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INDUSTRY NEWSNew-Home Sales Drop 8.3 Percent in August Following Turmoil In Mortgage Market Normal View Turmoil in the mortgage finance system in August led to an 8.3 percent drop in sales of new single-family homes for the month, according to figures released by the U.S. Commerce Department. The seasonally adjusted annual rate of 795,000 units was 21.2 percent below a year earlier. The median price of news homes sold in August was $225,700, 7.5 percent below a year earlier, the Commerce Department reported. The inventory of new homes for sale edged down 1.5 percent to 529,000 in August as builders slowed construction and worked to sell off their inventory. But the equivalent months' supply at the August sales pace increased to 8.2 months, up from 7.6 months in July, because of the slower August sales pace. Completed homes for sale were 34 percent of the inventory, while units still under construction represented almost 50 percent of the inventory and units for-sale that were permitted but not yet started represented 16 percent of the inventory level. The median length of time that completed homes were on the market was 5.9 months in August, down slightly from 6.0 months in July. Regionally, new-home sales in August were up 42.3 percent in the Northeast and 20.5 percent in the Midwest . Sales were down by 14.7 percent in the South and 20.8 percent in the West. All four regions reported a sales pace well below a year earlier. More information regarding housing statistics is also available at www.housingeconomics.com. Read the complete article Builders Applaud House Approval of FHA Reform Bill Normal View The National Association of Home Builders (NAHB) today applauded the House for passing legislation to implement reforms to the Federal Housing Administration's single-family mortgage insurance programs that would enable more working families to become home owners. H.R. 1852, the Expanding American Homeownership Act of 2007, was approved by a strong bipartisan margin of 348 to 72. In recent years, the FHA has been unable to respond fully to borrowers' needs because of statutory constraints, and the ongoing turmoil in the subprime market has greatly increased the urgency for enactment of FHA revitalization legislation, said Catalde, who noted that NAHB designated passage of H.R. 1852 as a “key vote” because of its importance to the housing industry. FHA's share of the market fell from 18 percent in 1990 to less than 4 percent in 2006. FHA's descent steepened in the latter stages of that period as competing subprime mortgage loan programs lured many borrowers into less advantageous mortgages. Lawmakers approved by voice vote an NAHB-supported amendment offered by Reps. Barney Frank (D-Mass.), Gary Miller (R-Calif.) and Dennis Cardoza (D-Calif.) that would enable more creditworthy borrowers to purchase an FHA-insured home in many high-cost metropolitan markets. Currently, the FHA loan limit is too low to enable many potential home buyers to utilize the FHA program in areas where housing costs run high. To give the FHA the tools it needs to deliver the range of mortgage products it needs to meet its mission objectives more effectively, H.R. 1852 would also:
The House-passed bill must now be reconciled with legislation pending in the Senate Banking Committee, which is expected to consider its FHA reform bill tomorrow. Read the complete article NAW Takes Legal Action in Ohio Asbestos Product Liability Case The National Association of Wholesaler-Distributors (NAW) is one of nine organizations that today joined in filing an amicus curiae (“friend of the court”) brief in the Supreme Court of Ohio in a case focused on the retroactive application of the doctrine of strict liability (i.e., liability based on the condition of a manufacturer's product rather than the conduct of the defendant) in product liability actions brought against non-manufacturer product sellers (e.g., wholesalers, distributors and retailers). According to NAW President Dirk Van Dongen, the association views DiCenzo as a “major, even seminal case that carries with it profound legal and economic ramifications for wholesaler-distributors in Ohio and across the nation.” In their brief, amici support appellants' effort to overturn a State appeals court's June 28th decision in DiCenzo v. A-Best Products, Co., Inc. et al. (Court of Appeals Case No. CA 06-088583). In DiCenzo the Appeals Court held that strict liability in product seller liability actions, first recognized in Ohio in 1977 in Temple v. Wean United, Inc., may be applied retroactively back to 1966, when the Ohio Supreme Court's decision in Lonzrick v. Republic Steel Corp. was issued. In Lonzrick , Ohio 's high court first “imposed a type of limited strict liability on manufacturers, but it did not address the liability of sellers”. The amicus brief contends that the appellate court erred in