“Green” Saved Some Homebuilders from Recession

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Homebuilders are finding that betting on green features could be the key to rescuing an ailing business.  A new study finds that builders with energy-efficient and green home construction experience remained in business during the Great Recession at higher rates than those who did not have any knowledge or experience with green housing.

In 2013, green homes comprised 23 percent of overall residential construction.  It is expected to rise to one-third of the market by 2016, according to the newly release Green Home Builders and Remodelers Study by McGraw Hill Construction.

More communities have adopted green principles into building codes, ordinances, and regulations, which is helping to spur their adoption.  Also, more products are becoming affordable, which helps more homeowners incorporate them.

About half of builders and remodelers in 2013 said it’s easier to market green homes, up from 40 percent in 2008.  What’s more, 68 percent of builders say their customers will pay more for green features.  Twenty-three percent say their customers are willing to pay more than a 5 percent premium for a home with green features.

Green experience was a significant part of what kept builders in business during the peak of the recession, and now those firms are embracing the competitive advantage they earned by deepening their delivery of energy-efficient and green homes.  The homebuilders that are reentering the market using traditional home building practices, will be encouraged to learn green practices over time.  As a broader availability of green building products and educated consumers increase, so will the demand for more homebuilders with green building knowledge.

 

January 2014 Housing Industry Update

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New home construction reached the 3rd highest level in the past 66 months.  However, the latest annualized pace of 999,000 new units is insufficient to satisfy demand.  Another 50 percent increase in housing starts is needed to help relieve the inventory shortage conditions.

The latest figure is a decline from the prior month, which was the best in over 5 years.  But activity is still higher from a year ago.  Both single-family and multifamily housing starts softened in December.  Perhaps the deep freeze in a good portion of the country could have impacted builders, postponing the digging of the earth.  Housing permits, which are just paper approval and which should not have been impacted by the weather also weakened a bit.

It takes about 6 months to go from housing starts to housing completion and ready for sale for a single-family home.  Big builders can do it quicker on spec homes.  Owner-initiated construction takes more than twice as long to complete.

The inventory of newly construction homes is essentially at a 50-year low.  Much more construction is needed.  Publicly listed companies like KB Homes and Toll Brothers can tap Wall Street funds to get busy.  However, small local builders have historically been the principal supplier of new homes.  These local homebuilders rely on construction loans, which are very hard to get.  Many local lenders have indicated burdensome regulations arising from Dodd-Frank financial market regulations have hindered their ability to lend.  Hence, large companies are getting bigger at the expense of smaller guys getting shut out.

The insufficient new housing starts will mean a likely continuation of a housing shortage in 2014.  And, it is predicted that home prices and rents will continue to rise in all markets in 2014.

Housing Market Continues to Show Gradual Improvement

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Markets in 56 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI).

“More markets are slowly returning to normal levels and we expect this upward trend to continue as an improving economy and pent-up demand brings more home buyers back into the marketplace,” said NAHB Chairman Rick Judson.  “Policymakers must be careful to avoid actions that would harm consumer confidence and impede the ongoing recovery.”

“More than 35 percent of all the markets on this month’s LMI are operating at a capacity of 90 percent or better of previous norms, which is a good sign that the housing recovery will continue to pick up steam in 2014,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identify those areas that are now approaching and exceeding their previous normal levels of economic and housing activity.

Forty five percent of metro areas are recovering at a faster pace than the nation as a whole, with smaller markets leading the way. Of the 56 markets that are at or above normal levels, 48 of them have populations that are less than 500,000, and many of these local metros are fueled by a strong energy sector, which is producing solid job and economic growth.

U.S. Sees Record Low Natural-Disaster Activity in 2013

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This year we saw a record low number of natural-disaster events in the U.S., despite a few highly publicized storms – such as the twisters that ravaged Central Illinois – according to CoreLogic’s annual Natural Hazard Risk Summary and Analysis.

