MHN Blog

Prince Charles Urges Climate Consideration to Protect World Economy

It's not many days we get to link to a newspaper commentary that ends with an attribution like "The writer is heir to the British throne" -- so Out and About couldn't resist sharing Prince Charles' thoughts on climate issues, published today in the Financial Times.

The prince wrote about a climate recommendation that the Corporate Leaders Group on Climate Change prepared yesterday for the group of world leaders that are scheduled to meet next week in Bali to discuss that very issue.

And the 150 U.S., European, Chinese and Australian businesses in the CLGCC -- what the prince called "an unprecedented global corporate alliance" -- are making their message clear: It's time to be proactive about addressing climate issues, because the longer we wait, the more expensive and difficult reversing climate damage will be.

The business heads feel:

• Economic growth absolutely depends on directly addressing the issue of climate change.

• Long-term plans need to be made, and highly industrialized countries need to be ready to buckle down and make changes.

• We need to stop tropical deforestation, responsible for about 20 per cent of global greenhouse gas emissions.

Prince Charles wasn't just making an emotionally-based argument (although he did mention his grandchildren): He did his homework.

"The Ice and Snow Data Centre in Colorado predicts that within the next seven to 23 years, the entire north polar ice cap will completely disappear in summer," the prince wrote. "Why does this matter? A lack of sea ice means that the world is no longer able to reflect as much solar heat as it used to and so the rise in global temperatures will accelerate."

He also warned that as more emissions and natural resource damage was done, floods, droughts, rising sea-levels, spread of disease and poverty will increase.

Will the CLGCC's recommendations have an effect on the decisionmakers next week? Prince Charles seems to think so.

"These companies are showing remarkable leadership and I can only congratulate them," he said. "It is the fervent hope of myself and the signatories that it will strengthen the resolve of those in Bali to make the tough decisions."

We hope so, too.

Cities Sign On for Green Building

The number of cities with green building programs has increased 418 percent since 2003. In just four years--wow. Think about it: 418 percent.

That's an increase from 22 to 92, according to the American Institute of Architects, who recently paid for a study of areas with more than 50,000 residents to find out how effective green building policies are.

The report, Local Leaders in Sustainability, analyzed 661 communities, according to the online Dexigner publication.

We knew cities were signing on to green building -- not only have numerous cities tried to establish green building codes, the summer U.S. Conference of Mayors meeting led to a resolution urging Congress to offer funding of K-12 green school demonstration projects and to support new funding to research the  economic and health benefits of green schools.

But still ... a more than 400 percent increase? Why--is green just getting popular? Or, as some are suggesting, is green building just getting easier and less expensive?

"Technological advances now allow for the design of buildings that are efficient, modern, possess great aesthetics and are financially viable," says Paul Mendelsohn, AIA vice president, Government and Community Relations. "High premiums for green buildings are no longer the case as costs are coming more in line with traditional building practices."

What are your thoughts on cities adopting green building policies? Does it help to have green building standards at the local level, or should the industry instead rely on national codes such as LEED's system? Post your thoughts below.

Commerce Department Data Not as Cheery as We'd Like

Following the National Association of Realtors' data release, today the Commerce Department unveiled its October housing information -- and it paints an interesting picture.

• Home sales were up 1.7 percent last month.

• Median home prices dropped 8.6 percent from the month prior and is down 13 percent compared to the same time last year (its sharpest drop since September 1981).

• New home inventories fell (one area in which a decline is a good thing!) 2.3 percent to from a nine-month supply to an 8.5 supply in October.

Some industry experts think the sales increase is linked to builders who are trying to do whatever they can -- offering deals, holding auctions and more -- to sell their array of unsold homes. Could be. We suggested some of the very same things in an earlier blog.

But is a spike in home sales reason for cautionary excitement -- or just another blip on the big housing slump screen?

The answer possibly can be found in one of the Commerce Department's other pieces of information, also released today. The department revised its September sales pace numbers -- downward -- to 716,000, from 777,000, the original figure.

Sure, revisions happen all the time -- but when one drags what we all thought was a maybe OK month down to the lowest level in more than 10 years, as  AFP reported, it suddenly seems like more of a concern. (And makes you wonder what October's revisions will look like.)

Some analysts, unfortunately, agree.

“The overall picture is housing is still going to decline at least for the rest of this year,” said Adam York, economic analyst at Wachovia Economics in Charlotte, North Carolina, told MSNBC. “We would not be willing to call September the bottom.”

And there you have it: We're still sinking. But maybe Wachovia will be willing to label October  the low point. We should know in about a month.

The Housing Data Is In ...

The National Association of Realtors has released its data on October home sales, and the results are -- despite the group's trademark positive outlook -- really somewhat disappointing.

Pre-owned home sales hit their lowest point ever; so did home prices. October, in fact, marked the eighth consecutive month home sales dropped, according to CNNMoney.com.

Some more "highlights:"

• Single-Family Homes Suffered. The annual pace of single-family home sales in October was 4.37 million, the same as September. However, September showed the lowest annual pace since early 1998 -- so holding steady was nothing to celebrate.

