Riding out the downturn at PCBC
SAN FRANCISCO —The chief executives from two of the nation’s largest home builders, Pulte Homes and Shea Homes, delivered the following message to a large gathering of builders, architects, LBM dealers and manufacturers here on June 25:
The housing industry is cyclical.
Hang in there any way you can.
The business will come back.
Attendees at the annual Pacific Coast Building Conference (PCBC), held June 25 to 27 at the Moscone Convention Center, needed a pep talk this year. On the day the event officially opened, news broke that the average price of a single-family home in the Bay Area had dropped 22.1 percent in the past year, hitting another record low in the S&P/Case-Shiller Index. Show attendance was noticeably light, booths were downsized and many builders, having written off 2008, were already positioning themselves for next year.
Richard Dugas, president and CEO of Pulte Homes, and Bert Selva, president and CEO of Shea Homes, shared their outlook in a well-attended session called “What’s Next : A Housing Market Overview.” While both reported building activity in the Rockies and job growth still strong in Texas and Colorado, neither builder saw definite signs of a recovery. Looking into 2009, the CEOs saw a healthier market, but a changed one.
“There will be less players when the dust settles,” said Selva, addressing the issue of builders merging or going out of business.
Dugas agreed. “The headlines don’t show it, but you’re going to have more consolidation.”
On the issue of reducing the cost of materials—a subject of several seminars on PCBC’s educational program this year—Dugas said he hopes to use value engineered home plans across different parts of the country. He also mentioned a plumber contractor on one project who agreed to provide just the labor, leaving Pulte to buy the materials more cheaply from its own suppliers.
“That was music to my ears,” said Dugas. “These contractors who are trying to think forward will be the ones doing business with us.”
Green building materials did not dominate the show, but several vendors showed solar water heaters, LED lighting systems and energy-efficient ventilation fans. One high-end option gaining in popularity is the removable wall between living rooms and patios. Nana Wall displayed a folding glass wall with insulating qualities, and Phantom Screens added retractable screens to keep out insects and glare.
One of the more timely niches addressed by PCBC exhibitors was fire protection. Wildfires broke out all over Northern California the same week as the building show, some as close as Brisbane, a city just south of San Francisco, and Napa County, just over the Golden Gate Bridge. By June 30, more than 1,000 fires were burning throughout the region.
Last year’s wild fires in Southern California resulted in the state passing the most stringent building codes in the nation to prevent property loss when these disasters occur. Manufacturers got busy testing their products this spring, and several were ready to debut at PCBC.
Louisiana-Pacific’s Smart-Side engineered siding passed California’s new standards, according to an LP spokesperson interviewed at the show. PVC decking made by AZEK Building Products also met the state fire marshal’s requirements, as well as those of San Diego County, where the October 2007 wild fires resulted in an additional layer of building codes.
“In San Diego County, you also have to worry about burning embers blowing around, which causes flame spread and under burn,” explained Greg Stout, a sales manager for AZEK’s Southern California territory. “We passed all three tests.”
While the focus of the conference is always on new construction, special attention was paid this year to the annual forecast from the Lusk Center for Real Estate. Three academics associated with the University of Southern California talked about how occupancy rates and rents in California are climbing; at the same time, average monthly mortgage payments are dropping. When the two numbers meet, a housing turn around may not be far behind, they said.
Honda lawn mowers recalled
American Honda Motor Corp. is recalling about 20,500 Honda Lawn Mowers, according to the Consumer Products Safety Commission.
Arear shield attached to the lawnmower can break off and be thrown at the operator, posing a laceration risk. The company has received one report of this incident, but no injuries have been reported.
The recall includes HRX walk-behind lawn mowers, and the items were sold from Oct. 27, 2007, through June 2008.
Fannie Mae, Freddie Mac woes could lead to Fed takeover
Following a slew of funding problems for government-sponsored mortgage finance companies Fannie Mae and Freddie Mac, the federal government is considering taking over the two organizations, according to a report by the New York Times.
The two mortgage companies, which are government-sponsored entities (GSEs), have had difficulty raising funds in the face of the housing market downturn.
According to the report, a plan is under consideration by the Fed to place Fannie Mae and Freddie Mac into conservatorship, which means losses on home loans under their names would be paid by taxpayers. The newspaper cited individuals briefed with the government’s plan, although the sources also said no action is imminent.
Congress created Fannie Mae during the Great Depression and created Freddie Mac in the 1970s. Later, legislators eased some restrictions on the two organizations to help spur growth, allowing them to cash in on the slew of jumbo mortgages that eventually entered the market. Like many other mortgage companies, the two groups were deeply hurt by fallout in the housing market. But unlike other mortgage companies, Fannie Mae and Freddie Mac collectively hold huge relative chunk of the outstanding mortgages in the United States.
Shares of Fannie Mae and Freddie Mac are expected to slide further today, after plunging throughout the week. If the government were to take over the companies, their stock would be worth “little or nothing,” according to the New York Times.