the application of strict product liability to non-manufacturer suppliers to pre-1977 sales, complaining that the lower court's decision is inconsistent with Ohio law before 1977 and will have significant negative impacts on smaller and medium size Ohio businesses unless it is overturned.” “In 1966, the Lonzrick Court imposed a form of strict liability on manufacturers … did not go so far as to adopt the Restatement (Second) Sec. 402 A (1965)…The Court was not focused on the liability of non-manufacturer suppliers.” Tracing the development of strict product liability law in Ohio , amici point out “It was not until years later, in Temple , that this Court formally adopted the Restatement (Second) of Torts Sec. 402A. Even after Temple, however, there continued to be confusion…Thus, a supplier would not have been on notice prior to Temple in 1977 that it could be held strictly liable for failing to warn purchasers of the hazards…In fact, it was not until 1985 that this Court explicitly recognized the application of strict liability to product sellers.” The DiCenzo case revolves around workplace exposure to asbestos. In their brief, NAW and its fellow amici outline the nature and dimension of the asbestos litigation crisis, pointing out that “the net has spread from the asbestos makers to companies far removed from the scene of any putative wrongdoing…Nontraditional defendants now account for over half of asbestos expenditures”. The brief makes a chilling prediction “(i)f the appellate court's decision is permitted to stand … non-manufacturer suppliers would be subject to strict liability in many (if not most) of the 35,000 or more asbestos personal injury cases pending in Ohio state courts. It is virtually certain that such massive liability would cause some Ohio businesses to join the growing list of companies that have been forced to seek bankruptcy court protection from asbestos-related liabilities...The devastating consequences of the appellate court's decision will not be limited to asbestos cases. If the decision is permitted to stand, strict liability claims will be brought against suppliers of any pre-1977 products that may have contributed to a latent injury.” NAW and its fellow amici conclude, “Countless Ohio businesses would face liability beyond any amount they reasonably could have anticipated prior to 1977. This would be manifestly unjust.” Read the complete article NAHB Says Fed Rate Cut is Good News for Home Buyers Normal View Today's decisive action by the Federal Reserve to ease its monetary policies is good news for the economy and prospective home buyers seeking a piece of the American dream, according to the National Association of Home Builders (NAHB). In an economy that continues to grow, create jobs and increase household income, the Federal Reserve's move to lower borrowing costs is just one more reason to consider buying a home in the current economic climate, Catalde said. In today's buyer's market, there is an abundance of new and existing homes on the market, creating a wider variety of choice for home shoppers, said Catalde. “As a result, builders are offering a range of concessions, from discounted financing packages to value-added incentives.” The Fed's rate cuts will help the economy to gain strength, said Catalde, and also help the housing market begin to recover next year, which bodes well for future house price appreciation. Read the complete article Builders See Hispanics as Key to Houston Market's Future With former Secretary of Housing and Urban Development Henry Cisneros' award-winning book, “Casa y Comunidad,” as a focal point, members of the home building community in Houston recently assembled to discuss the “critical importance” of the Hispanic population to the future of that market's housing industry. Led by Dr. Oscar Gonzales, managing partner of the Gonzales Group, with Cisneros in attendance via teleconference, participants gathered for three open discussions of the distinct cultural differences of Hispanics and the housing trends, designs and services most likely to resonate with them. Everything and the Kitchen Sink Published by NAHB, the book notes that homes designed for Latino families should have more bedrooms to accommodate larger families and floor plans suited to the needs of more than one generation living under the same roof, with the kitchen of particular importance. In addition to being centrally located and large, kitchens geared to the Hispanic market should include deep sinks, where dishes can stand longer, and a range with an open gas flame, which is necessary for preparing traditional recipes, Cisneros says. An extra three-quarters bathroom — including a sink, shower and toilet, but no tub – will also be sought by Hispanic buyers, he says. Also, “homes should have a green element, because Hispanic families like a garden where they can grow some of their own vegetables. That means extending a