• Condos Aren't in the Clear. The condo market seemed especially troubled. Sales dropped 9.1 percent from September and the supply increased to 13.1 months worth of condos. In September, the condo supply was 12.2 months. (Just to compare, note that the national housing supply -- which is also way up -- is at just less than 11 months.)

• And About That Housing Supply ... In September, the housing supply was at 10.4 months. Now it's at almost 11 -- the largest supply in more than 22 years (!).

Yet not all the news was bad: Roughly 93 of 150 metropolitan markets are showing flat or slightly higher home prices -- and not declines.

However, plenty of markets are seeing declines, so nationally, home prices are down. Which you might think would spur home sales -- but the price drop wasn't much help due to the ongoing issues in the jumbo loan market.

NAR blamed problems with jumbo loans, which are those over $417,000, for making it hard to sell securities backed by the loans. The situation hurt some high-end buyers' chances of securing loans. (Not that everyone buying a home for less than $400,000 is having an easy time securing a loan these days ...)

We're all waiting for that sign that the housing slump is over: But it doesn't look like today was it.

We know things are going to be dicey for awhile. As Reuters (among others) reported today, Fed Vice Chairman Donald Kohn's comments this week to the Council on Foreign Relations -- stressing concern over the state of U.S. growth -- got economists all atwitter with expectations the Fed would again cut rates at its December meeting.

The Fed has been criticized this year for not reacting quickly enough to the housing slump and credit crisis, focusing instead on inflation -- and seeing the central bank now start to scratch its head and ponder the fallout makes one wonder if we're in for a longer haul than any of us thought.

And yet, it's important to remember that construction -- residential especially -- and prices are cyclical.

There are good years and bad ones. And yes, this year is especially bad. (As CNNMoney.com said today, before the start of the current housing slump, it had been 11 years since home prices fell year-on-year.)

But every cycle has a down point from which it rises -- meaning logically, statistically and without a doubt, things are going to improve. And some signs exist to inspire hope -- mortgage rates were about the same in October compared to the month before; and while still down for the year, single-family home sales held steady from September to October.

The question isn't "will it?" -- it's "When?" Unfortunately, the more home prices and sales fall, the harder it becomes to formulate an answer. Hopefully November's home sales data will provide a clearer picture ...

New October Housing Information Due Today

Last month's previously-owned home sale figures are due out later this morning ... will they be relatively unchanged, as many industry experts have predicted? And could that be a sign things are over -- or that the economy isn't quite as "headed for trouble" as we'd earlier feared?

Tune in later today to MHN's Out and About blog for the full report ...

Real Estate's External Appeal

We all know the U.S. housing market is rocky -- but does the rest of the world feel that way?

Maybe not. As the subprime crisis threatens international banks, some other countries have expressed interest in investing in U.S. commercial and other markets. Building comes in waves -- and some may be ready to ride it out.

Curious? Some suggested reading:

Real Estate Has More Appeal Outside the U.S.: Jane Bryant Quinn

 British Real Estate Investor Sees Potential in U.S. After Subprime Crisis

Green Building: Portland Calling

The city of Portland is premiering a new green building initiative -- and it's just one phone call away.

The green building hotline was designed to give businesses, developers and residents information about green materials, indoor air quality, energy efficiency and more, according to GreenBuildings.com.

The hotline also helps by offering information about financial incentives for residential and commercial buildings, new or pre-existing.

Why did Portland set up its green hotline? A month ago, a report about green building's economic pluses commissioned by several Portland agencies was released. The report was made to kick-start conversation in the Portland building industry about going green -- no new concept to the area, which has invested more than $1.5 million in sustainable building since 2005.

What a simple, yet great idea. Part of green building's biggest challenge is the fact the information is constantly evolving. LEED certification is expensive; standardized guidelines are under development in many cities, but having one informational center for a community should help to drive up green building tremendously.

Green building has gotten way more popular in recent years, but we've still got room to grow. Communities need to educate developers, investors and other industry players about the benefits of green building --  that it isn't as expensive as you might think (a recent LEED study of 33 California buildings showed a green building can pay for itself in three years), and that benefits like improved indoor air quality have been proven to help kids be healthier, more productive and reduces absenteeism in green-designed schools, according to the U.S. Conference of Mayors.

But you don't have to tell that to Portland, who hopes to someday add a green library, mobile workshop and larger Web site to its green building info program. Makes you wonder: What's my city doing to encourage green building?

 

Residential Round-Up

As the October housing numbers trickle in, residential building and construction industry reports from areas around the country can provide a snapshot of what the various regions are experiencing as the housing slump drags on. And on. And ... say it with me ... on.

Some recent state results include:

• Utah -- New home demand along Utah's Wasatch Front hit its lowest level in 17 years last month, according to a new Construction Monitor report. Builders took out just 530 single-family home permits, down from 1,186 in October 2006, the Salt Lake Tribune reports.

