Photo Credit: cambodia4kidsorg

If you’re looking to buy a house, you’ve probably had your share of frustration. You might have even been caught up in a few bidding wars that left you discouraged. Or perhaps you’re one of the 100 million Americans who no longer believe that owning a home is a realistic way to build wealth.

There are a lot of mixed feelings when it comes to homeownership. So what’s the buzz out there? The National Foundation for Credit Counseling (NFCC) released the results of a recent survey (taken during May & June) and it looks like nearly half of this country is anti-homeownership. People no longer believe in the American dream of building equity as a means to financial security.

More survey findings:

• About one-in-three (roughly 72 million people) don’t believe that they could ever afford to buy a home.
• 42 percent of those who once owned a home but no longer do believe they’ll never afford another one.
• 31 percent of those who still own a home don’t think they could ever afford to buy a second home or upgrade their own.

What will happen next?

Photo Credit: woodleywonderworks

We’ve seen the stock market crash and it came back. It always does. That’s a fact. We’ve also seen housing crashes and the market always bounces back – and that’s a fact.

Here’s a blurb from an article I wrote a few months back titled “Every contractor should operate on this 18 year cycle”

There is a pattern here – real estate booms and busts have been cycling every 18 years since 1800. It happened in 1818, 1836, 1854, 1888, 1908, 1926 and 1944. These peaks were followed by slumps or depressions, which lasted about four years. The pattern was interrupted during World War II but the cycle started back up again in 1955.
You remember the last boom and bust. It started in 1989 when existing home prices peaked and bottomed out in 1991. Then, 18 years later, between 2006 and 2007, it peaked again. Since we’re now in the third year of the downturn, 2010 should bottom out and a new 18-year cycle will begin – peaking around 2024.

Given that homeownership is a great tax benefit and equity builder, why would half of the American population turn their backs on it? As a renter, where will you be 30 years from now? If you paid your mortgage off in 30 years, you’d be sitting pretty. But as a renter, you’ll rent forever.

Our parents compared to us

Look at how our parents lived. They bought their homes with hard-earned money and paid off their mortgage after 15 or 30 years and they rarely took out a dime of equity. Now they have security. They can get a reverse mortgage and live comfortably in their old age.

Photo Credit: firepile

2nd generation Baby Boomers and Generation X, on the other hand, bought more housing than they could afford, put little or nothing down, got option arm loans so they could pay less than interest only, refinanced two to four times during the housing peak, bought toys, pools and vacations with their equity, and then lost their homes to foreclosure because they owed more than it was worth due to those refi cash-outs they took.

When I was shopping for a home, I always looked up the owner’s mortgage history and guess what I found? Every foreclosed home and short sale had refinanced two to four times during the final two years of the peak.

Foreclosure stats for July

• Prices have dropped 30 to 50 percent from the peak
• Banks repossessed more than 87,000 homes in July and 79,000 homes the month prior.
• Over 360,000 households received a foreclosure notice (notice of default or trustee’s sale) in July

Investor advice

• Buy low, sell high

This is the best time to buy a house. Don’t let the housing crisis dictate common sense. History has proven time and time again that people who buy during scary times make the most money.

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The number of newly renovated condos in San Francisco skyrocketed since this trend began. Not only has it allowed developers and contractors to put their unique stamps on neighborhood styles, it’s offered young professionals a blank slate for creating their own interiors.

The trend among condo-dwellers in SF is minimalist, yet comfortable with a touch of luxury. The hard lines are softened by earthy tones, dark woods, art deco accents and distinct landscaping.

The result is uninhibited wide open space and gorgeous natural light, like this police precinct-turned-artist’s live/workspace.

For the most part, developers offer condos and lofts with very simple designs, but the professionals moving in quickly add their own ideas to make the homes warm, cutting-edge and individualistic.

One condo buyer found her digs to be completely without character, so she embarked on a lengthy remodeling project. The furniture in her Cole Valley condo is down-to-earth and very attractive, with eye-catching accents around the rooms.

She even turned her hallway into a gallery to showcase her art and photography.

Because most of these condo owners live so close to work (or work at home), the expenses they save on transportation are invested into remodeling. We see the fruits of their labor in the form of luxurious draperies, furniture, gourmet kitchen features, artwork and home décor.

