Light at the End of the Tunnel for Housing?

While it's not hard data, Housing Giants Senior Editor Bill Lurz has been uncovering signs of life in housing markets as he talks with home builders across the country.
By Bill Lurz, Senior Editor, Business | January 31, 2007

There are signs of life in housing markets across the country. This is only anecdotal evidence, not hard data, and it's coming from builders — known to be notorious optimists. Moreover, it's mostly about increasing traffic, and that may mean even qualified people are interested in buying, but only contracts mean they are willing.

Bigelow Homes President Jamie Bigelow says traffic is up in Chicago. "It's decent," he says. "We're keeping our spec count low, but I'm cautiously optimistic."

John Wieland Homes and Neighborhoods' former CEO Terry Russell said in January Atlanta is still choking on excess inventory, especially at higher prices. He doesn't expect a turnaround until 2008: "We've got a 15-month supply of homes above $500,000," he says. "Land prices just got too high and caused people to build bigger houses to make their financial ratios work."

Dave Hill of Kimball Hill Homes, featured in our CEO Spotlight on page 20, says he's encouraged by traffic across the country. He hopes for normal market conditions in most cities by mid-year.

"Investors are gone as buyers, but we haven't seen their full impact as sellers, where they dump houses they've been sitting on as long as they could," Hill says. "The MLS in Tampa is three times what it was 15 months ago. That's a lot of houses."

Don't Wait

Here's a novel idea: Rather than wait for that light at the end of the tunnel, why not make one?

  • Start looking at land deals, especially for in-fill sites. Location is more important than ever. Economists didn't believe it would ever happen, but America's love affair with the automobile is cooling. They're moving back to the city or near suburban downtowns. Russell says Atlanta is going vertical and condo builders are still selling three units a week.
  • Shop. Builders with 'A' locations, even in suburbia, are still selling houses and making money. With so much land back on the market, why not shop? Those 'A' sites are not as risky as 'B' sites.
  • When you find the right location, invest in architecture. Design got really staid when builders could sell anything. Put some 'wow' in your product. Find some new floor planning concept that fits buyer lifestyles better than the competition.
  • Broaden your marketing horizons. The Internet means that old rule about concentrating on potential buyers within five miles of a site is as dead as Julius Caesar. Toronto-based marketing maven Stan Kates is using Internet marketing to sell Nevada condos to buyers in Italy, Israel and Russia, as well as California, Colorado and Texas. "We're going outside Las Vegas to find sites that work as second-home and retirement destinations for baby boomers," Kates says.
  • Boomers are still an attractive target. Look for sites in college towns like Athens, Ga.; Gainesville, Fla.; Iowa City, Iowa; and Columbia, Mo. Boomers have the money. Those college towns are powerful beacons drawing them back to where they spent the best four years of their lives. Get your hands on an alumni data base and get cracking.

How many New York and L.A. Aggies yearn to go back to College Station?