• Pennsylvania -- Pittsburgh's October residential building permits revealed an increase over the same period in 2006, but the total permit number for the first 10 months of the year is still lower than last year, according to the Pittsburgh Business Times. Housing permits in the Pittsburgh Metropolitan area were 12.8 percent higher than last year -- however, the total permits issued this year thus far are down 6.4 percent from 2006.

• South Carolina -- The October unemployment rate rose slightly from September to 5.8 percent but construction payrolls expanded by 500 jobs from September to October, according to the Post and Courier. The construction payroll is still, however, off by 300 positions compared to October of last year. A senior Wachovia Corp. economist said building industry employment will probably drop in the coming months.

Overall, a mixed bag: But then again, we're just talking about three states. Given yesterday's Commerce Department report, which indicated a dip in building permits, and the surprise Freddie Mac announcement that the government-sponsored mortgage agency had lost $2 billion in the third quarter, people certainly aren't feeling 100 percent better today about the housing industry.

They may, in fact, be feeling a lot of things, most notably, confusion. There hasn't been a clear indication we're out of the woods yet, but the sprinkling of good news items of late -- such as the Wall Street Journal reporting that McGraw-Hill Construction expects residential construction spending to see less declines than it did this year and total construction spending to drop just 2 percent in 2008 -- have given hope to some.

And yet, there's one group some analysts are saying might be a little less hopeful: The Fed. The Fed's comments from its last Oct. 31 meeting (which can be downloaded in PDF form here) were published yesterday, revealing concerns about increased unemployment and reduced growth in 2008 that were interpreted to mean we may be seeing another rate cut in December. It was influential enough, anyway, to drive Wall Street was up yesterday after the notes' release.

Should we be pleased the Fed is acknowledging how serious the housing situation is after expressing more concern for most of the year about inflation? Or should we be nervous that the Fed appears to feel that we're in for a long, rough ride? Post your thoughts below.

Commerce Department Data Offers Mixed Signals About Housing

The Commerce Department today released its October new residential construction data today. We're all looking for proof that the housing decline has hit its lowest point and will begin a correction. But was today's news indicative of that?

Well, the report contained some good news: After falling in September, housing starts set at an annual pace of 1.229 million units in October. That's their biggest monthly increase (3 percent) since February -- and a surprise to many economists who had said they were anticipating a decline.

Single-family housing completions in October were 2.8 percent above the September figure of 1,127,000. In all, privately-owned housing completions in October were also up at a seasonally adjusted annual rate of 1,436,000.

That's still down 6.7 percent from the revised October 2006 rate, but 1.9 percent up from September's revised estimate.

And yet ... building permits fell. Permits hit a 14-year low in October, dropping 6.6 percent to a 1.178 million unit pace, Reuters reports. (That would be the lowest permit level since July 1993.)

Which might not be as positive as sign as we'd hoped. Higher housing completions and starts are great -- but as concern over the state of the economy has grown in recent months, concern that the housing slump will last longer than expected has grown, too.

Since the housing market is considered such a strong economic indicator, and residential permits are considered an early sign of how the housing market is doing, a lower permit number sends a serious message.

It's not uncommon for permits to rise after mortgage rates are lowered -- and yet, despite the Fed has done that, we have yet to see an increase.

Will another rate decrease help? Maybe. Although many economists have predicted the Fed is done with rate cuts, minutes released today from the Oct. 31 Federal Reserve meeting revealed that policy makers lowered growth forecasts last month and are concerned about credit-market losses, Bloomberg reports.

Yesterday, the National Association of Home Builders/Wells Fargo index was released, indicating builders weren't very confident about the future.  Will the building permits pick up on their own? Or will the Fed offer another rate cut to spark a rise in construction? 

They're scheduled to meet on Dec. 11. Until then, we wait and watch.

Incoming: Housing That Could Change Our Take on the Housing Slump

The National Association of Homebuilders' housing index was released this afternoon, and it revealed what many expected: As home prices decline and mortgage restrictions increase, homebuilders are not feeling good about the industry.

The Financial Times reported this morning that industry experts expected that the NAHB housing index -- compiled from a monthly survey in which builders rate aspects of the housing situation as good, fair or poor -- would set a new low point of 17 (compared with 19, the revised number from October).

However, the reading stayed at 19. Some thoughts:

• Yay And Nay: A consistent reading is slightly positive sign, but given that 19 is the index's lowest level in more than 20 years, not a reason to break out the champagne.

• As the Magic 8 Ball Might Say, Outlook Not Good: Survey respondents also judge the amount of prospective buyers and offer a six-month outlook. Builder sales expectations for the next six months dropped a point to 26. However, buyer traffic rose from 15 to 17.

• Regional Results Were Mixed: In the Northeast, the housing market index gained one point, rising to 27, and in the West increased three points to 18. However, the Midwestern HMI dropped one point to 13 and in the South declined two points to 19.

• Steady, but Slumping: Single-family home sales remained at 18 for the second month -- again, not great news, as any reading under 50 indicates builders thinks conditions are bad.
  