Since the housing market took a nosedive, prices on these gentrified condos and lofts are the most reasonable they’ve been in decades, some even adding incentives (parking spaces, anyone?).

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Limping a little, perhaps, but not dead. According to Remodeling Magazine, the slack in the construction industry caused many job losses this year and last, but it seems to finally be slowing. In May 2009, nearly 60,000 construction jobs were lost. While this is an astounding number, it’s also promising, considering that it was double that just the month before. Many remodeling company owners report that they are seeing an increase in workload this year. However, they are doing much more to market themselves to their communities than ever before.

Photo Credit: Re-New Magazine

McAdams Builders, in Kirkland, Washington, for example, held an open house to invite the public into their new showrooms and offered an ice cream social as an incentive to check it out. The owner, Len McAdams, also noted that he’s been writing a monthly article for a local newspaper to draw attention to his company.

Diane Menke, co-owner of Myers Constructs in Philadelphia, said that their business has been steadily on the rise as well, due mostly to the company’s media blitz, which included getting on Twitter and actively networking.

Depending upon how you look at it, the downturn in the economy has been both a blessing and a curse for the remodeling industry. While remodeling companies have definitely suffered losses over the past two years, they are the first in the construction industry to start significantly picking up the pace again. Many homeowners are not able to afford new houses or to secure home loans, and so their natural inclination is to improve upon their existing home. Another feather in the cap of the remodeling industry has been President Obama’s stimulus package, which has upped the ante on tax credits for adding more energy efficient features in the home. Caps were raised and new incentives brought in, making it easier and more affordable for homeowners to do things, like replace old windows, inefficient appliances and other major and minor renovations.

Photo Credit: Time for Remodeling

One major setback, however, has been the tighter lending restrictions, which are keeping people from being able to obtain loans for large remodeling projects. In fact, banking has been so strict lately, that many people are foregoing doing anything at all to their home for fear of foreclosure in the near future. It’s hard to think about investing in a home that might get pulled out from under you in the blink of an eye. Fortunately, even though the economy is sluggish, people seem to have a much brighter outlook this year and are starting to loosen their purse strings just a bit, especially if they perceive that a good home remodeling project can help them save money on their tax returns and monthly energy bills.

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I once read an article about a man who bought an old house for $1. The purchase agreement contained the caveat that the house had to be removed from the property on which it sat, so that the property owner could repurpose the building site without having to demolish the old house first.

Photo Credit: aka kath

That story was so colorful, it made me curious about the process of moving an entire building from one place to another. As I delved into the topic, I discovered a company that specializes in moving houses and other buildings around the country. Wolfe House & Building Movers talks about some of the benefits of moving an entire structure:

• The structure changes locations, intact
• All the plumbing, heating, and HVAC systems go right along for the ride
• A wonderful house can go from an unsavory location to an appealing one
• A building with historical value can be saved

House-moving services include oversight by qualified engineers (they must be!), who utilize high tech moving and lifting equipment such as remote-controlled dollies and hydraulic jacking. Wolfe’s house raising experts say, “We can raise your building, rest it on our state-of-the-art dollies in order to create a smoother and more accurate ride, and then gently lower the structure onto its new foundation without compromising its integrity in any way.”

But what about big, big structures? A major builder relocated an entire factory to supply a 1,000-unit subdivision in Ontario, Canada. The factory, which was dismantled and moved, was built to create a warm, secure working environment for the construction of prefab homes.

“To move a building of 1,200 square feet, it typically takes 2-3 days,” says Davis Construction Building Movers. This company’s website is chock-full of important considerations for the would-be house-mover, including arranging for permits and preparing the new site to receive the structure intact. Another issue that needs addressing is the removal of existing landscape to allow for house relocation, along with ensuring that the new site has a foundation in place to receive the structure.

It can be done by boat, too! Nickel Bros. House Moving moves recycled homes in neighborhoods and by barge in the Puget Sound area. The company claims that home relocation reduces landfill waste by an average of 80 tons and 60 trees. In addition to moving the houses, the company will sell you a house to “recycle” onto a new location. Their website has a great Before & After gallery that shows examples to educate as they inspire many ideas for moving entire homes.

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With building materials at record lows and annual spending on renovations down by almost twenty-five percent, it’s the perfect time to get great value on a remodeling project. Adding to this consumer bonanza is the onset of builders entering the market. With housing starts slumping — down 80 percent from their high mark in the first part of 2006 — more builders are available for smaller renovation or remodeling projects. Advantage consumer.

