Sustainable Land Development Today - January 2008 - (Page 13) Opportunities ■ in an Economic Downturn Watch the financial news as interest rates drop. Investments in your operation may come with a lower price tag in a buyer’s market. ■ One of the most significant opportunities is to acquire land/real estate at bargain prices. ■ When the market is bearish and business is slow, take the time to evaluate your operation. The slow period may be opportune for cost-effective adjustments or positive upgrades. ■ Take advantage of the time by becoming educated on new technologies and trends that can help you succeed. ■ Build relationships with potential business partners and allies. ■ Engage the community with your ideas so that when you are ready to act, arguments or opponents against your projects are already known and can be addressed. ing starts slipped only two percent, despite noticeable reductions in condo and town home sales. In 2007, as the single-family market steadied, analysts believe the financial figures for multi-family housing starts will show a whopping 18 percent plummet. These large housing projects, those that are able to continue to completion, will further add to the unsold inventory of condos and town homes, creating a glut of housing unit inventories in many markets. McGraw-Hill analysts predict this will put downward pressure on new starts and result in an 11 percent decline in 2008. As we predicted last year, commercial construction helped steady the overall development picture in 2007. However, the growth that continued last year will evaporate over the next year as developers, investors, and traditional funding sources become much more conservative. From all indications, there will still be a more than adequate supply of funds for builders, developers, and investors to utilize for land development projects in 2008. However, tapping into those resources are expected to be more challenging. The evaluation and due diligence performed by lenders will be more thorough and discretionary. This will more than likely include residential and commercial projects. The Federal Reserve took action in 2007 to shore up liquidity to ease credit strains. Similar moves are predicted in 2008. Mortgage interest rates are hovering at about 6.25 percent for a 30-year fixed mortgage as the calendar turns to 2008, and the expectations are that rates will likely stabilize this year. In addition, the Federal Reserve imposed tougher new restrictions in mid-December 2007 to curb unfair and deceptive home-lending practices and prevent a recurrence of the meltdown in subprime mortgages this year. The Feds approved a plan that would tighten provisions meant to protect borrowers and apply them to a far larger share of home loans - whether from banks, mortgage companies or other lenders - than under current regulations. Most economists and industry insiders agree, however, that the reigns on loan availability for consumers will also be tighter in 2008, which will reduce home buyer demand. Meanwhile, home builders with existing inventory will be challenged to move product in this environment of tighter money and slackened demand. With housing and commercial construction undergoing a continued slow down in 2008, this will not be the case in other industry segments. Due in part to increased property tax revenues caused by the booming development earlier this decade, and a refocus on the nation’s decaying infrastructure, government investment in land development is expected to undergo a significant increase in 2008. The collapse of the I-35W bridge in Minneapolis, Minn., has sparked support for transportation projects. Environmental concerns over water quality have also resulted in public awareness of stormwater and waste- water issues. This is profiled further in an adjoining article about regulatory changes impacting the industry in 2008. FMI, a management consulting and investment banking firm for the construction industry, predicts 5.8 percent growth in construction in 2008 in its annual U.S. Construction Overview. “The 2008 construction forecast is generally positive and many sectors of the construction industry will remain healthy, despite the continuing drag of the housing downturn,” said Heather Jones, construction economist for FMI’s Research Services. “In terms of trends, the aging of the population, immigration and deteriorating infrastructure will drive much of this growth. The health care, public safety, office and transportation segments will see the strongest growth in 2008.” The projection is that there will be a total $1.21 trillion in construction put in place in the new year, about nine percent of GDP. On the other hand, the McGraw-Hill Construction overall analysis predicts a two percent reduction in overall construction in 2008, to $616 billion, which follows this year’s eight percent drop. One of the factors that FMI cites for its positive forecast is the growth in green building and environmentally friendly construction activity. Its report projects $21.2 billion of all new nonresidential construction will employ the use of green-building principles—a 58 percent increase from the $13.4 billion in 2006. “This sizable growth in green construction has created a shift in percepwww.SLDTonline.com 13 http://www.SLDTonline.com
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