The National Association of Realtors thinks residential starts will end up being 1.351 million this year and 1.14 million next year, down from 2006's 1.801 million. Construction's weakest year -- 1991 -- had more than 1.139 million, according to Bloomberg. Also today, the S&P homebuilder index declined 6 percent, according to the Times.

But wait! There is  more indicative news on its way. The Commerce Department's report tomorrow will reveal the annual residential construction rate for the year thus far. Bloomberg says the numbers may show that the decline has hit its worst point.

Now, *that* would be some unequivocally good news (finally) -- or will we here things are still looking bad for the future? Stay tuned tomorrow ...

The New Byproduct of Our Foreclosure Rate

As more and more homeowners felt trapped by rising mortgage rates and stricter lending guidelines, more and more homeowners found themselves in foreclosure -- not a nice place to be.

According to the RealtyTrac Inc., Nevada -- a state particularly hard hit by the housing slump -- has the nation's worst foreclosure rate, with 1 in every 61 households filing for foreclosure. Nationally, the rate is one filing for every 196 households.

And while homeowners are finding foreclosure isn't a nice place to be, their neighbors are finding it's not so hot to be near foreclosure, either. That's because those newly-empty houses are bringing a new neighbor to the area: Crime.

According to a recent study by an Immergluck of Georgia Institute of Technology in Atlanta and Geoff Smith of Woodstock Institute in Chicago, violent crime rises 2.33 percent in neighborhoods where the foreclosure rate increases one percentage point. Just one!

These are all findings from a recent AP article, Squalor, Crime Follow Wave of Foreclosures, which describes one historic Ohio neighborhood that has seen foreclosures rise become plagued with "house fires, prostitution, vandals and burglaries."

Why? A few reasons:

• Lower Rents Attract Transient Renters. With the housing supply as high as it is, banks are finding foreclosed properties aren't selling fast -- and renting is one way of making some money back while they sit on the market. And they're willing to take what renters apply (it stands to reason credit checks and other standard measures wouldn't be considered quite as necessary for short-term renters at a property the owner is hoping to sell as they would be with renters agreeing to a yearly lease.)

• The Landlord Takes Federal Holidays Off. Banks that are finding themselves with an excess of foreclosed properties are also finding they aren't landlords. Policing residents takes a back seat. Repairs do, too -- which is why many foreclosure listing Web sites, like ForeclosureFreeSearch.com, clearly state foreclosed properties are sold as is.

• A Visibly Empty House Can Be a Magnet. A street with several windowless houses or homes with overgrown lawns indicates to passersby that there are vacant homes -- which can attract squatters and the homeless, who are looking for shelter as the winter months kick in. It seems unlikely people would wander the streets looking for empty houses; but somehow, people do find them. Consider the Santa Ana, Calif. community who the Orange Country Register reports is finding even houses being readied for demolition have attracted unwanted residents -- both human and animal.

LEED for Homes to be Finalized on Nov. 27

Earlier this week we discussed our heated anticipation for the LEED for Homes program release -- is it finalized? What will it entail, exactly?

Good news: The USGBC's site now includes news about the member ballot process ending Nov. 26. (You and I can't vote ... unless you're a member organization primary contact. I'm not.)

And the LA Times has some information about LEED for Homes' final OK in an article about last week's Greenbuild conference in Chicago.

According to the Times, LEED for Homes, which has been in the testing phase for two years, *was* officially announced last week at the U.S. Green Building Council-organized Greenbuild extravaganza as anticipated -- or, at least, the launch of LEED for Homes was announced.

As it turns out, the program, with the USGBC earlier said would be released in fall 2007, is still being finalized, which may explain why we're still waiting for news about the specifics. The Times article indicates those will come in a little over a week, with an approval vote scheduled for my birthday (awww.)

The article says that LEED for Homes, "if adopted by vote of council members Nov. 27 ... will become official." Which is great news! As more excitement builds about sustainability, more people are asking, what can I do to help? A home is the biggest lifetime investment most people will make -- and the impact of a paradigm shift in construction and maintenance techniques could be huge.

I know what I'll be using my blowing-out-the-cake-candle wish for ...

Could Big Homebuilders be Facing Bankruptcy?

As residential building starts slow -- the annual housing start rate was more than 2 million in 2005; economists expect it to fall to 1 million by mid next year, according to the Associated Press -- some large homebuilders, no matter how many bargains they offer, may be in trouble.

They're not going down without a fight, mind you. Some, like the 50-year-old Centex Corp. and Pulte Homes Inc., are reducing their operating costs and cutting prices via sales promotions and auctions to sell homes. (Pulte recently trimmed $10,000 to $50,000 off prices at an event and also offered a deal on closing costs and free golf carts in senior communities.)

But when things were booming, some companies may have showed too much enthusiasm. Last Friday, Levitt and Sons, a subsidiary of Florida-based Levitt Corp. filed for Chapter 11 bankruptcy protection. The reason: "unprecedented conditions" in Florida and the Southeast, AP reported.

Fifteen or so years ago, a number of builders filed for bankruptcy, including Reston. Va-based NVR Inc. and U.S. Home Corp. of Houston. Will the same hold true in this slump? Share your thoughts below.