“Many predicted that 2013 would be a record year of catastrophic destruction, but the number of natural disasters that typically cause widespread destruction – mainly hurricanes, wildfires, and tornadoes – were far less than anticipated in comparison to last year’s record-setting hazard season,” said Thomas Jeffery, senior principal scientist for CoreLogic.  “Interesting, one natural hazard that tends to receive very little attention took center stage in 2013, as three separate sinkhole catastrophes took place in Florida.  Though massive damage and loss of life from sinkholes in uncommon, this year’s events were large enough disasters to draw significant media coverage, raising public awareness of the true risks associated with this often overlooked hazard.”

Here is an overview of natural disasters in the U.S. this past year:

  • Hurricanes:  Hurricane threats were minor this year, with only 13 named storms and two that reached hurricane classification (none of which hit the U.S.).
  • Floods:  Flood damages totaled about $2 billion for the year, more moderate compared to recent years.  The most significant flooding events were in Boulder, Colorado in September which caused damage to more than 19,000 homes.
  • Tornadoes:  Tornado activity this year hit a record low, with 229 fewer tornadoes than any other year in the past decade.  However, the tornadoes that did touch down were “unusually violent.”  A tornado in Moore, Oklahoma that struck May 20 caused an estimated $2 billion in damage and resulted in 23 deaths.  The widest tornado ever recorded – 2.6 miles at its widest point – struck El Reno, Oklahoma in early June.
  • Wildfires:  The number of wildfires this year was lower than 2012 and western states saw dramatically lower wildfire activity than in recent years.  The most destruction this year came with Arizona’s Yarnell Hill Fire, which destroyed 8,400 acres and 129 homes, as well as Colorado’s Black Forest Fire, which burned 14,000 acres and damaged more than 500 homes.  The Rim Fire, about 100 miles east of San Francisco, was the third largest fire in California’s history and burned more than 257,000 acres but only destroyed 11 homes. 
  • Sinkholes:  Three rate, extreme examples of sinkholes in Florida captured media attention this year.  In Seffner, Florida a sinkhole that formed under a home resulted in a man’s death.  CoreLogic has a database of 23,000 identified sinkholes.  It predicts that sinkhole property damage will continue to be a substantial risk across the nation and for Florida residents in particular.

 

New-Home Sales Up Sharply in October

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Sales of newly built, single-family homes rose 25.4 percent to a seasonally adjusted annual rate of 444,000 units in October, according to data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The government also reported that new-home sales fell 6.6 percent in September.  The release of both the September and October report were delayed by the partial government shutdown in early October.

“The October sales number show that there is clearly a demand for new housing and the recovery remains on track,” said Rick Judson, chairman of the National Association of Home Builders (NAHB).  “However, the recovery continues to be slowed by political uncertainty in Washington and ongoing constraints builders face with regard to tight credit conditions for consumers and the availability of labor, lots and materials.”

“The strong October results return us to the sales levels we saw earlier this year and negate the pause caused by the sudden jump in interest rates,” said NAHB Chief Economist David Crowe.  “We expect sales to continue to rise as pent-up demand is released and first-time home buyers creep back into the market.”

All four regions posted double-digit sales gains in October.  Sales rose 19.2 percent in the Northeast, 34 percent in the Midwest, 28.2 percent in the South and 15.2 percent in the West.

The months’ supply of new homes fell to 4.9 due to the quicker sales pace in October, and the inventory of new home sales also edged down to 183,000 units.

Electricity Consumption in 2012

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There are four categories of electric industry consumers traced by the U.S. Energy Information Administration (EIA); residential, commercial, industrial and transportation.  Residential consumers account for the largest share of electric sales at 37.2% with commercial consumers a close second at 35.9%.  Industrial consumers account for 26.7% of sales.

The average monthly electric bill for residential properties in Hawaii was $203.15, the highest in the nation, with New Mexico having the lowest with an average of $74.62 per month.