water line to the outside for irrigation and a gas line for an outdoor grill.” Young and Native-Born Reviewing current Hispanic demographics and growth trends, Gonzales said that a majority of the country's Latinos are native-born U.S. citizens. Almost half are under 25, the age at which the prime home-buying years begin. Looking at prospective home buyers in the Hispanic market, Gonzales said that 11 percent are in the process of buying a home, 44 percent are planning to buy in one to five years and 29 percent aspire to become home owners, but not in the next five years. Third-generation Hispanics — those who are fully assimilated and fluent, at various levels, in English — are easily swayed by their parents and grandparents. Looking at 2010 and Beyond For builders and others who want to do business in Houston 's Hispanic market, Gonzales emphasized the importance of staying connected with people in the know and joining local and national Hispanic association groups. Housing industry professionals participating in the discussions said that their companies have been moving aggressively to position themselves to sell to the Hispanic market. Online in Three Languages Houston 's Harris County , where Hispanics outnumber Caucasians, has been recognized as one of the country's friendliest markets for Hispanics because of its job and housing opportunities. It is also prime territory for CasaNuevaGuide.com, the first online new home trilingual real estate guide to inspire, motivate and teach shoppers how to purchase a home. Written in English, Spanish and Vietnamese, the site promotes the benefits of homeownership, explains financing, offers helpful resources and assistance programs and provides a full listing of all new home builders and communities in Texas. Read the complete article Diesel Rises 1.6¢ to $3.048, Gas Dips 2.4¢ to $2.788 Diesel fuel's national average pump price rose 1.6 cents to $3.048 a gallon, the Department of Energy said on Monday, Oct. 1. The increase followed a 6.8-cent jump last week that was the biggest in more than a year, according to DOE figures. Gasoline, meanwhile, fell 2.4 cents to $2.788 a gallon, erasing most of last week's 2.5-cent gain, DOE said. Monday's gasoline price was 47.8 cents over the same week last year, DOE said. The latest diesel price left trucking's main fuel 50.2 cents higher than the same week last year. Diesel's all-time record was $3.157 a gallon, set Oct. 24, 2005, following Hurricanes Katrina and Rita. Each week, DOE surveys about 350 diesel filling stations to compile a national snapshot average price. – From Transport Topics NAHB's Outlook Shows Solid Growth in Output and Employment With Inflation Under Control Economic growth has rebounded nicely from the first-quarter lull. However, GDP growth is slackening on a trend basis and the government has revised downward the “speed limit” for the U.S. economy. NAHB’s baseline forecast now shows slightly below-trend GDP growth (through 2009), and there’s no recession in that forecast. The labor market is losing some forward momentum as GDP growth comes off earlier highs. We expect payroll employment growth to taper down further as GDP growth runs slightly below trend, and the unemployment rate should gravitate upward in the process. Even so, labor market conditions should remain quite solid at the same time that unit labor costs recede – contributing to a reasonably benign inflation environment. Core consumer price inflation has been receding in recent months, largely because of deceleration in the large imputed homeowners’ equivalent rent component, and core inflation measures have retreated to the upper ends of the Federal Reserve’s apparent tolerance zones. We expect further deceleration during the forecast period, completing our admittedly “Goldilocks” macroeconomic outlook (not too hot, not too cold). -From NAHB's Eye on the Economy newsletter. But Turbulent Financial Markets Pose Real Threats to the Economy in the Near Term Financial market conditions currently pose considerable downside risks to our “Goldilocks” economic outlook. Financial markets turned turbulent in the latter days of July and the first half of August, kicked off by fresh revelations of credit quality problems in U.S. residential mortgage and mortgage-backed securities markets, and the infection quickly spread to a wide range of markets and to other parts of the globe amidst a worldwide flight toward credit quality. The drive toward quality froze up various securities markets around the world as risk became difficult (or impossible) to price, particularly on mortgage-backed securities without government backing, causing credit demands to shift toward depository institutions. Interbank loan rates shot up in the process, prompting the Federal Reserve and some foreign central banks (including the European Central Bank) to inject large amounts of reserves into banking systems in order to