   

Keeping Your Construction Company Moving When Business Isn't

Residential construction company owners have a lot to lose sleep over these days. First, there's the decrease of work -- a year ago, business may have been booming. Now, it's barely limping along in many parts of the country.

Then there are the building costs -- many materials have gotten more expensive, which isn't helping. And reports keep pushing the end of the housing slump further and further into 2008, showing no relief on the immediate horizon.

Which is why many construction small business owners may be wondering what things they can do to help business run as smoothly as is humanly possible until the situation improves. It got us wondering, too.

Some tips and tools that may help:

• Offer More Services to More People. An Ohio-based construction company owner wrote to Fortune asking for advice on how to keep his business afloat in these tough housing times -- and he received some helpful advice about taking on subcontractor work and looking outside of his local market for work.

• Conquer New Markets and Charge Less to Work More. Some other construction business owners offered advice about reducing prices and hitting up other construction industries on Fortune's Small Business blog.

• Keep your profit margin healthy. Don't go over your budget -- if you can't pass the costs on to the client, you're going to eat them, and as work slows, you're going to feel it. ConstructionBusinessOwner.com has some tips for keeping budgets in check.

Have any other solutions to offer small business owners in the construction industry? Post them below.

The Case of the Mysterious Missing LEED for Homes Guidelines

We waited and we watched ... we heard progress reports about the pilot program and whisperings that a final set of guidelines would be announced in fall ... and finally, our LEED for Homes wish was supposed to be granted last Friday when the U.S. Green Building Council was set to unveil the official LEED for Homes program at the Greenbuild conference.

But did they?

The USGBC has launched a new LEED for Homes Web site -- that I can confirm.

And while it appears the site still needs a bit of work -- I had problems downloading the program guidelines (my Mac is still trying to convert the metafile as I write this, not sure why the USGBC didn't put it in a PDF format) and the link back to the USGBC site for more information is pretty outdated (both sites just have an old FAQ), we can answer a few questions about what the LEED for Homes program might entail for you:

• Who is LEED for Homes designed for?

New home types such as affordable housing, mass-production homes, custom designs, stand-alone single-family homes, duplexes and townhouses, suburban low-rise apartments, urban high-rise apartments and condominiums and lofts in historic buildings (so pretty much everybody).

• What benefits can designing a home with LEED for Homes provide?

According to the USGBC, "lower energy and water bills, reduced greenhouse gas emissions and fewer problems with mold, mildew and other indoor toxins." Plus, the USGBC is touting the LEED for Homes rating as a sign of quality planning and construction.

• OK, so how the heck do I get a LEED home?

Check out the list of LEED for Homes providers in your area.

(Note they aren't everywhere yet -- current states with LEED providers include Arizona, California, Colorado, Florida, Georgia, Michigan, New Jersey, Oklahoma, Oregon, Pennsylvania, Texas and Canada and areas of the Northeast including Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.)

• What if I'm not building a new house? Can I make my current home green?

LEED also offers retrofit guidelines to green up your living space if it isn't new.

But as I can't download the guidelines, and the site's press releases and news updates don't include anything about the new LEED for Homes release, I'm not sure if it was launched or not.

I had hoped to include links to the plethora of articles the media wrote about LEED for Homes -- but I have, as of yet, been unable to find any of those, either. That's likely due in part to the fact the USGBC doesn't have a press release up on its site yet -- which to be honest, seems odd that the site would launch without it. Has LEED for Homes been delayed?

I'm checking in with LEED; we'll keep you updated as the story unfolds...

Fed Chairman Says The Economy Will Slow -- And The Dollar Pays For It

They've hinted at it before, using terms like " will likely slow."

But yesterday, Fed Chairman Ben Bernanke said in a speech -- after months of a sluggish housing market, inconsistent spending and other brow-furrowing economic events -- that the economy is expected to noticeably slow in the coming months.

Just in time for the holidays! That should thrill the retail industry (sorry, guys.)

The immediate result? The dollar hit a new low against the euro today and dropped further from the British pound, CNNMoney.com reported. That brings the dollar down more than 11 percent against the euro since the start of 2007. (In short: Now is not the time to plan that dream European vacation if you live in the U.S.)

The long-term result? After the last Fed rate cut, it seemed pretty likely there would be no more for quite some time -- in its Oct. 31 statement, the Fed said, "Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time."

Many economists took that to mean "this move and the earlier one should do the trick." However, now that the Fed is glumly predicting the economy will decline soon, the financial market isn't so sure we've seen the last of the Fed cuts.

"The stock market had been hoping that the Fed chairman would hold out some promise of another rate cut but instead, he emphasized the risks of inflation," David Jones, chief economist at DMJ Advisors, told CNNMoney.com.

And yet the dollar had different hopes. Its drops are partially a result of the possibility the Fed may offer further rate cuts. Another  cut might shoot some adreline into the economy, true, but rate cuts often weaken currency because investors switch their money to higher-earning markets.

In a time when even the world's supermodels are doing that -- news broke this week that former Leonardo DiCaprio flame Gisele Bundchen is asking to be paid in any other currency than the U.S. dollar -- you know it's bad.

