Strong leadership will help

It’s been a year of survival for Las Vegas new home builders. That’s what incoming Southern Nevada Home Builders Association President Bill Hoover told a Four Seasons banquet room full of people attending the group’s Dec. 3 luncheon to install 2009 officers and directors and distribute awards.

“This will be the third year of adverse market conditions through which we have endured,” he told the audience. “And, as I look around the room, what I see are ‘survivors’ — true professionals, the core talent of our industry. And you should be congratulated. You have had to innovate or perish. Most (of you) have likely had to change the very structure of (your) companies in order to survive, but you have recognized what you needed to do, and you have adjusted.”

A few weeks later, the president of Las Vegas-based Pageantry Homes was in a teleconference with members of the local media, other builders and Dave Seiders, an economist for the National Association for Home Builders in Washington, D.C., calling for Congress’ help in stimulating the market. The media event was part of a national coalition called Fix Housing First (fixhousingfirst.com) that includes 600 industry organizations advocating for more government help to kick-start the home-building industry.

Because SNHBA names presidents well in advance, Hoover knew he was going to be in this spot back in 2005.

“It was not like this at that time,” he said. “The decline began in mid-2005 and then pricing fell gradually in 2007, and at lighting speed (began falling) in the wrong direction in 2008. Everyone is certainly hoping we have hit the bottom and are on the road to recovery, but it’s still an uncertain period. Clearly, nobody knows.”

Many in the organization feel he is good leader in these troubled times.

“Bill is experienced and he understands the market. His strong point is that he tells it like it is,” said Home Builders Research President Dennis Smith. “He’s dealing with it, personally, every day, just like ‘Mick’ (Michael Galatio, 2008 SNHBA and president of Las Vegas-based Desert Wind Homes). They are the same type of person, very outgoing and likable and very experienced. It’s important. No, vital that this person (in the top SNHBA post) has experience going on day to day, and knows what he has to deal with.”

One of the points Hoover has made about the local market is that new homes are undervalued, mostly due to the large inventory of foreclosed and short-sale homes.

“The value of the home is less that what the builder can build it for,” he said. “An increase in (new) home prices has to happen.”

Smith agreed. “Once we plow through them (foreclosed homes) and prices stop going down on resale homes, new home prices will stabilize. We have to see that resale segment hit bottom, it has not hit the bottom. It’s close, though.”

Smith said larger, national builders are in a better position to “weather the storm,” than smaller local operations, such as Pageantry Homes and Desert Wind Homes. Both builders have seen their sales and profit plummet this year. Hoover said his company closed the year with about 60 home sales, down from 300 in 2007.

Still, big home builders can’t sell homes at a loss forever.

“Right now the most current headache is the appraisals of new houses,” Smith said. “A home can be listed at $300,000, but the comps in the area show $240,000 and those comps are for foreclosed properties. When builders finally get a sale from a quality buyer, the appraisal comes in short. They end up selling it at less than replacement cost.”

Sounds like a buyer’s market, and it is, but with the credit crunch it’s tough for buyers to qualify for loans.

“The pendulum has swung too hard the other way and nobody can get a loan,” Hoover said. “We do have to have some reeducate (the public on mortgage lending). People can’t think they don’t need any money to walk into the house. But reeducation takes awhile.”

As groups like Fix Housing First call for enhancements to the homebuyer tax credit and provide below-market, 30-year fixed-rate mortgages for home purchases.

Hoover said the government packages will be a place to start repairing the failing housing market, however, it is not “going to solve all the problems.”

Another piece of the puzzle Hoover sees in the Las Vegas housing picture is the stricter building and zoning codes that focus on neighborhood aesthetics.

Hoover has argued that while the building quality standards of the industry should remain the same, lawmakers should take another look at the requirements to enhance the look of housing.

He said area municipalities and communities insisting on multiple elevations, front porches for every other house, garage to be offset, four-sided elevation and pop-out elements, may be limiting builders’ ability to provide affordable housing in the valley.

“Nobody wants ugly housing,” he said, “but not everyone drives a Mercedes; there are basic cars out there for people who can only afford basic transportation.

In the meantime, the industry is working to hang on to their companies and their trade group, SNHBA, which has seen their membership drop to 350 members from its peak total of 850 in 2004.

SNHBA Executive Director Irene Porter has held the post in the 55-year-old organization for 31 years. She said she hasn’t seen the market this low since a bad bout in the early 80s.

The group provides services, education and service directories for its members. One of the most important things it does for the industry is lobby the state government on behalf of home builders. This year’s Legislature will consider 180 bills that affect the industry.

“This is a very challenging time,” she said. “Our focus is to help our members in these times.”

Smith said SNHBA is important to bring home builders together to deal with the changing times.

“It is more important than ever to have the appearance of a strong organization and especially a strong organization base that can pull through this working together,” he said.

“One company cannot pull the organization through as a group. Everyone has to stick together and get their message out: Save housing first. It’s obviously the first thing to go down in the recession. If we get housing going again, people will have more confidence in new homes and resales, and this whole economy will start moving again.

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