Making a presentation before the Home Building Association of Richmond when the news is discouraging is tough.
I did so earlier this month along with Lloyd M. Poe of Lifestyle Builders & Developers Inc.
But at least we're beginning to see some glimmers of hope in an otherwise depressed market.
Figuring out when the homebuilding industry would rebound in past recoveries was easier than it is now.
The number of houses for sale, as well as those in the process of being built, make up the excess inventory that must be sold before homebuilding can start growing again.
The shadow inventory of foreclosed and yet-to-be foreclosed homes is impossible to measure with any accuracy. For example, the number of new houses expected to foreclose in the next year is dependent on a combination of economic factors, including changes to unemployment and interest rates.
Even the number of current foreclosed homes is difficult to measure.
Fannie Mae lists 354 foreclosed properties on its Housepath.com site as of Feb 1.
However, since they are Fannie Mae homes, none exceed the general conforming limit of a $417,000 mortgage.
The Multiple Listing Service for the Richmond metropolitan area showed 498 bank-owned homes on the market in December. These are homes that have gone through the foreclosure process and are now listed in MLS by the lender.
With a little more than 7,100 homes listed for sale in the MLS for the month of December, the area's foreclosure rate stood at 7 percent. A year ago, with 359 homes, 4.7 percent of the listings were bank-owned.
These homeowners, more importantly, suffered the stress of late payments and evictions.
Where do they now live? Many went to apartments or doubled up with family.
To homebuilders, those foreclosures represent lost market share.
In fact, Lloyd noted that as the national housing crisis intensified, bank-owned sales took market share away from builders. Through the third quarter in most markets, banks sold 2.5 new or almost new homes for every one new home sold by a builder and at a much lower price.
The national homebuilding industry remains depressed. Housing starts fell 79 percent from their peak in January 2006 to the trough in April 2009. The number of starts in December is up only 10 percent since April 2009.
The Richmond metro area is treading with the nation to some degree. Residential building permits in the Richmond region dropped 76 percent from the peak to the bottom, but the number of permits issued in December was up by 15 percent over April 2009.
This prolonged contraction in home sales has taken its toll on residential builders.
In the Richmond metro area during the first quarter of 2008, more than 1,200 firms identified residential building as their primary business. By the second quarter of 2010, those firms dwindled to 927.
But there are some glimmers of hope.
Initial unemployment claims for construction workers in the Richmond metro area dropped to 740 people in December 2010 from 1,107 in the same month a year earlier.
As a leading indicator, this suggests homebuilding is showing signs of picking up.
Although it may not be much solace to homebuilders in Richmond, this region has fared much better than others across the nation.
Consider Miami-Dade County, where Fannie Mae currently lists 1,297 foreclosures, or more than three times as many as in Richmond.
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