Think about this for a minute, if you could add greater value to your home at historically low prices for materials and labor, you might regret not acting sooner to take advantage of some savings. This buyer’s market may not last for long, especially if the economy rebounds later this year as many are predicting. But for now, all indicators are giving consumers the green light on that remodeling project.

David Crowe, chief economist at the National Association of Home Builders, told the New York Times that he’s never seen economic factors this favorable for the shopper. “Consumers are the ones in the driver’s seat now,” he said. “It’s the worst of times for the builders and remodelers, who are very anxious, but it’s the best of times for consumers.”

Because the demand is lower across the board, builders and contractors are able to lower prices to the consumer. Imagine saving $3,000 on a second bathroom. That was the case for Stephan Curley and Elizabeth Curley O’Malley, a North Portland couple living in a 1,100 square ft. house. They got an estimate on roof repairs and asked about adding a second bathroom. Contractor Kirk Linder gave them a huge discount, in large part because of the price drop in materials and the company needing the work. Last year at this time, Linder said that job would have been $9,000, but he did it for a 30 percent discount. Even with all this good news for consumers, some believe the market hasn’t reached rock bottom.

The NYTimes article indicated that many homeowners are going to wait and see on renovation projects. They think costs will continue to slide, meaning that a remodeling project priced at $30,000 could cost even less, if you’re patient. In this new economic landscape, consumers can get more bang for their buck, but you never know when prices will go back up.

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• Respecting Generational Divides
• Living Within Our Means
• The Live-In Kitchen
• The Green Kitchen
• The Wellness Kitchen
• Cooking for Fun

The annual show, which took place in March at McCormick Place in Chicago, featured nearly 2,000 exhibitors from five continents, including more than 400 new companies introducing thousands of new products. The latest housewares industry news is tracked by the producers of the Home + Housewares Show, the International Housewares Association.

The top trend discussed by the panelists was Respecting Generational Divides, and their findings are intriguing. The general population is divvied up into four age groups, with the following descriptions:

• The Gen Y group is aged 14-33 and is completely connected and wired all day. Most rent an apartment rather than own a home, are still in school, or are just entering the workforce.
• The GenX group is aged 34-43 and typically is raising a family, so the kitchen is a family communications hub for them.
• Baby Boomers are aged 44-63 and are either entering the empty-nester phase or are experiencing children and/or parents moving back in with them. This group is going to need to work longer than planned and is the group with the most discretionary income for housewares.
• Prime Timers (age 64+) are concerned with safe aging-in-place. They want to grow old where they are. They are reinventing themselves, and their focus is on ergonomics and intuitive design.

Recession-proof strategies were presented for all the age groups, because people of all ages are negotiating today’s economy together.

Tom Mirabile, vice president of global trend and design at Lifetime Brands, Inc. said, “The recession is changing the way we view cash versus credit. And durability is now more important, in addition to redefining leisure time activities. Household expenses that did not exist 20 years ago, like Internet service, are now considered non expendable, which reduces the money left for housewares and home products.”

The Wellness Kitchen trend is affected by the state of the economy, too. It’s all about nutrition, plans to live longer, and an overall commitment to well being. People of all ages are interested in houseware products that deliver maximized nutrition, purified air and water, stress management, effective rejuvenation, and beneficial exercise. There’s a lot of cross-over between the wellness and green trends. Mirabile noted, “Being green is becoming a key factor in the way consumers view companies and each other. Even consumers who aren’t green are getting pressure from their children, parents, and peers at work…green is a huge power.”

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There are a lot of conflicting forecasts – some suggest the market hit bottom in 2008, while others say the housing market will drop another 10 to 20% by mid 2009. The best bet is to be prepared for anything and do whatever it takes to weather the storm.

How to Forecast

Inventory

There are many factors that affect housing: home sales, housing prices, housing starts, housing permits etc. These are all vital indicators, but the inventory numbers in particular are most important.

Inventory of homes for sale is measured as a number of months supply at a current pace of sales, e.g. if, in a particular area the inventory of existing single-family detached homes for sale was 8.6 months, it would take that long to deplete the supply of for-sale homes. The more months of supply indicates a weaker housing market and fewer months suggests a limited number of homes for sale or the sales pace is faster.

