Building green finally profitable, Oregon builders say
A group of builders in Eugene, Ore., who consider themselves early pioneers of the green building movement say their businesses have finally turned profitable, even during the downturn. Interviewed for an article in the Oregon Register Guard, these contractors, designers and architects now find themselves in a multimillion-dollar niche market.
While not every firm is successful, a mixture of local government incentives and public awareness has made green building projects more popular. RainbowValley Design and Construction, a 40-year-old firm, said it was once wary about marketing itself as green. But that stigma has turned into a calling card, and the company, which has offices in Portland and Eugene, has an established reputation for sustainable design and construction.
“People know that we do green building,” said company designer Alec Dakers. “Now we get a lot of people that walk in the door asking for specific products. We don’t really have to pitch it at all.”
Several of the construction firms interviewed said they’ve had to adapt to the slowdown by taking on more remodeling work instead of just new construction. And projects tend to be smaller. But the work keeps coming in the door, and revenues for green building far exceed what they did in previous years.
No change in builder confidence
Builder confidence in the market for newly built single-family homes remains unchanged for August, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August.
The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
The overall index number for August was 15. Two out of three of the HMI’s component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 — its highest level since March of this year — and the component gauging traffic of prospect buyers rose one point to 13, following two consecutive months at 12. However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month’s revised number.
"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, NAHB’s chairman and a home builder from Reno, Nev. He noted that 41% 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.
NAHB chief economist David Crowe said: "The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time. 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."
Remodeling reaches record levels
Residential remodeling activity rose 23% in June 2011 in year-over-year comparisons, according to an index compiled by BuildFax, a national database of building permit data. It was the 20th straight month of increases and the highest level of remodeling activity since the index was introduced in 2004.
Most regions of the country posted year-over-year gains. In June, the West grew by 6%, the Midwest by 13%, and the South by 1% in month-over-month gains. Only the Northeast saw a decline in remodeling activity, by 4%.
"The first half of 2011 brought pain to many sectors of the economy, including home sales and jobs. However, Americans continue to invest in remodeling, sending the BuildFax Remodeling Index to a new all-time high," said Joe Emison, VP research and development at BuildFax. "With so many Americans unable to sell their current home, it is apparent that they are planning on staying in their current residences and are making renovations and upgrades."
Based in Austin, Texas, BuildFAX derives its remodeling index on monthly building permit activity filed with local building departments across the country.