Spring 2006 issue of Horizons

INDUSTRY

HOME BUILDERS

Building for Profits

NEWS FROM THE HOME BUILDER’S CONFERENCE IN ORLANDO

THE MARKET

The good news - after a very slow fourth quarter, traffic has improved substantially the first two months of 2006. In fact, traffic counts have soared to levels seen in 2005. The not-so- good news is many people shopping now appear to be “tire kickers” and are not “anxious” to buy. Despite the calls for ris- ing prices and potential interest rate increases, it seems many home buyers are in no hurry to commit. What does this mean for 2006? With backlogs down 18-22 percent going into the year, builders will need a strong selling season to match prior year results. The abundance of spec home inventory provides many home builders the opportunity to “catch up” quickly. Also, after a recent lull, several new projects are expected to come on the market in the next few months, which should provide some needed excitement. There does appear to be some capacity in the subcontractor market. STAY TUNED! With nearly 105,000 people in attendance, the 2006 National Home Builder Convention drew another record crowd in Orlando. The mood at the convention continued to be upbeat. Despite a recent softening in the national market, it continues to be a good time to be in the home building industry. Here are some observations: The industry just enjoyed its 15th year of strong housing demand with 2005 bringing another record-breaking year - as were the three years preceding. Even with a weak fourth quarter in new home sales, the backlog going into 2005 along with first quarter sales were sufficient to provide record numbers. The strong involvement of investors and second home pur- chasers totaling nearly 20 percent of the market were a major reason for the 2005 boom. The economy would actually be considered “red hot” last year had it not been severely weak- ened by hurricanes and rising gas prices. THE CONVENTION FROM THE ECONOMISTS

Steven Hays, CPA Felicia Malter, CPA

31 • spring 2006 issue