Archive for the ‘Real Estate’ Category

Last week, we had the opportunity to speak with David Welsh, president of W3 Development & W3 Construction companies, about the state of the home building industry.

Below is the transcript from our interview. After reading David’s take on the industry, feel free to email us your thoughts at homeeditor@homeintelblog.com.

HomeIntel (HI): As both a builder and a developer, you must watch the national market as closely as the regional one. What’s your impression of the state of the housing industry nationally?

DW: I watch national trends and try to relate them to what’s happening in my local area. New home construction rose nationally in June for the first time in a long time. It’s a telling sign, and it’s an indicator to builders that consumer confidence is growing and that the turn around is coming.

I’m continually trying to analyze the consumers’ behavior to help understand what’s causing an uptick in sales for new and existing homes. The way the national data is collected – typically through MLS submissions that rely on data from realtors – it’s often difficult to really know if an increase is driven by first time homebuyers who are taking advantage of low interest rates and the $8,000 tax credits or if its people who are worried that they’ll miss on the market’s bottom.

HI: As a builder who is seeing an upturn, what is your next step?

DW: As builders watch product beginning to move again, we’re taking a look at the strike price (the most desirable selling point) and seeing if we can get products moving in that price range. Sometimes it’s possible, but this market is also plagued by low prices due to builder discounts. If we can’t compete in the current price range, we have to wait longer for prices to rise.

HI: What’s the outlook in your area of Florida?

DW: I live and work in Brevard County, home to Cape Canaveral, miles and miles of livable ocean-front and river-front housing and busy towns such as Cocoa Beach and Melbourne. So, we have several different types of housing scenarios to keep track of.

Things are looking up in Brevard County right now. We’ve watch available housing inventory shrink from 2008 high of 9,800 units available to just below 4000 units. Two things are happening. First, homes are moving again, as I discussed a minute ago. Second, builders aren’t flushing the market with new builds, so we’re not piling on additional inventory. This is all working together to create a better environment for builders in the coming months.

We saw housing prices increase in April, which hasn’t happened for a long time. In May it dropped back down, driven heavily low-cost foreclosed properties or buyer sale properties. The sale price average is about $100,000 lower than at peak in 2007. However, as we look at the properties in Brevard that are near or on water, the market stabilized back in late 2008 and January 2009. The increase we’re seeing is because people are buying waterfront properties that they couldn’t afford before.

In all, the market is vibrant and brisk for sale, but price appreciation coupled with interest rates under 6% will be the two things necessary for builders to be able to grow their businesses again.

HI: What external factors do you track as your building your plan for 2010 and beyond?

DW: All builders should look at the industry or industries that support the areas in which they build. For example, I keep my eye on the NASA program. If NASA doesn’t continue the space program past 2010, that will greatly affect the area from a housing and inventory area.

HI: As a builder and developer, where do you get your information and what sources do you find credible?

DW: The main source for sales movement is the MLS (Multiple Listing System), but it’s not a perfect system. In addition, I track the Case-Shilling index, but typically don’t use national media to perform my industry analysis due to pockets of performance that they don’t report on. I have to mesh what I learn from MLS with data from my local home builders association, the national home builders association, talking to my fellow builders and local observation.

HI: What advice do you have for folks who are looking to buy right now?

DW: Potential homebuyers need to look at the whole of a home – lot price and location, the condition of the home, design, size, location and specialty items within…. And not just at “comps” (the price of similar looking homes in the area). Many comps are based on sales of foreclosures where things like appliances and fixtures are missing. To understand the true value of a home, all things must be taken into consideration. I recommend consulting with a trusted realtor and a local builder or developer to understand your fair market value.