So which is better -- a weaker dollar or a stronger economy? We'll find out what the Fed thinks when it next meets, in early December.

Vacation, Not all the Environment Ever Wanted

Spain's Balearic islands have been a popular vacation spot since the 1960s -- maybe a little too popular. That's why Spain is expected to announce tomorrow that all construction on the islands of Ibiza, Mallorca and Menorca will be halted, the Guardian reported today. Done. No more.

Details haven't been announced but the move is expected to save land in Palma, at one of Mallorca's largest bays and in urban marshlands in Ibiza and Palma de Mallorca. Those areas will be made protected land, making them untouchable in the future.

Last week, the government began a plan to remove illegally built homes, chalets and hotels  -- construction in Spain is banned within 100 meters of the coast, but some developers ignored that law -- along 500 miles of Spanish coastline.

"We cannot mistreat our natural resources, damage the coastline and allow for a disproportionate growth in residential properties," the socialist president of the Balearic islands, Francesc Antich, said.

Tourism is a rich financial resource for Spain, and for many countries around this world. It's also great for the residential market. Popular destinations require new hotels, rental homes, apartments.

But balancing economic advantages and ecological concerns is important. Consider:

• A recent Travel Industry Association survey found 78 percent of travelers are environmentally conscious, the Chicago Sun-Times reported. More than 50 percent of those travelers said they would choose a travel supllier who ''demonstrated a true commitment to environmental responsibility" over one who didn't, according to leisure trend analyst Peter Yesawich.

• St. Thomas recently nabbed the title of worst island vacation destination in National Geographic Traveler's fourth annual survey of islands around the world because of its habit of packing in tourists -- but in 2004, St. Thomas also was given poor grades on the National Geographic report card system when launched in 2004 for refusing to encourage sustainable tourism, according to The Virgin Islands Daily News.

• In that same survey, St. John was named best of the Caribbean islands -- with panelists praising its committment to maintaining the "natural environment" and "ecologically minded business people," but lost out on getting into the highest-rated category because of excessive development in Cruz Bay, the Daily News reported. "[St. John's] long term prospects, especially for the locals, will depend on good sustainable tourism management," according to the reviewers.

Even in low economic times, people vacation -- and that makes vacation spot development a lucrative industry. But whose responsibility is it to balance progress with protection -- the government's? Developers'?

It's great that Spain has stepped up to protect its natural resources, but one wonders how things progressed so far that demolition has to be involved. It seems it would be easier to determine what land needs to be hands-off before building begins -- or are local governments the ones who are on vacation?

Calling Up Customers Without Dialing

Apple's iPhone was a huge hit -- 1.1 million iPhones were sold in the last quarter. And while it may not appear to be a likely way to sell real estate, REALTOR.com is ringing up potential homebuyers using what may be this season's hottest tech accessory.

REALTOR.com, the National Association of Realtors' Web site, decided to utilize the iPhone's popularity and create a search capability compatible with the iPhone. Using their phone browser, iPhone owners can access listings at http://iphone.realtor.com, search by neighborhood, view photos, property info and listing agent contact information.

This isn't the site's first foray into cell phones: the REALTOR.com mobile application also works on cell phones and PDA devices running Windows Mobile 5.0, including HP hw6965, HP hw6925, Palm Treo 700w (or Palm Treo 700wx), AT&T 8525, Cingular 8125, O2 Xda Stealth and Audiovox XV6700.

Sound like a gimmicky promotional tie-in? It isn't. Part of keeping afloat in this challenged real estate era involves creative marketing -- and making listing searches easier for the more than 3.4 million people who are expected to buy iPhones (which also go on sale in the UK this week) this year is a smart move.  

Last week an Out and About blog touched on successful marketing techniques like e-newsletters and Talking House that are helping to sell homes. As the market sees less and less buyers, due in part to credit issues and consumer fear, it's more important than ever to make things as convenient and easy as possible for those considering buying or selling. If you don't, there's a developer or real estate who will.

Consider creating a podcast. Adding to your Web site. Test-marketing new technology. The real estate industry isn't just about business cards and open houses anymore -- are you changing along with it?

Homeowners Aren't Selling -- But They are Improving

Yesterday we started to discuss how several U.S. cities -- and studies -- indicate remodeling may be rosier than anyone expected.

• The Sunshine State Swells. In Florida -- one of the states hardest hit but the housing decline -- the Manatee County Building Department in August reported that 88 percent of its issued building permits were for additions and other home renovations.

Those projects included new pools, fencing, air conditioners, additions -- and that number does not include redecorating/remodeling projects that do not require a permit (basically new structures, according to the city of Bradenton) the Bradenton Herald reports. The total actually may be higher.

Are people in the Bradenton/Sarasota/Tampa Bay area actually putting in hot tubs as the foreclosure rate hits an all time high? Really?

According to local builders, yes.

"Many homeowners have realized that perhaps it's a better idea to turn their eye toward their current home instead of trying to move," Carol Freitag, chief operating officer of Home Forge Remodeling, told the Herald.

