Home builders expect rough ride this year

The recession may be over but not for the home-building industry.

"The economic recovery in the U.S. is taking hold but, in your industry, things will remain rough this year," economist Christine Chmura said Thursday at the annual forecast seminar presented by the Home Building Association of Richmond.

"Foreclosures are hampering your sales," said Chmura, president of Chmura Economics & Analytics in Richmond.

Billed as the "Survivor's Playbook," the event at the Holiday Inn Select in Chesterfield County drew 360 people in the building and related industries.

Chmura and Lloyd M. Poe of Lifestyle Builders & Developers Inc. have headlined the event for years.

"It's all about surviving, what we have to do to survive, and how we get out of this mess," Poe said.

He noted that bank-owned homes outsold new homes in 2010 nationally and locally.

Nationwide, banks sold 2.5 houses for every one house sold by builders. New home sales accounted for 11 percent of all house sales, while distressed house sales made up 28 percent, Poe said.

"Who would have thought that one of our biggest competitors would be banks and they would also be driving down prices?"

Some foreclosures on the market are new homes that sold three years ago and come with fully landscaped yards, drapes and the whole works, Poe said.

Builders can reduce costs only so much before they cut into the reasons people buy new homes, he said. They can compete with foreclosures on design, warranties and clean titles.

The latest new-home trends include separate and larger laundry rooms, Poe said. The mud room has evolved into a drop zone with charging locations for electronic gadgets. Don't forget the charging station for the hybrid or electric car.

"The home office is now what used to be called a living room." The outdoor grilling area was put on hold to cut costs, but it's still important. The dining room has been replaced with a large breakfast area close to the kitchen.

And there could be a market for the baby boomer's McMansion in the suburbs, Poe said. Many houses are being used by multiple generations, from aging parents to boomerang children who come back to live at home — and they need space.

The good news is the existing inventory of all homes on the market has dropped to eight months, meaning it would take that long to sell all the houses on the market at the current sales rate. "We need to get to six months," he said.

Poe said the home-building industry is at the bottom. But once housing recovers, expect to see prices for lumber and drywall to go through the roof, he said.

Chmura's data showed that nearly 500 listings, or 7 percent of the properties for sale in the Richmond area in December, were bank-owned properties or repossessions.

Henrico and Chesterfield counties were among the top 10 localities with the most foreclosures in the state in December, with 180 and 148 foreclosures, respectively. Richmond had 107 foreclosures in December, and Hanover County recorded 25.

Fairfax County led the state with 438 foreclosures.

"Not until 2012 and 2013 do things start to feel good — and foreclosures are the biggest part of that story," Chmura said.

"Consumers still don't feel good about the economy," she said. But they are optimistic that it will improve in the next six months.

Chmura noted that Virginia created 36,900 jobs in December but that the state needs to recover 197,000 jobs to get back to pre-recession levels.

"It could be a year before we see those jobs come back, which is much better than the nation," she said.

At the current rate of job growth, the nation will not recover all of the lost jobs until late 2016, she said.

The Richmond area lost 45,000 jobs in the recession. "It will take four years to get back to the peak," she said.

Housing permits and starts are starting to inch up nationally and locally. Construction layoffs in the Richmond area are coming down.

Still, she said, "clearly, your industry has suffered."

chazard@timesdispatch.com

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