Employment trends

Employment trends and unemployment rates are also important indicators of local housing market conditions. If, in a particular area, employment is expanding people will be moving into that area and, since they’ll need a place to live, this will be a positive for anyone in the remodeling or building industry.

You can also get useful information from reports and articles published by the Federal Reserve and its 12 district banks. Each bank puts out their own periodicals about local economic conditions, which include sections about the outlook for commercial and residential real estate. Link to the Fed’s Beige Book: http://www.federalreserve.gov/fomc/beigebook/2008/default.htm

Link to the map of the district banks: http://www.federalreserve.gov/otherfrb.htm

Programs Help Stabilize the Market

Foreclosure relief

• Tax waiver – Last year, congress started removing some financial vulnerability of default when it passed a bill that temporarily waives the income tax on mortgage debt that is cancelled when a homeowner is foreclosed upon, sells a home for less than the remaining debt (short sale), or gets a loan modification that reduces the principal balance. This tax waiver applies only to debt on primary residences cancelled through 2013. Exceptions – the tax waiver applies only to debt that was used to purchase or improve a primary residence.
• Mortgage help – Federal Housing Administration is offering two programs: Help for Homeowners and FHA Secure. And, The Streamlined Modification Program, sponsored by the government agency that oversees Fannie Mae, Freddie Mac, and 27 loan servicers, promises to quickly reduce payments for certain homeowners who are on the verge of foreclosure.
• Chapter 13 relief – Now that Citigroup has announced its support for legislation that would allow people in Chapter 13 bankruptcy to get their mortgages modified via judges, advocates are hopeful that other lenders will follow suit. These modifications, known as “cram downs,” include reducing principal, interest rates, or extending the mortgage term.

Incentives to Jump-Start the Stalled Housing Market

• First-time home buyer tax credits – This is smoke and mirrors for the most part, certainly not enough incentive to spark interest for a first-time homebuyer to take a risk. The current $7,500 tax credit is more of a loan that has to be paid back instead of a true tax credit. Home builders suggest a larger tax credit that would never have to be paid back and NAR supports keeping the current tax credit, but also removing the requirement that it be paid back – both ideas might be enough to give buyers an additional incentive to buy now instead of holding off.

Incentives that SHOULD be enacted

• Allow down payment/closing cost assistant programs, such as Nehemiah –Bush shut down these types of programs last July by signing H.R. 3221 – Housing and Economic Recovery Act of 2008. Prior to this bill, the seller could contribute up to 6% to the buyer to cover down payment or closing costs.
• Government buy-down of mortgage interest rates for home purchases with a termination date of December 2009.
• Allowing immediate use of tax credit (first-time homebuyers) for down payment/closing.

When will the market recover?

Existing home sales have increased in certain markets because they’re finally affordable. Buyers feel the housing slump has bottomed out or they’re buying because finally the mortgage payment is equal to rent. You’ll probably see the bottom hit between 3rd and 4th quarter 2009. Historically speaking, once the market bottoms out there will be a 3 to 4 year adjustment period where pricing will remain flat. The new housing market will most likely be sluggish through 2010-2011 as existing inventory settles.

Projections for housing starts

The NAR is projecting housing starts to continue falling in 2009 by almost 22% as builders hold back on new construction and continue unloading current inventory, which would total around 731,000 units. They say a rebound, though weak, won’t occur until 2010, approaching a rise of 6% to 772,000 units. The National Association of Home Builders has a different outlook on building activity. They’re projecting housing starts to hit bottom at 740,000 units in the first quarter of 2009 before rising to 835,000 units by the end of the year. And, they’re projecting 1.1 million housing starts by the end of 2010.

Remodeling activity

Home builders have entered the home remodeling industry to stay afloat during these bleak times, forcing existing remodelers into an even tougher and more competitive environment. In 2007, the value of home improvements fell by 4% and in 2008 it’s expected to more than double to 9% and rise to 11% during the first quarter of 2009. Though these declines are harsh they don’t compare with the declines impacting the home building industry, which are off by 65% since the beginning of 2006. So moving into the remodeling arena is a much safer bet. According to NAHB, half of the builder members have made the leap into the business of remodeling. The value of remodeling jobs is project to approach $400 billion by 2015.