Plus with the housing crisis ongoing, labor and materials are often cheaper and more readily available, according to local builders, who reported dry wall, insulation and other materials had "dropped drastically" in price.

• Wichita Wants Updates. In Wichita, Kan., the number of residential remodeling permits issued through September was up 2 percent and permit value was up a whopping 20 percent compared to the same period in 2006, according to Wichita's Office of Central Inspection.

The local remodeling market has grown steadily in recent years, and appears to be continuing to, with local builders reporting no slow-down the Wichita Eagle reported this weekend.

Moving Forward

And yet, the Leading Indicator for Remodeling Activity (LIRA), a new initiative developed by Harvard’s Joint Center for Housing Studies (which replaces the Remodeling Activity Indicator), predicted in October that remodeling spending essentially will be flat for the next three business quarters, according to the Chicago Tribune.

And what about companies like USG Corp., the Chicago-based maker of building products that reported a 95 percent drop in third-quarter earnings recently? Its CEO blamed the softening residential repair and remodeling sector, according to the Trib.

It seems for every good news item, there is a bad one: And homeowners are taking note. A LIRA study found that they still felt improving their homes was a good investment; what they were not sure about was whether or not improvements would increase value. 

Perhaps that's why Freddie Mac reported it expects the volume of cash-out activity to decline by roughly a third later this year.

Whether or not homeowners are renovating to improve the only home they feel they will be able to afford living in for awhile or because they believe the market will soon turnaround and they'll be able to sell it, the remodeling industry may profit. They may also stay busy: About 67 percent of remodelers believe revenue will increase or be stay steady from 2006, according to Home Tec.

It's hard to say whether homeowners or remodelers are more on the money. It's also hard to say whether the former will spend it and the latter will get it.

But whichever way remodeling swings, it's going to have an impact. Homeowner remodeling accounts for more than 2 percent of the overall economy in this country, according to Harvard’s Joint Center for Housing Studies.

We've all been carefully watching consumer spending, auto sales and other economic indicators for months. So doesn't the suggestion that the remodeling industry may weather the housing decline feel like a tiny bit of good news? There's hope in those new hot tubs -- really.

Beautifying Over Building: What May Not Be Slumping

New home construction: Down. New home sales: Also down. They dropped 1.5 percent at the end of September to the fewest amount since early 2006.

But before you start thinking the only happening real estate in the U.S. involves tents and lean-tos, consider the recent slightly hopeful remodeling news.

Yes, it seems somewhat unlikely that has home values decrease, owners would pour money into fixing up their abodes. But that's what some recent numbers indicate.

Take, for example, the 2006 survey of home electronics installing/dealer firms that found 52 percent of their revenue came from new construction and 48 percent -- almost half -- came from remodeling/retrofit work, according to the E-Commerce Times.

The market was better then; you'd expect home investments and building to be high. The National Association of Home Builders, in fact, called the strong remodeling returns in 2006 "the last gasp of the recent housing bubble."

The NAHB is predicting that the renovation market is just a step behind housing, about to ripple downward with housing for the rest of this year and part of next, recovering by 2009.

Seems like a logical theory. Or is it?

Remember that home electronics installing/dealer firms survey? The same study's 2007 data indicates that, as housing slumped further, remodeling rose -- this year to 51 percent of revenue, compared to new construction revenue, which dropped down to 49 percent.

Harvard’s Joint Center for Housing Studies says that "homeowner spending for home improvement activity will likely decline for the first time since late 2003" -- but since this summer reports said it would hold steady and might even increase (according to Kitchen & Bath Design News), the Center's projected 2.3 percent drop for the year may not hold true once the numbers have been run.

And even if it does, considering how terribly, horribly far the housing industry sales have fallen, is 2.3 percent even really that bad?

Kitchen & Bath Design News quotes NAHB Remodelers Chairman Mike Nagel as saying " the market has been buoyed by an increase in the number of homeowners requesting smaller-scale projects and home alterations.”

Well, some renovation is always necessary -- things are going to break or need replacing. That's what the NAHB calls the "counter-cyclical nature of spending for maintenance and repairs" (and what I, in the past, have called my flooring and windows.)

Vanity projects, however, are a different issue. The rental market started holding off on improvement renovations in 2005 and 2006, according to the NAHB.

Will housing follow? Are people who are afraid to try to sell their homes right now happy to splurge on home additions? And what does that mean for -- and indicate about -- the housing industry?

Check the MHN Out and About blog Tuesday for more surprising news about the state of the U.S. residential remodeling industry, You won't believe what's happening -- and what's being added -- in some communities...

More About Marketing Those Unsold Homes

Yesterday, we discussed some ways to cut costs and improve real estate agents' profits. Increasingly, that involves going online.

For example, the Baltimore Sun reported recently that one in five agents/brokers say they have a blog; one out of four use social-networking site like MySpace, according to a real estate advertising survey released in October by Classified Intelligence and Realty Times. (And by the way, neither strategy even showed up last year on the survey.)