Residential consumers generally pay the highest prices and the average retail price in 2012 was 11.88 cents/kWh.  The average price paid by commercial consumers was 10.09 cents/kWh while industrial consumers paid 6.67 cents per kWh.

In 2012, the state with the highest average monthly consumption was Louisiana at 1,254 kilowatt-hours and the state with the lowest average monthly consumption was Maine at 531 kilowatt-hours.  However, according to EIA over 80% of the homes in the Northeast rely on heating oil for space heating instead of electricity.

The electric bill is a large part of the residential energy expenditures.  Energy efficiency is becoming a top priority for many homeowners.  A recent study by NAHB showed home buyer preferences found that nine out of ten buyers would pay a 2 percent to 3 percent premium for a home with energy-efficient features and permanent lower utility bills.

Builders: Congress to Blame for Market Unease

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Builders are blaming lawmakers in Washington, D.C. for the mounting challenges facing the new-home sector.

“Policy and economic uncertainty is undermining consumer confidence,” says NAHB Chief Economist David Crowe.

Despite the challenges, builder confidence held steady in November, with slightly more builders viewing market conditions as “good” rather than “poor,” according to the National Association of Home Builders/Wells Fargo Housing Market Index

“The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline,” Crowe said.

The NAHB/Wells Fargo index gauges builders’ perception of current single-family home sales, sales expectations for the next six months, and buyer traffic.  A reading above 50 indicates that there are more builders who view conditions as good rather than poor.

The index showed a reading of 58 from builders on current sales conditions in November, the same as the previous month.  The measure for future sales, however, dropped one point in November and the measure for buyer traffic dropped one point.

“Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending down the road,” says NAHB Chairman Rick Judson.  “Meanwhile, builders continue to face challenges related to rising construction coast and low appraisals.”

The Good, the Bad and the Ugly

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Final actions on more than 2,000 proposed code changes for the 2015 editions of the International Code Council’s International Residential Code (IRC), International Energy Conservation Code (IECC), and other I-Codes were decided in Atlantic City, NJ in late October.

The Good

National Association of Home Builders (NAHB) was successful on 85% of the hundreds of proposals that the association supported or opposed for the 2015 IRC.  Of particular importance are:

Additional Requirements for Exterior Foam Plastics.  A proposal was disapproved that would have required all single-family homes or townhouses with foam plastics in the wall or roof system within 10 feet of the property line to be protected on both the interior and exterior by a thermal barrier.

Additional Stairs and Ramps.  A proposal that would have required all single-family homes and townhouses with multiple levels to have a stair or ramp within 50 feet of any habitable portion of the home was disapproved.

Residential Accessibility.  A proposal was disapproved that would have required all one and two family homes to be designed so people with disabilities could enter unassisted, have zero-clearance entrance, an elevator or lift, an accessible bathroom, bedroom and a kitchen with 40 inches of clear floor space at all counters.

Foundation Walls in Flood Zones.  A proposal that would have required reinforced short stem walls in riverine flood zones (FEMA Zone A) was disapproved.

The Bad

While NAHB posted resounding victories for the 2015 edition of the IRC, only about 60% of the changes proposed in favor of cost-effective, energy-efficient new homes were approved for the 2015 IECC.

Key proposals to restore mechanical equipment trade-offs, and to provide trade-offs for building tightness and window area, were soundly defeated despite testimony from dozens of builders, NAHB staff and building officials.

The Ugly

Trade-offs are energy-neutral by definition and allow builders and their customers to make choices based on affordability, marketability, or just plain personal preference.  Unfortunately, there was concerted effort by opponents of home builders to maintain the reduced flexibility of the 2012 IECC and mandate that builders meet the stringent requirements of the energy code without exception.

For instance, another energy-neutral proposal to allow a builder to get credit in the performance path of the code was installing solar panels was disapproved, with opponents arguing that builders could possibly skimp on insulation to save money.

Common-sense proposals to improve the flexibility, cost-effectiveness and product neutrality of the energy codes were too often thwarted by a coalition of energy-efficiency advocates funded by those businesses with the most to gain from more stringent codes.

