News & Moves: November 10, 2008

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From a new home building company to plunging material prices, the latest news at your fingertips

November 24, 2008

A retreat in Materials Prices?

Wall Street's financial meltdown and the tightening of credit throughout the economy are combining with the collapse of oil prices to cut the legs out from under the spike in building materials prices that showed up late last spring. That might seem like good news for builders, but it's really not. To gauge trends in materials prices, we keep an eye on the Whole House Commodity Index produced six times each year by Leesburg, Fla.-based Ro-Mac Lumber and Supply. The index covers the commodity materials required to build a 2,200 square-foot, entry-level home on a concrete slab in Central Florida, but excludes labor, mechanicals, electrical and plumbing products. Although it's a Florida measure, many building materials, especially lumber, move on a national trend-line.

After a long retreat from its peak, $28,692.71 in November 2005, the index hit bottom in March 2008 at $22,554.05. Then it spiked dramatically until August. But now it's plunging again. “OSB (oriented strand board) manufacturers have set a floor on their pricing. Rather than go any lower, they'll just shut down production,” says Ro-Mac vice president Don Magruder, who doesn't see prices going up.

In fact, it is the loss of production capacity that worries Magruder. “If we get a sudden turnaround in home sales, all bets will be off. The capacity is not going to be there to meet a surge in demand. That will drive prices up fast.”

However, Builder Partnerships CEO Glenn Singer (who spent 43 years in home building products manufacturing) says he doubts product prices will spike even when the market turns. “Most manufacturers have shut down production lines, but they'll be able to fire up that capacity within 45 days or so. The housing market is not going to turn so fast that shortages of supply drive a price spike,” Singer says.— Bill Lurz

New Jersey moves to slow foreclosures

Legislators in New Jersey approved a measure recently to make mortgage lenders pay $2,000 before taking a homeowner into foreclosure, reports Reuters. Believed to be the first of its kind, it joins a growing list of local and national efforts to slow home foreclosures. Foreclosure filings in New Jersey by mortgage lenders rose 22 percent in a year.

Building Material Distributor Expands

PrimeSource Building Products, a wholesale distributor of building materials, is acquiring the assets of Compass International. Compass International supplies construction fasteners from various locations. The purchase allows PrimeSource to expand its product offerings and distribute coast-to-coast more easily.

Excel Homes Hires Director of Sales

Eric Merling will take the reigns as director of sales for the AvisAmerica team at modular home manufacturer Excel Homes, based in Camp Hill, Pa. Merling comes with 19 years of experience, recently serving as vice president of sales and marketing with Coachmen Industries RV and All American Homes. He previously worked with Westchester Modular Homes.

Credit plight continues

One home builder in New York is struggling to get bank loans for new construction and site development, a plight many builders are facing. In a development by Eldan Homes, The Hamlet, two specs and two lots remain unoccupied because of struggles to get the loans. Watch the news clip from WSYR-TV Syracuse to hear the story.

Fast FACT: 1%

Forbes reports that some neighborhoods are appreciating and selling well. The median home sale price in most of these areas is more than $700,000, which puts them in the richest 1 percent of zip codes in the country, says Forbes. These zip codes include 10069, part of New York's Upper West Side; 94111, San Francisco; and 33109 in Fisher Island, Fla.

Fast FACT: 80 Million

The U.S. Census Bureau released“American Housing Survey For The United States: 2007“ data, which shows the number of houses, apartments and mobile homes in the nation rose by almost four million from 2005 to 2007, to 128.2 million. Of these, renters occupied 32 percent and owners 68 percent. The vast majority, 80 million, of these were detached single-family homes.

New Home Builder Amid Bad Market

Dallasnews.com reports John Landon is starting a new home building company in Texas. He started his last company during the late 1980s Texas housing bust. Landon worked recently for Meritage Homes before leaving in 2006 during a restructuring. He had been with Meritage since he merged his company, Legacy Homes, with Meritage in 1997. According to the report, his new company, Landon Homes, is debuting with new houses priced from $150,000 to $300,000 in three locations north of Dallas. His company is also building a 1,000-home community west of Frisco in Little Elm, Texas. He plans to build energy-efficient homes at affordable prices, according to the article.

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