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Boomers, Multifamily and Gen Y Bring Fresh Hope for Homebuilders

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Bright spots in the homebuilding industry are being embraced like a long-lost family pet by builders slogging through the seemingly endless recession. First cause for optimism is a resurgence in the 55-plus market, described as “the buzz of the show,” at a recent National Association of Home Builders (NAHB) event.

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Secondly, demand for multifamily housing is keeping many firms busy in anticipation of demand far outweighing supply in the next few years. And, the so-called Gen Y — some 80 million children of baby boomers — soon will flood both apartments and single-family homes, giving builders further hope for the future.

David Crowe
CROWE

However, the sagging economy still weighed heavy at the NAHB’s International Builders’ Show (IBS) Jan. 12-15 in Orlando, Fla. The ever-so-slow recovery, which David Crowe, chief economist for NAHB, labeled “a constant annoyance,” was the chief subject of conversations. Crowe admitted that, like most other economists, he was more optimistic at the beginning of 2010 than end of year figures justified. Sales figures for single-family homes in 2010 were up, though just 7% higher than those of 2009, the worst year of the downturn. Crowe predicts growth of single-family home sales of 21% this year over last year, with the 55-plus sector up 33% this year. He expects house prices nationally to neither rise nor fall overall in 2011. He foresees some softness in prices of both new and resale homes in the spring — 1 to 1.5% — and a little rise in the fall to offset that. Local markets vary significantly on all counts and can be volatile, he cautioned.

For many people who have been out of work for prolonged periods and lost their homes, rentals may be their first step back. In addition, in 2010, the biggest number ever of youth turned 18 in one year, and once they move out of their parents’ house and get jobs, they will be candidates for apartments. Jay Jacobson, director of Wood Partners, Boca Raton, Fla., calls it “almost a perfect storm for the apartment business.” Crowe forecasts 133,000 new multifamily units in 2011, but demand could be for as many as 300,000. Already several designers and builders at IBS reported being busy with work in the multifamily arena. Because apartments take so much longer to design and build than single family homes, experts expect multifamily units to become scarcer and scarcer, resulting in more work and profitability as rents rise, which they are already starting to do in many markets.

Another area with a glimmer of new life is the 55-plus market, which may be purring back to life rather than roaring, but homebuilders will take it. John Schleimer, president of Market Perspectives, Roseville, Calif., said that 16% of buyers age 55 or older say they are seriously looking to buy in the next year, and 21% say they are likely to buy. The 55-plus market is fragmented and tied to local customs in terms of specific features to include, said Tim Sullivan, principal at John Burns Real Estate Consulting, San Diego.

One increasingly effective vehicle to attract buyers is social media. IBS had several education sessions on it, including four competing in the same time slot. The two biggest things to remember when establishing relationships through LinkedIn, Facebook, Twitter, YouTube or others are: “It’s not for selling, it’s for sharing,” according to Jennifer McKee, vice president of communications for The McKee Group, Springfield, Pa. And, “Respond immediately and follow up, follow up, follow up,” advised Dee Minich, senior vice president for sales and marketing for K. Hovnanian Homes, Landover, Md.

NAHB says attendance at this year’s show was more than 47,000. Before the recession, attendance surpassed 100,000. Nevertheless, many exhibitors reported being pleased with the quality of visitors to their booths. Kris Anderson, director of marketing for National Nail Corp., Grand Rapids, Mich., was ecstatic over the response from attendees for their CAMO (as in camouflage) hidden deck fastening system, due to become available in April. The steady stream of people requesting demonstrations and wanting the product exceeded the company’s greatest expectations, she said.

Companies from China exhibited in three different colorfully labeled areas of the show, offering everything from entire kitchens and baths to doors, cabinets and toilet seats. Most were looking for distributors or partners. They reported varying degrees of success.

Energy-saving and “green” were popular themes on the show floor. Generators for the home that slash energy consumption, toilets that require 20% less water and “green” materials of all kinds were on display. A recurring question in education sessions was whether homebuyers were willing to pay for green features. The answer so far is, not so much. “The consumer expects green but isn’t really willing to pay for it,” said Sullivan.

 

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