maintain established policy rate targets. -From NAHB's Eye on the Economy newsletter. The Interest Rate Structure Reflects Threats to the Economic Expansion and the Flight to Quality The recent central bank actions successfully restored order to money markets, at least temporarily, and neither the Fed nor the foreign central banks have reduced their policy rate targets. The Federal Reserve actually reaffirmed the 5.25% federal funds rate target at the August 7 FOMC meeting, although the FOMC statement recognized the turmoil in financial markets and moved toward a balanced risk assessment. NAHB’s forecast now shows a quarter-point rate cut at the October 31 FOMC meeting, and an earlier cut is not out of the question. The stunning flight to quality in financial markets drove Treasury securities rates downward and drove rates on lower-quality debt instruments upward. The net impacts on home mortgage rates differed considerably across market components: rates fell slightly in the FHA/VA/Ginnie Mae market, rose modestly in the prime conventional conforming market (served by Fannie Mae and Freddie Mac) and rose considerably in the nonprime (subprime and Alt-A) and jumbo loan markets. We expect the adjustments to risk spreads to prevail for some time. -From NAHB's Eye on the Economy newsletter. Home-Buyer Demand Still Is Trailing Downward as Affordability Remains Depressed Home-buyer demand has continued to trail downward, and the deterioration of mortgage market conditions has added to the downward momentum. NAHB’s proprietary survey of large home builders shows deterioration of gross and net home sales in July, along with a rise in cancellation rates at the big companies. Furthermore, NAHB’s broad-based single-family Housing Market Index deteriorated further in August and now stands only slightly above the low recorded during the 1990-1991 economic recession. National house price appreciation has slowed dramatically from the record highs in 2005, increasing numbers of local markets have been recording absolute declines during the past year, and absolute declines now are being recorded at the national level. But the price corrections to date pale in comparison to the earlier accumulation of rapid price increases, and measures of housing affordability still are hanging around the lows of the early 1990s. Although home prices are destined to decline further, prices promise to remain “sticky” on the downside – stretching out the inevitable downward adjustment to sales activity. -From NAHB's Eye on the Economy newsletter. Housing Vacancies Are Near Record Highs and Homeownership Is Slipping Second-quarter data on housing vacancies show that the supply overhang remains quite heavy in both the for-sale and for-rent components of the market. The overhang is particularly heavy in the for-sale market, reflecting large increases in both single-family and multifamily (condo) markets since mid-2005. This overbuilt condition is a legacy of outsized purchases by investors/speculators during the boom period and subsequent unloading of units onto the market as house price prospects have deteriorated. The U.S. homeownership rate has been eroding for three years and the rentership rate has shown equivalent gains. Persistent affordability problems facing prospective home buyers, combined with relatively friendly conditions in the rental market, will put further downward pressure on the homeownership rate – and a rising wave of mortgage foreclosures will contribute to the own-to-rent dynamic. The homeownership rate is sure to rebound on a longer-term basis, however, and new records will be achieved down the line. -From NAHB's Eye on the Economy newsletter. U.S. Green Building Council Hits 10,000 Member Mark Milestone Indicates a Shift in the Green Building Movement The U.S. Green Building Council (USGBC) today welcomed its 10,000th member company. The achievement marks a turning point in the building design and construction market. “This achievement is a significant milestone in the growth and development of the green building movement because it demonstrates a broad conviction that our built environment can improve the health of our planet, our economy, and our communities,” said Rick Fedrizzi, President, CEO and Founding Chair of the organization. “At all levels, our members – their vision for a sustainable built environment, their knowledge of building science and practice, and their commitment to results – are why the green building movement has grown exponentially in the last decade and a half,” said Rick Fedrizzi, President, CEO & Founding Chair. “Thousands of volunteers have contributed tens of thousands of hours to the development of the LEED® green building rating system; chapter leaders all over the country are making transformation happen at the local level; and all of our members are raising the bar for their colleagues throughout the industry.” Economic Growth Has Rebounded