Fourth Anniversary

This has been an awesome year for my blogs. I had over 550 posts this year and over 15,000 new visitors. Below are my top posts for this

  1. Using Evernote as a Customer Relationship Management(CRM) Tool (Second Year)
  2. How to Deal with Rude People – 5 Lessons for Leaders and Others
  3. The Great Depression Part 34. Tracking housing values from 1940 to 2011.
  4. The Role of the iPad in Construction Consulting, Green Building and Forensic Investigations(Second Year)
  5. Using Customer Journey Maps to Improve Customer Experience (Second Year)
  6. Mind Manager
  7. Checklist Manifesto (Third Year)
  8. The Power of Habit
  9. Thank you for your business – we really appreciate it
  10. Lignin — Wood Science
  11. Very Funny Team Building Cartoon (Second Year)
  12. 2012 Predictions for Timber Industry
  13. Great Designs in Wood
  14. Three Myths about What Customers Want

Thank you for your support over the past year.


Rail vs Housing Start – March 2010

From the Association of American Railroad Rail Time Indicators—the AAR reports traffic for March is up 14.2% compared to March 2009 for Lumber & Wood Products. There is a 32.3% increase from February 2010 to March 2010. See the two graphs.

The third graph from AAR reports shows how Lumber & Wood products rail traffic compares to US Housing Starts.

Don’t Bet the Farm on the Housing Recovery

From Robert Shiller in the NY Times ( : Don’t Bet the Farm on the Housing Recovery

MUCH hope has been pinned on the recovery in home prices that began about a year ago. A long-lasting housing recovery might provide a balm to households, mortgage lenders and the entire United States economy. But will the recovery be sustained?

Alas, the evidence is equivocal at best.

The most obvious reason for hope is that, unlike stock prices, home prices tend to show a great deal of momentum.

Momentum only goes so far. And I think it is likely that prices will fall further in many bubble areas later this year as more distressed properties hit the market.

Shiller also argues prices might fall:

Consider some leading indicators. The National Association of Home Builders index of traffic of prospective home buyers measures the number of people who are just starting to think about buying. In the past, it has predicted market turning points: the index peaked in June 2005, 10 months before the 2006 peak in home prices, and bottomed in November 2008, six months before the 2009 bottom in prices.

The index’s current signals are negative. After peaking again in September 2009, it has been falling steadily, suggesting that home prices may have reached another downward turning point.

Usually I graph the total NAHB Housing Market Index. Here is a graph of the NAHB traffic of perspective buyers and two home prices indexes: the Case-Shiller Composite 10 (seasonally adjusted) and First American Corelogic’s LoanPerformance HPI (NSA).

Click on graph for larger image in new window.

Although Shiller is correct about traffic index peaking in 2005 and declining sharply in 2006 (when prices started to fall), I think this isn’t a reliable indicator of future house price movements. I think a better indicator that prices were about to decline in 2006 was the rapid rise in inventories in the 2nd half of 2005 and into 2006 – and I think we should watch inventory levels again this year.

I think the NAHB does provide hints about housing starts.

This second graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the March release for the HMI and the February data for starts.

This shows that the HMI and single family starts mostly move generally in the same direction – although there is plenty of noise month-to-month.

For house prices, I think we need to watch inventory levels – especially distressed inventory.

Shiller concludes:

Recent polls show that economic forecasters are largely bullish about the housing market for the next year or two. But one wonders about the basis for such a positive forecast.

Momentum may be on the forecasts’ side. But until there is evidence that the fundamental thinking about housing has shifted in an optimistic direction, we cannot trust that momentum to continue.

Housing Shortage Coming In 2011

I found this article in Forbes.

Housing Shortage Coming In 2011 –

Alexandra Zendrian, 02.15.10, 06:00 AM EST

If new houses aren’t built soon in the U.S., there won’t be enough next year.

The focus of the U.S. real estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don’t start focusing on building new houses, the market will have a much bigger problem on its hands.

“We need one and a half million houses per year just to keep up with population growth,” Wesbury said in an interview with Steve Forbes. “And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we’re down to about six and a half, seven months’ inventory whether you look at new homes or existing homes.”

Privately owned housing starts in December 2009 were at a seasonally adjusted annual rate of 557,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4% less than where it was in November, which had 580,000 housing starts.

