Builder confidence in multi-family housing down
Builder confidence in the multi-family housing market fell in the third quarter, driving the Multifamily Condo Market Index (MCMI) and the Multifamily Rental Market Index (MRMI) to their lowest levels since the National Association of Home Builders (NAHB) started them in 2003.
“We have a serious supply/demand imbalance in the housing market, coupled with a weakening job market, and stringent credit market conditions, and that is negatively impacting the multi-family sector,” said David Seiders, NAHB’s chief economist.
The component of the MRMI that measures supply was lower for market-rate and affordable apartments, at 22.2 and 15.7 respectively. In the 2007 third quarter, this component stood at 43.8 for market-rate and 44.3 for affordable apartments.
The MCMI fell to 8.1 for current conditions in the condominium market, down from 13.5 at the same period last year. Builder confidence in the condo market over the next six months fell from 20.8 in the third quarter of 2007 to 9.9 in the third quarter of this year.
The component tracking expectations for supply for market-rate apartments fell from 47.1 in the third quarter of last year to 19.1 in the third quarter of 2008. The component tracking the expectations of affordable housing developers for supply over the next six months fell to 20.3 in the third quarter, down from 39.1 in the same time a year ago.
Spectrum Brands plans to exit fertilizer category
Spectrum Brands, a leading manufacturer of lawn and garden products, pest control products, pet supplies and other consumer goods, will stop making fertilizer and several other products in its Home & Garden Business segment in an effort to stem losses. The Atlanta firm announced the decision as part of its fourth-quarter 2008 results, which posted a net loss of $492.6 million, compared to a loss of $333 million for the same quarter of 2007.
Sales for the quarter, which ended Sept. 30, 2008, were $706.5 million, a 7.2 percent increase over the prior year, after excluding the Canadian division of the Home & Garden Business segment, which the company sold in November 2007.
Year-end figures showed a loss of $931.6 million for 2008, compared to losses of $596.8 million in fiscal 2007. Annual sales for fiscal 2008 were $2.68 billion, a 4.8 percent rise over fiscal year 2007 sales of $2.56 billion.
In a prepared statement, the company said it decided to exit the manufacture of fertilizer, potting soil, mulch and grass seed because they had become “a drag on profitability.” The sluggish housing market, tight inventories at retailers, low levels of foot traffic and unprecedented commodity costs — particularly DAP and potash — all worked against the company’s efforts to boost margins, it said. Spectrum also tried to sell this segment of the business, in part or whole, but failed. “The company believes these attempts were unsuccessful due to the current credit market environment,” Spectrum said in its statement.
Spectrum also has exclusive private-label manufacturing agreements with national retail chains, including the Vigoro brand at Home Depot, Sta-Green at Lowe’s and Expert Gardener at Wal-Mart. A Spectrum Brands spokesperson could not comment on whether the company would end these particular partnerships.
Spectrum’s Home and Garden Business will continue to manufacture a number of other products, including outdoor and indoor insect control products, insect repellants and rodenticides. Continuing brand names include Spectracide, Cutter, Hot Shot, Repel, Garden Safe and Schultz.
Spectrum Brands also makes Rayovac batteries, Remington electric shavers, Tetra aquarium supplies and other consumer products.
NLBMDA calls for housing stimulus
The National Lumber and Building Material Dealers Association (NLBMDA) is calling on Congress to take bold action before the end of the year to boost the housing market.
Specifically, the NLBMDA seeks an extension of the Home Buyer Tax Credit for primary residences purchased between April 2008 and December 2009, to up to 10 percent of the home price up to a maximum of $22,000, depending on geography. In addition, buyers should have access to discounted 30-year fixed-rate mortgage financing that would encourage eligible home buyers to enter the market.
The organization pointed to the success of a similar credit plan in the 1970s.
“In 1975, Congress passed a short-term home buyer tax credit for all new homes, coupled with subsidized mortgage rates,” said NLBMDA president and CEO Michael O’Brien. “This stimulus jump-started the depressed housing market then, and the effects continued long after the measure expired. We believe Congress must once again take bold action to restore consumer confidence in the market.”
The NLBMDA is also urging Congress to extend bonus depreciation and increased Section 179 expensing provisions for at least one year. The move would promote investment during the current economic downturn, according to the group. The Economic Stimulus Act signed into law in February temporarily created a 50 percent depreciation bonus and increased the amount that small businesses can expense under Section 179 to $250,000, but those provisions are due to expire at the end of 2008. Additionally, the NLBMDA is asking Congress to extend net operating loss (NOL) carryback provisions from two years to five to allow building material dealers to discount current losses against past profits.
“Taken together these proposals will go a long way toward reviving the housing economy, which is key to overcoming our current economic crisis,” said O’Brien. “We are calling on all our members to contact their members of Congress to urge quick action.”
The NLBMDA believes that its housing stimulus proposal will create much-needed jobs. Almost 85,000 jobs have been lost in the past two months in the construction industry alone, mostly in specialty trades related to home building, according to the industry group.