Construction Informer

The people who own apartments and multi-family housing told the Senate Finance Committee yesterday that the nation’s housing policy of "home ownership for everyone" is the cause of the current housing finance woes. They also are urging the Congress to rethink federally insured zero-downpayment loans. Such loans are pending as part of an FHA reform measure (H.R. 1852, S. 2338).

"The marketplace has made it clear that zero-downpayment mortgages are extremely risky," said Jim Arbury, NMHC/NAA Senior Vice President of Government Affairs. "The largest PMI (private mortgage insurance) firms are already exiting this market because of losses reaching more than $1 billion. One large PMI firm is now requiring at least three percent downpayments and another is requiring five percent down in 30 markets around the country. Yet the government is still pursuing zero-down as a housing policy at considerable risk to the Federal Treasury."

The National Multi Housing Council and the National Apartment Association stated that warnings of the current housing dilemma were evident as long ago as in 2004 when housing experts, former HUD officials and consumer organizations started raising questions about policies that encouraged home ownership at all costs. Aubrey summed it up by asking lawmakers to acknowledge that "home ownership isn’t the right housing choice for all households at all points in their lives." These organizations say that just about a third of all Americans rent their housing.

But when you consider what’s really going on in the housing market, those actions by the Congress may be just more band aids on a leaking artery.

The Portland Cement Association (PCA) came out with a rather bleak assessment of that market. It cited a glut of homes in inventory as evidence homebuilding won’t get fired up again until mid 2009. It also predicted a 25 percent drop in new housing starts for 2008. That means prices for new homes will be down eight percent in 2008 but PCA says that won’t spur sales since "tight lending standards, weak economic conditions and slower household formation" will be in the way.

"Even though buyers can get better priced homes in 2008, they must now have good credit scores and as much as a 20 percent down payment to qualify for loans. With job and income gains expected to slow during the next four quarters, most potential home buyers will back away from such a major purchase until the economy is more stable," said Edward J. Sullivan, PCA chief economist.

There is more and more talk about the recession thing. It could just be that we will talk ourselves right into it. And we probably deserve it for pursuing policies that allow our governments to operate in the red, our businesses and industries to pursue profits at all costs, and our citizens to owe more on their homes than the homes are worth. What’s most amazing to me is that we act shocked when it’s time to pay the piper.

A Site You ‘Wood’ Want To Visit: Wood has long been the material of choice for residential construction and now the Wood Products Council has an initiative underway to support architects, engineers and contractors who want to use wood in non-residential buildings. The program is currently available in California, Georgia and the Carolinas and will be available this spring in Minnesota, Illinois and Wisconsin. There will be free educational events, support hotlines and expert field staff all to supply tech support on such diverse topics as building code issues and cost efficiency.

But for those of you in other places you should know that this council has a very handy website too with a lot of information and links about building with wood. You can get CAD drawings, see impressive wood designs, and use span tables, calculators and design software. There are a number of publications available for download too. If you work with, and like working with wood, this site will capture your interest for at least awhile.

What ‘Would’ You Think If You Were Listed Here: If you are considering moving into a neighborhood and want to find out something about your potential neighbors, well, little brother is watching. You can search the address in a nationwide database called RottenNeighbor and find out ahead of time if the guy next door has barking dogs or offensive habits. There are also posts on some great neighbors too, but generally this site reads like a who’s who of all the neighbors you wouldn’t want to have. I checked out a few and it seems that some of the people who report others may have similar traits.

• One poster wrote: The people who live here is lazy and stupid.
• Various Comments in One Neighborhood: Evil boy; Wow; Loud and Abusive;TV Light;Great Neighbors; Nosey Neighbors.
• In Another Neighborhood: 3 Barking Dogs; OK; Neighborhood gossip.

You can put specific addresses in a search form, or you can browse by city on a satellite map that has little red and yellow houses on it. It’s all interesting for a little while but you have to wonder just how valuable it is. Once all the feuding neighbors turn each other in for all the real, imagined and made-up offensiveness, who’s going to want to move there? I guess they’ll all end up just stuck with themselves.

It looks like there is a movement afoot that might help to stimulate new ideas for funding the repair of the nation’s aging infrastructure. This is good news as we wait for the government to start functioning again and taking care of things at home.

The American Society of Civil Engineers estimates the country needs to spend more than a trillion dollars on infrastructure over the next five years. Thirteen governors have pledged their support of efforts to increase federal funding to help address this problem. Additionally there will be state and locally-elected people on board. The coalition press release summed up its efforts this way:

As state and local governments continue to pay more of the costs and the condition of our infrastructure further deteriorates, America’s infrastructure crisis becomes more critical every day. One of the primary jobs of the coalition is to create an environment where infrastructure funding is treated like the national priority it should be.

