Builder - September 2008 - (Page 99) SEIDERS’ECONOMY The Oil Factor Oil prices are affecting consumer spending, policy decisions—and home building. G lobal oil prices have virtually exploded since early last year. Despite periodic improvements, fundamental supply and demand factors are bound to keep oil prices at historically high levels for the foreseeable future. Projected growth of the global economy, including outsized growth in developing areas such as China and India, ensures a strong upward and public transportation, and increases in gasoline taxes are not out of the question. Growing concern about global warming and the environment naturally support such shifts in the policy balance. In July, the NAHB surveyed about 400 single-family builders across the country to monitor the impact of higher energy prices on home sales. Half the respondents to the survey said that higher energy costs were taking a toll on their home sales, 14 percent described the negative impacts as “substantial,” and only 5 percent talked about positive effects on their sales. The patterns of response were reasonably trend in demand that figures to overwhelm feasible increases in global supply. The shock of record-high oil prices has already caused turmoil and restructuring in parts of the U.S. economy. The domestic auto industry obviously has been hit the hardest as imports of energy-efficient passenger cars have risen while sales and domestic production of gas-guzzling SUVs and pickups has shifted downward. Furthermore, the run-up in transportation costs has prompted a wide range of domestic goods–producing corporations to reassess the economics of offshoring production of goods destined for sale in the U.S. The dramatic changes in energy markets are also bound to have major impacts on the U.S. housing market. High energy costs inevitably will influence where people want to live and the kinds of houses they want to inhabit. In this regard, the pattern of producing large single-family homes at the outer edges of major metropolitan areas may very well be seriously challenged. It’s up to the U.S. housing industry to adjust to the new realities. The winners will be those who can read the energy market tea leaves as well as the impact on consumer preferences in housing. Builders will also need to stay on top of inevitable changes in government policies toward land use as well as toward alternative forms of transportation. There’s bound to be some change in the balance of public support toward road building consistent across regions of the country and size classes of builders. Close to half the builders reporting adverse impacts on home sales said they had dropped house prices in order to bolster sales, and a similar percentage said they had increased non-price sales incentives such as paying closing costs and financing points for their buyers. Attempts to counter the downward pressures on sales were most common among larger builders (producing at least 100 units per year) and builders in the West. Half of all builders in our July survey said they are changing plans for the future because of the substantial increase in energy costs. The types of planned adjustments ranked as follows: Build smaller homes in the suburbs, build smaller homes closer to cities, build high-density homes close to cities, build townhomes close to cities, build high-density homes in the suburbs, build homes near public transportation, and build more homes in cities. Three-fourths of the larger builders said high energy costs have prompted changes in their plans for the future. The ranking of adjustments was similar to rankings for the entire sample, with higher proportions of builders in every category and particularly strong readings showing up in two areas: building smaller homes closer to cities and building homes near public transportation. Many builders noted that they are focusing hard on energy efficiency. There were a lot of references to Energy Star certification as well as to the NAHB’s National Green Building Program. B David F. Seiders Chief Economist NAHB Washington, D.C. email: dseiders@nahb.com FOR MORE STORIES ABOUT HOUSING DATA AND THE ECONOMY, GO TO WWW.BUILDERONLINE.COM/BUSINESS/HOUSING-DATA. W W W.BUILDERONLINE.COM sep t e m ber 2 0 08 B U I LD E R ■ 99 http://WWW.BUILDERONLINE.COM/BUSINESS/HOUSING-DATA http://WWW.BUILDERONLINE.COM
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