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Building industry fares better in Alaska than in other places

Posted: Wednesday, November 24, 2010

Recovery of the national building industry is slow, but developers and home builders are optimistic that 2011 will see growth compared to recent years.

"The home building industry is -- let me put it this way: I would say it's challenging," said Robert R. Jones, president of the National Association of Home Builders.

Jones, owner of Robert R. Jones Homes in Bloomfield Hills, Mich., and a home builder with more than 35 year experience, visited Homer earlier this month for the 30th annual Alaska State Home Building Association Convention, held Nov. 4-6 at Land's End Resort. Jones and Kenai Peninsula Builders Association president Jeff Twait sat down with the Homer News at the start of the convention to talk about national and local trends.

Last year, NAHB members built from 300,000 to 350,000 homes. That compares to 1.5 million homes a year built in the early 2000s. Jones said members hope to build 400,000 to 475,000 homes in 2011.

"We think it's going to start up," he said.

As part of his role as president, Jones visits builders in local NAHB chapters, like the Homer trip and a recent trip to San Diego, Calif.

"What I've tried to do is go in and talk to these people," Jones said of the trip to San Diego. "They spoke. They brought up comments about what bothered tem, how we could help them. Some of them are really experiencing some difficulties."

As evidence, Jones said NAHB membership has dropped from 250,000 members in 2007 to 168,000. Some members have been unable to pay dues while others have gone out of business. The building industries in the worst shape are in California, Nevada, Florida and Arizona.

In contrast, the Alaska home building market is doing OK, Twait said.

"Every time I've gone Outside, I get on the airplane and come home, I thank my lucky stars," Twait said. "We're kind of bobbing along the bottom, but it's going to be a long, slow recovery to where we need to be."

With new construction stalled, some builders have been adapting, Jones said, and turned their focus to remodeling.

"It's becoming a major thing. It continues to keep advancing," Jones said. "Any of our members that have the potential, that have the ability, they're going to go into remodeling."

On the Kenai, remodeling has become more common, too. Home owners also are using energy tax credits to replace windows and put in insulated siding, Twait said.

With the rise of the small-home movement, families are shifting away from huge McMansions. Jones and his company designers are looking at new styles and trying not to duplicate what they did before.

"It's going to be a new type of housing, smaller housing -- probably a more unique and better designed house," Jones said. "People are going to sit back and say, 'My God, we can't afford to spend that kind of money.'"

Homeowners also are looking at more energy efficient homes, Twait said.

"With the cost of energy, if you don't need a four-bedroom house, if you can survive in a three-bedroom house, people are going to start doing that," he said.

Another trend Twait sees is less building to invest. In the past, homeowners might have periodically traded up, using equity to finance a larger house, with the expectation that selling a large house before moving into a smaller, empty-nest home would support a family's retirement.

"We might get back to where we're going to build a house you're going to be in for 25 years," Twait said.

Alaska has been spared many of the economic difficulties of the Lower 48, Twait said.

"We're fortunate here. We haven't see a lot of the factors that caused the housing crisis Outside," he said. "We didn't have a lot of subprime lending, a lot of spec home building."

The oil industry and tourism also softened the blow in Alaska, Twait said. Foreclosures were about the same for 2010 as in 2000.

With the auto industry recovering, Jones said the economy in his home state of Michigan has improved.

"GM and some of the other companies are starting to do better," he said.

Wisconsin also is coming along, although Jones called the Chicago market "not so terrific."

Foreclosures in the Lower 48 have stalled the recovery, Twait said.

"What's becoming an issue is the fact you have all these foreclosed properties and distress properties. The appraisals are becoming an issue," Twait said. "The appraisal on a house is less than what a builder can do it for."

Some contractors are building in older neighborhoods, but development of subdivisions also is happening, Jones said. Recovery has been proceeding "in fits and starts," he said.

"It's interesting. It was starting to move really well in the early spring," he said of the national trends. "In August things started to slow down."

The Cold Climate Housing Research Association of Fairbanks held its annual membership meeting and board of directors meeting in conjunction with the home building convention. The three-day convention offered classes on topics such as ice dam prevention, building envelope retrofits, energy efficiency in heating and hot water systems, improving indoor air quality and insulating an energy efficient home. There also was a trade show and election of new officers.

Michael Armstrong can be reached at michael.armstrong@homernews.com.



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