Despite these setbacks, NAHB was still able to hold its own as the 2015 residential energy requirements will not be more stringent than the 2012 and could actually turn out to be a bit less stringent.

 

Winter Home Energy Improvement Tips

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As the weather changes and the temperature begins to fall, the importance of home insulation and energy efficiency becomes a priority for many homeowners.  We are happy to provide some advice on how best to use cellulose insulation along with other tips for making practical energy-efficient improvements to your home.

Adding cellulose insulation to your attic and existing walls can save you money month after month on your utility bill.  Use our Energy Savings Calculator to find out just how much money you can save.

Replace worn or damaged weather-stripping around doors.  Also use Draft Dodgers between the bottom of exterior doors and thresholds.  The Department of Energy estimates drafts can waste up to 30% of energy use in a home.

Caulking around windows and doors is very inexpensive.  An easy way to determine if your windows need caulked is to have someone use a blow dryer on the outside and someone hold a candle on the inside.  If the flame flickers or blows out, it is time to caulk.

Reverse your ceiling fan in the winter months so the air is moving up instead of down.  Heat air rises and this will help push warm air down to make rooms with ceiling fans feel warmer.  Ceiling fans do cost money to run, so keep the fans off unless someone is in the room.

Installing a digital programmable thermostat may save you more money than you think.  There are many models available for $50 or less.  Program your thermostat to automatically lower the heat when the house is empty during the day and at night when everyone is toasty in bed under the blankets.

You will be presently surprised how these practical tips can save you money on your monthly heating costs!

Air Sealing for New Construction

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Minimizing air movement in and out of a house is key to building an energy-efficient home.  Controlling air leakage is also critical to moisture control.  It is always best to use techniques and materials identified as best practices for your site and climate.

Air Barriers

Air barriers block random air movement through building cavities.  As a result, they help prevent air leakage into and out of your home, which can account for 30% or more of a home’s heating and cooling costs.  Although they stop most air movement, air barriers are not necessarily vapor barriers.  The placement of air and vapor barriers in a structure is climate-dependent, and it is wise to work with building professionals familiar with energy-efficient construction in your area.

Many of the materials used in a house as structural and finish components also act as air barriers.  Sealing all the holes and seams between sheet goods such as drywall, sheathing, and subflooring with durable caulk, gaskets, tape, and/or foam sealants will reduce air leakage.  In addition, some types of insulation, like cellulose insulation, when densely packed in wall cavities and crevices, can reduce airflow as well as heat flow.

House Wrap

The most common air barrier material is house wrap, which is wrapped around the exterior of a house during construction.  Wraps usually consist of fibrous spun polyolefin plastic, which is matted into sheets and rolled up for shipping.  House wraps may also other materials woven or bonded to them to help resist tearing.  Sealing house wrap joints with tape improves the wrap’s performance by about 20%.  All house wrap manufacturers have a special tape for this purpose.

Airtight Drywall Approach and Simple Caulk and Seal

Two-wall construction techniques-the airtight drywall approach (ADA) and simple caulk and seal (SCS) can be used to create a continuous air barrier within a house.  Using one of these techniques can significantly reduce air leakage to help improve a home’s energy efficiency.

The typical procedure for ADA is to seal seams, joints, and openings in the building envelope during construction.  SCS is less disruptive to the construction process because seams and gaps are sealed after the exterior sheathing and drywall have been installed and finished.  However, SCS is less comprehensive that ADA, and may miss some critical points inside the building cavities that become inaccessible after the drywall is installed.  Tests on ADA and SCS detailed homes indicate some similar energy savings.  For health and safety, a heat or energy recovery ventilator should be installed in an airtight home for proper ventilation.

Before developing an air sealing strategy, you should also consider the interactions among air sealing materials and techniques and other building components, including insulation, moisture control, and ventilation.  This is called whole-house systems approach.