many unemployed college graduates are there? We need to recognize that some young people have skills and abilities which they could put to use in manufacturing or construction jobs.  The FT article quotes one business owner who has been unable to fill 3 positions for sheet-metal set-up operators.  These jobs pay $80,000 and include health and pension benefits.

I have served on the board of advisers for our local school district’s vocational-technical education program.  That program is suffering because parents and guidance counselors discourage kids from taking those classes. Many students are unaware that the programs even exist.

I have been in the construction industry all of my life.  I started as a carpenter’s helper the summer between my sophmore and junior years in high school.  I loved building things.  My favorite toys as a kid were building blocks, Lincoln Logs, and a toy by Kenner called the Girder and Panel Building Set.  My counselor encouraged me to attend a liberal arts college, but I knew what I wanted to do when I finished school.

Those robots we’ve all seen on TV commercials assembling our cars and trucks are operated and maintained by skilled workers.  Our homes, our schools, our hospitals,our churches, the buildings where we work and shop are all built by skilled-workers.  The demand for skilled workers is always going to exist.  The BIG question is how will we meet the demand.

Home Buyers Opinions Regarding Short Sales and Foreclosures

Sales of new U.S. homes fell to in August. The fourth straight monthly decline during the peak buying season suggests the housing market is years away from a recovery.

The Commerce Department said Monday that new-home sales fell 2.3 percent to a 295,000 – a six-month low – and less than half the roughly 700,000 that economists say must be sold to sustain a healthy housing market.

But all home sales remain weak. August sales for previously occupied homes at a seasonally adjusted annual rate of 5.03 million were slightly above last year’s sales but still almost a million less that the roughly 6 million older homes that economists say need to be sold each year to sustain a healthy housing market.

The low sales have been attributed to a lack of consumer confidence and on competition from short sales and foreclosures which are selling at an average discount of 20 percent. But is that really the case?

The Builder Magazine/American LIVES 2011 Study of buyers who had recently purchased or looked at newly constructed homes measured, among other things, home shoppers opinions regarding Short Sales and Foreclosures. The survey asked:

“Home shoppers have different opinions about Short Sales and Foreclosures. Check what is true for you.”

 I’ve heard that Short Sales take forever and sometimes you don’t even get the house.
 I’ve heard that the Foreclosures can be a really good deal.
 You need to know a lot more than I do to consider a Short Sale or Foreclosure.
 You can find some really good deals in a Short Sale.
 I’ve heard that Short Sales are a pain in the neck, even if you finally get the house.

In the Builder Magazine/American LIVES 2011 Home Buyer Study, 40% responded that they’d heard that the Foreclosures can be a really good deal and 38% believed that you can find some good deals in short sales. But 41% heard that Short Sales take forever and sometimes you don’t even get the house, 40% felt that you need to know a lot more than they do to consider a short sale or foreclosure, and 32% had heard that Short Sales are a pain in the neck, even if you finally get the house.

Short Sale or Foreclosure homes are selling at an average discount of 20 percent, and they are lowering neighboring home values, making many re-sales a bargain compared with new homes and creating an average 30 percent disparity in prices.

Given the uncertainty about jobs and the economy, is it a surprise that people are shopping for “deals?” Getting a “perceived deal” can give you the psychological lift you need to be confident that you are making a good decision. In addition, our expectations are being set by all of the “deals” being offered by other parts of the economy – groceries, dining, vehicles, and vacations.

According to the latest report from my friend and fellow MIRM, Mike Pennington, while the number of distressed properties in Ada and Canyon counties is declining, it is not declining at the rate we need to cause average prices of homes to increase.

Because all real estate is local, I would like to know how you would respond to the survey question on short sales and foreclosure.

Chuck Miller GMB CGB CGP CAPS MIRM CMP MCSP CSP
President / Builder – Chuck Miller Construction Inc.
(208) 229-2553
chuck@chuckmillerconstruction.com