Builders gather, scour for optimism
With budgets tight and sales slow, some could not afford to attend this year's convention in Orlando, Fla.
Home builders are gathered for their annual convention in Orlando, Fla., in what may well be the worst of times for the housing market.
Credit remains tight, home values are still falling, and foreclosure sales at cut-rate prices continue to clog housing markets in the Sun Belt.
Even after subtracting distressed sales from the equation, home prices in Arizona and Nevada fell 7.81 and 6.03 percent, respectively, in November 2010 from the same month in 2009, according to CoreLogic of Santa Ana, Calif.
Those two states, into which many builders expanded during the mid-decade boom, have led the list in foreclosure filings since the bubble burst.
In fact, RealtyTrac reported Thursday, while foreclosure filings in the United States fell 26 percent in December from the same month in 2009, bank repossessions of houses rose 45 percent in Nevada, Arizona, and California, another state that's key to the growth of the new-home market.
"High inventory levels are expected to be characterized by a large portion of bank-possessed properties," said Ed Sullivan, the Portland Cement Association's Philadelphia-based chief economist.
"Banks are not in the realty business and will offer the homes below prevailing home-market prices to remove the financial liabilities of possessed homes from their books," Sullivan told builders in Orlando on Wednesday, the first day of the International Builders Show.
"These homes, some nearly new, compete directly with new homes for the buyer - putting downward pressure on new-home prices," he said.
Mortgage rates, too, are headed higher, the result of key changes by Fannie Mae that "will translate into real cost to borrowers," LendingTree chief economist Cameron Findlay said in a report Wednesday.
The industry's troubles notwithstanding, this year's builders show, which runs through Saturday, has drawn thousands of builders and product exhibitors. For those not attending, an app can be downloaded for iPhones.
Speaking at the show Thursday will be Springfield, Delaware County, builder Frank McKee. In a phone interview from the show floor, he called the mood in Orlando "cautiously optimistic."
That's a feeling he has, too, about the Philadelphia-area market. While financing is still difficult to obtain, McKee said, "banks are willing to talk with you again."
The builders show "recharges my batteries, especially since the marketplace has been so tough," he said. "It is also a great source of ideas."
Among the ideas tweeted Wednesday: a Martha Stewart/KB Home partnership on an environmentally friendly home with kitchen composters and solar-panel roofs.
What has kept some from attending the 2011 show is the nature of doing business today: Budgets are tight, and builders spend much more time selling a single house these days than they did selling a dozen five years ago.
South Jersey builder Bruce Paparone skipped this year's show, saying his company was "watching budgets very tightly, trying to spend money where it will have the most impact on operations."
Plus, "staffing has been reduced dramatically, therefore making it difficult to send [people] to the show when we are all covering multiple jobs right now."
Still, the show offers a lot of value, Paparone said: "New products, informational seminars, and the ability to share our experiences with other builders is valuable."
Product exhibits continue to be a draw, although the list of top offerings compiled by the show's sponsor, the 175,000-member National Association of Home Builders, includes the second- and third-generation versions of many gadgets. The exception is energy-efficient - especially solar - technology, which reflects the "green" trend the builders' group began embracing a few years ago.
Although the pressures on the market have changed little in the last 12 months, there's a major difference between this year's show and last year's in Las Vegas.
Because a financial backer pulled out, the 2010 New American Home - the industry's showcase of trends and products - wasn't built in time for the show. Instead, the builders' group offered a virtual tour.
This year, there's a real, finished, house.