Builders and credit

Due to tight credit over 140 private homebuilders throughout the country have teamed up to form the Building Industry Coalition for Economic Recover. Their main goal is to force lenders into allowing them to complete existing projects instead of being forced into foreclosure. If allowed to finish their projects they would be able to extract a huge difference on the value, 40 to 60 cents on the dollar versus 20 to 30 cents. Builders are now asking for congressional support for mortgage ‘cram downs,’ where bankruptcy judges will be allowed to modify loan terms in order to prevent foreclosures.

The national housing market is large enough to encompass a wide variety of trends in various places and on various timelines. The most well respected forecasters make errors and tend to disagree with each other but, even if a forecast proves true nationally, your local market may behave in a wildly different way. Because of all the variables, you’ll need to rely on your own best judgment.

Useful links:

Residential construction starts – U.S. Census Bureau

Residential building permits – U.S. Census Bureau

Homeownership and housing vacancy rates – U.S. Census Bureau

Supply of for sale homes – National, state and local Realtor associations (NAR)

Median home prices – NAR

Volume of homes sold – NAR

Employment and unemployment rates – U.S. Bureau of Labor Statistics

Foreclosure rates – Federal Reserve Bank of New York

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Here are the top 5:

1. Viessman Solar System Packages

   
   They include a storage tank, system control, pre-assembled pumping station, hardware and more. Systems are available with vacuum tube and flat plate solar collectors. They can also be integrated with conventional boilers for hybrid systems.

2. Apricus Solar Collectors

   
   Twin-glass, highly efficient, Evacuated tube collectors. An insulated copper pipe, containing a heat transfer fluid, runs at the head of the collector where heat is then transferred into the living space. Read more about Apricus from our residential solar power website.

3. The SolarAide Passive Solar Water Heater

   
   A freeze-proof heat transfer fluid is circulated through a black, powder-coated solar collector. The heated fluid then flows through a sealed tank which itself contains a glass-lined storage tank through which potable water flows. The transfer fluid heats the water within the tank, which then circulates back into the home.

4. The Malcolm Plastic Welding Kit

   
   Includes a Weldy Plus programmable hot air tool, which itself includes adjustable heat and air flow. Also look for a pipe welding nozzle and two-pound supply of welding rod. What makes this kit so special is its design. It can repair Schedule 40 and 80 piping systems without glue. Separate nozzles for liners, tanks, and other products are also available.

5. Stiebel Eltron Solar Water Heating System

   
   Closed loop, flat plat collector system designed for commercial and residential use. The kit comes with everything necessary for installation from collector to mounting hardware.

Considering that this is the first year in which green products have been included in Contractor Magazine’s products sections, one can’t help but be a bit impressed that four out of the top five readers’ choice winners are solar power systems, a true sign of the present shift in remodeling and construction.

Read about these and the other winners at ContractorMag.com.

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“Ooo-ee, hoor-AY!” (Bob Kitts – contractor)

HA-HA! YES! (Amanda Reece – homeowner)

Photos were taken, complete with wads of 1920’s cash and kid-in-the-candy-store smiles.

“Woohoo! Oh Yeah!”

“You can have 10 percent, it’s my house.”

“I want 40 percent, I found it.”

Then things degraded. The proverbial record player came to a screeching halt. The party was over. The two argued and argued and insulted each other until finally lawyers and courts became involved. By the end, the rather large family of Patrick Dunne – the man who stashed the money so long ago — was in on the case. Everybody was looking for their share.

It all started when Kitts was demolishing Reece’s bathroom walls during her remodel. He found two metal lockboxes inside the wall below the medicine cabinet. Needless to say Kitts got them open and found several envelopes (with “P. Dunne News Agency” written on them) full of fifty dollar bills from the 1920’s and 30’s.

Reece and Kitts were former high school classmates but still couldn’t work things out and, in the end, nearly lost it all. After Reece spent a decent percentage of it, after $60,000 was allegedly stolen and phone threats made, and after Dunne’s 21 surviving descendants sued for the cash, there wasn’t much left to go around.

I just can’t help but laugh at this wonderful fable; Aesop couldn’t have written it better himself. The moral being; if you find a stash of money with your friend, for God’s sake SPLIT IT UP! Greed and selfishness can be powerful forces, we all know that, but this was free money…found in a wall! Split it up, shake hands, and take a day or two off work. It’s that simple.

It is certainly a creative way to pay for your remodel.

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