Fall 2009 issue of Horizons

INDUSTRY u HOME BUILDERS

from as low as 5.5 percent to prime plus some factor. Collateral and credit terms have certainly become more restrictive. • Pent-Up Demand — Buyers have been on the sidelines for several years now. There is no doubt that pent-up demand exists and eventually needs to be satisfied. The creation of new households, being generated by the booming college-age generation and aging demographics, will provide much opportunity. • Improvement in the Resale Market — The $8,000 first-time home buyer tax credit has generated more than 200,000 sales nationally through July per NAHB estimates. Although many of these homes were resale, it provided some much needed relief for people who could not sell their homes to move up to new homes. NAHB is pushing for an extension of the credit beyond its December 1 expiration date. • Competition — Only the best and strongest home builders have survived. Bad competitors, who often had little understanding of their financial operations, have been eliminated. As a result, expect margins to improve as the market recovers. • Lenders will continue to be cautious. Credit terms, often driven by regulators, will remain a concern for the intermediate term. Banks also will be challenged as other industries, especially commercial real estate, will now become victims of the troubled economy. The lack of pre-sale construction financing continues to be puzzling and must be corrected soon. • Jobs, jobs and jobs … The rising unemployment rate is a concern to all. The uncertainty of employment is a major deterrent to the biggest purchase a home buyer will make. The personal distress and psychological wear and tear cannot be overlooked. • Even the strongest companies were damaged

Business After the Crisis

By Steven W. Hays Sr., CPA

THE MARKET

However, many struggles still remain.

Home building is on the verge of “turning the corner” on what experts have noted has been the worst economic times in its industry’s history. Since July 2005, the market has been in a steep decline, operating recently as low as 25 percent of its peak capacity. Despite a struggling overall economy, there appear to be some reasons and signs of optimism: • Home Buyer Interest Rates—Long-termmortgage rates continue to be low by all standards and are projected to remain constant through the end of the year. While credit standards remain most challenging, there are still several options available in the mortgage market. • Home Builder Interest Rates — While most loans have added floors, the borrowing rate still ranges

31 u fall 2009 issue