Donald W. Reynolds National Center For Business Journalism

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Story ideas to follow in residential construction

July 26, 2012

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Much of the focus on home sales lately concerns existing properties, but with signs that residential construction might finally be picking up, you might want to consider a story about that market.

Last week, the National Association of Home Builders reported that its sentiment index leapt to the highest level since March 2007.  And while the index still is in somewhat dismal territory, the notion of an upward trajectory has heartened industry observers.  And while June new residential sales dipped compared to May, they still were more than 15 percent above June 2011 levels, the Commerce Department reported.

With for-sale signs, foreclosures and abandoned dwellings still abounding in most areas, it’s difficult to imagine why new housing stock would be in demand, and why lenders would want to take a chance on financing new construction in an over-inventoried market.  Why not browse recent permits and permit applications – many municipalities now post them online for even more convenient access – and contact the builder to find out the story behind each new project.  Ask them who their lender is, and check with that financier about why they feel new housing is a good bet in 2012.  Are there any new covenants or terms required of builders, post-recession?  Are speculative projects being financed, or must prospective buyers, complete with down payments, be on board before the loans will close?

Another avenue to explore:  What’s different about today’s projects compared to pre-recession building?  We know more multiple-family dwellings are being built these days; how are they represented among local building permits and applications?  Is the size or configuration of new homes changing in response to tighter pocketbooks or changing household dynamics?  MSN reports that in-law apartments, more flexible living space, bulk-storage pantries and other attributes that reflect increased frugality or multi-generation living are in vogue.  And check out this New York Times piece about 275-square-foot micro-apartments being contemplated in the city; while most markets don’t have the constraints of Manhattan, there is a small-house movement afoot that might be worth exploring.

Another topic of interest – especially in light of this recent Wall Street Journal blog post about the dearth of subdivision-ready land – is that of infill building.  This OregonLive story does a good job of synopsizing local land supply and demand, too.  In my neighborhood, three 1940s bungalows have just been razed and if recent past experience proves true, two-story behemoths that edge within feet of property lines soon will take the place of those vintage 1,200-square-foot cottages.  These so-called teardown projects can upgrade a neighborhood and provide projects for small builders, but they also can be a bone of contention among property owners who object to the character of their area being changed; you might want to plan a package about the rules regarding infill projects in your area’s older markets, and profile a couple of projects under way.

One last housing-related tip:  Homeowners insurance rates are zooming upward propelled by the last few years’ natural disasters; Texas is up in the double digits since 2009, for example.  You might check with your state’s insurance commission about rate trends and let readers know what to brace for.

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