Housing completion numbers also contribute to this dire picture, with December 2009 privately owned housing completions reaching a 768,000 seasonally adjusted annualized rate. That’s down 11.2% from the 865,000 completions in November and down 25.3% from the 1,028,000 completions in December 2008

The Widening Gap

This graph shows the Average Price per Square Foot of New One-Family Homes.


Click on graph for larger image

The gap between the National Average price per square foot and the price per square foot in both the Northeast and West has been widening since the year 2000. The gaps were at their peak in the year 2006 and 2007, respectively. The Northeast gap increased from 13.2 in 2000 to 25.0 in 2006. The gap for the West increased from 9.5 in 2000 to 29.2 in 2007.

Home Sizes Fall as Builder Embrace Economy

Here is a press release from RISMEDIA regarding the first drop in the size of homes built in 27 years.

RISMEDIA, January 28, 2010—(MCT)—New-home buyers responded to the tough times in 2009 by opting for smaller houses, driving down the average size of a house built in the United States for the first time in 27 years.

Data recently released by the National Association of Home Builders (NAHB) found the average size of a new home that was completed in 2009 fell to 2,480 square feet from 2,520 square feet in 2008. The last time the average completed-home size fell by a statistically significant amount was 1982.

“You’ve heard the mantra ‘downsize me’ and ’small is the new big?’ Well, last year was definitely a downer,” said Carol Lavender, president of Lavender Design Group, a residential design firm in San Antonio, Texas.

Homeowners surveyed by Better Homes and Gardens magazine said downsizing was becoming a bigger priority: 36% said in November 2009 that they expected their next home to be “somewhat smaller” or “much smaller” than their current home versus 32% who said that in 2008. “Not surprisingly, we see a ‘cents and sensibility’ approach when it comes to buying or improving a home, with practicality and price being the top priorities,” said Eliot Nusbaum, the magazine’s executive editor of home design.

While the small-house movement in the United States has been gaining steam for a number of years, the recession has accelerated it and home builders have responded.

“The era of easy money is over. You really have to think before you go out and decide you need that five-bedroom, five-bath home,” said Rose Quint, the NAHB’s assistant vice president for survey research. “Couple that with the energy cost concerns of consumers today and I think we will continue this trend. Houses will not shrink drastically, but they will shrink.”

Although actual square footage of homes didn’t fall until 2009, the percent of homes with four or more bedrooms in them has been falling since 2007, NAHB data show. And in 2009, the number of homes with three or more bathrooms fell for the first time since 1992.

Two other trends in home construction are contributing to the declining square footages: The prominence of first-time buyers in the housing market and the increasing number of households with members 55 and older who are buying homes.

First-time buyers, driven into the market in good part by the availability of an $8,000 tax credit, are more likely to compromise on home size in exchange for a lower price. And the 55-plus crowd tends to purchase single-story homes, which generally are smaller because of the land costs that favor the more-efficient two-story plans.

“Barely over half of new homes today are built with two stories or more,” Quint said. Two-story homes peaked at about 55% of the market in 2006. For 2010, home builders say they will focus on lower-priced models and smaller homes. More than 95% of builders surveyed by NAHB in January said that was the way they saw their business evolving this year.

The penchant for smaller homes will necessitate some design changes. Builders, attempting to respond to those consumer demands as well as hold the line on prices, told the NAHB surveyors that they were most likely to include these features as standard in their houses this year:

-Walk-in closets in the master bedroom.
-Laundry rooms.
-Insulated front doors.
-Great rooms.
-Energy-efficient windows.
-Linen closets.
-Programmable thermostats.
-Energy-efficient appliances and lighting.
-Separate shower and tub in master bathrooms.
-Nine-foot ceilings on the first floor.

Among the things that builders said they were least likely to add to houses in 2010:

-Outdoor kitchens.
-Outdoor fireplaces.
-Butler’s pantries.
-Media rooms.
-Desks in kitchens.
-Two-story foyers.
-Eight foot ceilings on the first floor.
-Multiple shower heads in the master bath.
-Smaller kitchens.

“You can see that builders are concentrating heavily on energy-saving features,” Quint said. “But a lot of the luxury items are on the chopping block or on hold as builders try to lower costs.”

(c) 2010, Inc.