Building America’s Future points to infrastructure as an important component to global competitiveness, quality of life, sustainability, and border and national security. Maybe there are ways for interested people in ACE to get involved.

In A Related Release: An international roadway safety organization is calling for 11 specific roadway safety initiatives in order to achieve its goal of zero roadway deaths. The American Traffic Safety Services Association (ATSSA), founded in 1969, is calling for initiatives that address:

• a highway safety improvement program;
• strategic highway safety plans;
• work zone safety;
• high risk rural roads;
• roadway hardware;
• brightness and visibility of signage;
• older drivers;
• mitigating congestion;
• funding roadway safety; and more.

You should expect to see more on this, and on surface transportation in general since it is time to reauthorize surface transportation legislation.

Don’t Rely on Inspectors For Contract Compliance: In South Dakota a road contractor was required to remove two miles of roadwork and re-grade the base that didn’t meet the contract specifications even though the DOT inspectors had checked grades at randomly selected grade stakes and verbally approved each layer. This one went all the way to the South Dakota Supreme Court but all along the way the courts maintained the contractor was required to perform the work to the satisfaction of the engineer at final inspection and that inspectors have no authority to change or waive contract provisions.

Another Example of the High Cost of Having Your Neighbor Do Your Roofing: In California a homeowner hired his neighbor to replace the roof on his house. The neighbor was an unlicensed roofing contractor. It seems strange to me that a person can be an unlicensed contractor of any kind, but apparently in some states that is possible. Within four hours of starting the job the neighbor fell off the roof and was injured. He sued the homeowner claiming the homeowner was negligent in not providing proper safety equipment and fall protection for the job. The roofer claimed he was an employee of the homeowner and therefore the homeowner was also negligent for not having worker’s compensation. In the end the appeals court held that even though an unlicensed contractor may not be eligible for worker’s compensation as an employee, the person can still claim employee status for the purpose of pursuing litigation for injuries sustained on the job.

Architecture Crystal Ball Shows Steep Drop in Billings: The Architectural Billing Index (ABI) dropped sharply in January to 50.7. This was almost a 5 point departure from December’s reported ABI. The ABI is put out by the American Institute of Architects and is an indicator of construction activity nine to 12 months out. Anything under a 50 means a decrease in billings. Regionally the Northeast was the strongest with an index of 63 and the Midwest was the weakest with an index of 49.3. Multi-family residential and commercial/industrial were neck-in-neck with indices of 55.4 and 54.5 respectively. Institutional and mixed practice were both in the 51 range.

Sometimes if you have enough regularly recorded data you can see patterns emerge that can offer opportunities to predict the future. One crystal ball of statistics resides with the Census Bureau Mining and Construction Division.

If you study the tables that show the number of housing building permits issued for every month since January of 1960 you will see some interesting patterns.

First, it may surprise some to know that in December of 2007 the number of building permits issued dipped below the number issued in January of 1960. But what is more interesting is that the numbers of building permits issued quarterly have only exceeded two million during just two periods since 1960. One period was from July 1971 through March of 1973 and the other was from March 2004 through March 2006.

If you look at the numbers of building permits issued after each of those periods you see a gradual, followed by steep decline. In April 1973 the number dipped below two million, rebounded a bit to top two million, and then dipped once again before finally going into a free-fall to bottom-out at 709,000. That whole process took 20 months before permits started climbing again.

Beginning in April 2006 permits dropped below two million, and with the exception of a couple of up-ticks inched downward until reaching a little over a million in January 2008.

The number of housing building permits issued in the 48 years from January 1960 to January 2008 has never dropped below 709,000, and whenever the numbers did hit rock bottom they did it in the 700s. In November of 1966 it was 736,000, in March of 1975 it was 709,000, in October of 1981 it was 731,000, and in January of 1991 it was 786,000. The trend seems to be that the bottoms are getting higher.

The decline from the two million mark this time has been much longer and more gradual then it was in the 70s. It has already been mostly dropping for 22 months. This may predict a softer bottom but it also means it may take longer to reach it. In the past whenever the numbers have dropped quickly they also started to rise quickly. It’s the difference between a slow death and a quick one.

So, it could be this housing downturn is nowhere near over. I think it’s entirely possible that it won’t be bottomed out until we see building permit issues drop below 800,000. And if history has anything to say about that we could be anywhere from six months to a year-and- half away from seeing the numbers topping one million again and continuing on the upturn.

Now,I’m putting away the crystal ball because Monday is here and there’s plenty of work to be done.