On the heels of that chat, I came across a press release on BusinessWire about agents and marketing.

According to survey company Constant Contact, Inc., a recent real estate agents survey revealed that 60 percent of respondents used e-mail marketing to communicate about property       listings and open houses. More than 35 percent said they have rented or sold a property as a result of an e-mail       marketing campaign.

Note that doesn't say Web site (which agents actually rated the most effective form of marketing, although 60 percent of them felt the sites hadn't paid off as they'd hoped, Classified Intelligence said) -- but e-mail marketing, like the e-newsletters mentioned yesterday.

The agents interviewed told Constant Contact it was a faster, cheaper way of reaching clients that the typical print ads.

Note the comments from Stephen Saunders, owner of The NextProperty Group: “I have had great success with my email newsletters and recently ran an online survey that gave me better ideas of what my clients are looking for, which will help put me in the best possible position when the market turns around in the Tri-City area.”

When the market turns around. No one is saying this will help sell every listing you have or bring in scores of new clients -- but positioning takes time, and if it can help keep you afloat and build a new base of clients, isn't it worth considering new tech marketing options?

Today's clients want constant contact: Immediate, online access to information, listings and advice. That's why the following tech goodies have proven popular:

• Coldwell Banker Real Estate in March unveiled Second Life, a virtual sales office, according to CNNMoney.com.

• Talking House, produced by an Illinois firm, involves placing a transmitter inside the for-sale house, which is advertised on the external "For Sale" sign. Potential buyers can pull up at any time of day or night and tune into an AM radio station to hear all about the house.

• YouTube features video walk-throughs for developer communities and single-family homes that are for sale -- just enter "home tours" into the search engine and see how many pop up.

• CellSigns Inc. charges agents about $5 a month per home for agents to have a telephone number for prospective buyers to text questions about homes as the wander neighborhoods, away from their computers.

These are just a few of the innovative marketing techniques agents are using to up home exposure -- and hopefully, home sales. Could one work for you?

Make More Real Estate Money Despite Slow Sales

This week, Denver, Colo.-based Real Trends, a residential brokerage analysis company, released a report that said real estate agent commission rates had risen last year -- and are likely higher this year, too, although it's too early to offer finite data.

If your reaction to that was "How is that possible?" -- well, so was mine. All the agents I know are having one of their worst-ever years, dealing with hesitant buyers who will get to the bid stage and decide to "just hold off for another six months;" willing buyers with credit issues that are blocking them from getting an affordable loan; and, some months, just very few buyers.

Let's just say these agents are not going to be splurging on a boat anytime soon.

But, statistically, their commission rates have risen -- from 5.02 percent in 2005 to 5.18 percent last year. And yet, that doesn't mean more money for agents: Average broker profit margin in 2006 actually fell to 4.3 percent from 7.6 percent in 2005, according to Real Trends.

Which makes more sense. First of all, agents have a number of expenses involved in each sale -- car upkeep and gas costs to take clients to properties, promotional expenses for Web sites and advertising, etc. -- and the longer a house sits on the market or a client delays buying a property, the more those costs escalate and cut into a sale profit.

Secondly, home prices have fallen -- single-family home prices have been on the decline for 21 months, according to Standard & Poor's -- and that means sale prices are lower, which means an agent's cut of the sale is lower, too.

Negotiating a larger percentage of a home's sale may be a more common practice in today's desperate seller times, but that doesn't mean more money for the agent if the home doesn't sell for much.

What can agents do to increase their profit? Some quick tips:

• Use Your Ad Money Wisely. A recent Classified Intelligence and RealtyTimes.com study showed agents are advertising more but carefully considering where their ads will appear for maximum impact. Are you targeting first-time buyers? Online ads may be the best way to lure younger clients. Trying to strengthen your presence in a specific neighborhood? Ads in community bulletins and highly local papers may offer more return than a pricey ad in the area's largest urban paper.

• Give Information; Get Clients. Today's buyers and sellers have another option -- the Internet. Don't lose clients to a sell-it-yourself Web site. Stress how having an agent guide you through the process is a true benefit in low-cost ways like teaching a free seminar on homebuying at a local school or restaurant (or anywhere you can get free space).

• Make Smart Plans. Try to reduce small costs -- it can have a big overall effect. This is a service industry -- but that doesn't mean you have to be available to take a client to see a single property a day. Urge clients to let you book showings in three to four hour blocks to save on gas, parking and other expenses. Hold open houses for your seller clients instead of always meeting interested parties there at random times. You won't be able to turn every showing or visit into a consolidated activity, but handling some that way can mean savings.

• Create a Permanent Ad for $50 or less. If you don't have a Web site, it's time to get one. If you're not tech-savvy, buy a program from your local computer store or try one like rapidlistings.com that allows you to build a basic site for free. If you have one, add an e-newsletter or other section to take the focus away from the featured listings (which may be few and far between and on your site for months). A newsletter or news section can help you cheaply -- and regularly -- inform nervous homeowners about the market outlook. If potential buyers and sellers see you as a source of trusted information, they're more likely to turn to you when they are ready to look.