From the First-Quarter Lull Growth of real GDP for the first quarter of the year now stands at an annual rate of 0.7 percent, according to the “final” estimate released by the Commerce Department on June 28. Residential fixed investment contracted at a 15.8 percent rate and subtracted 0.89 percentage point from GDP growth. Large negative contributions also came from net exports and business inventory investment. These drags held overall GDP growth to the slowest pace in more than four years and prompted a lot of speculation about near-term recession in the U.S. economy. The Labor Market Still Is Generating Good Job Growth and Low Unemployment The labor market performed well during the first half of the year despite the first-quarter downshift in GDP growth. Payroll job growth averaged 145,000 per month (with recent revisions), below the average pace in 2006 (189,000) but still quite respectable. The unemployment rate averaged 4.5 percent in the first half of 2007, presumably the low range for this cycle. Core Inflation Is Gradually Receding, Thanks Largely to Housing Persistently tight labor market conditions have been putting persistent upward pressures on average hourly earnings, and a cyclical slowdown in productivity growth (output per hour) has contributed to upward pressures on unit labor costs. Despite these pressures, and despite renewed upward pressures on energy prices, measures of core consumer price inflation (excluding food and direct energy) have been remarkably well behaved in recent months. Indeed, the core PCE price index slipped to a year-over-year rate of 1.9 percent in May and the core CPI showed an advance of 2.2 percent for that month – readings that are within the Fed's apparent “comfort zones” for these measures. Furthermore, the core CPI posted another relatively benign year-over-year gain in June (2.2 percent), and the technically superior chain-core CPI trailed down to a 1.8 percent pace. The Fed Holds Steady and Fusses About Inflation Pressures As expected, the Federal Reserve held monetary policy steady at the June 28 FOMC meeting, maintaining the 5.25 percent federal funds rate target. The FOMC statement referred to “moderate” economic growth in the first half and noted that core inflation had been improving “modestly.” However, the Fed did not declare victory over inflation, pointing out that the high level of resource utilization (i.e., the low unemployment rate) has the potential to sustain inflationary pressures down the line. Mortgage Credit Standard Tightening May Be Near an End The worst of the tightening of credit standards for home mortgages resulting from the emergence of problems in the subprime market early this year may be drawing to an end, NAHB Chief Economist David Seiders told reporters in a July 25 teleconference on the mid-year outlook for the housing industry. Adjustable-rate mortgages have plummeted to about a 10 percent share of the loans being used to purchase homes, down from about 40 percent at the height of the housing boom, he said. And considering the disruption being caused by such nontraditional loans as interest-only and option ARMs, this is “a healthy long-term development” for the marketplace, he said. After a breakdown of mortgage lending standards in recent years, “maybe the credit pendulum in home mortgage lending has swung back most of the way,” and lending standards aren't likely to be tightened much further, Seiders said. “We've had one heck of a lot of credit standard tightening,” he added, and moving forward “solid” fixed-rate mortgages are likely to be the dominant vehicle for financing home purchases. Builders Abandon Business as Usual to Weather Downturn A new study by the NAHB Research Center identifies how home builders have been changing their operations to deal with the current downturn in the housing industry and suggests ways that building product manufacturers can help them bolster sales and work down unsold inventories. Presented on July 13 at the Southeast Building Conference in Orlando , the survey-based study found home builders doing whatever they can to weather a slowdown that because of problems with subprime mortgages began to noticeably worsen early this year just as the market was beginning to show some positive signs. “Anything manufacturers can do to help builders sell homes is most welcome,” said Ed Hudson, director of the Research Center 's Marketing Research Division. The custom builders who were among the 320 companies participating in the study were more likely to be looking to manufacturers for enhancing their choice of products and materials in the construction process, while help on sales was more what production builders were looking for, he said. Fed Chairman Addresses the Housing Market, Subprime Lending On June 5, Federal Reserve Chairman Ben Bernanke addressed via satellite the 2007 International Monetary Conference in Cape Town, South Africa. Bernanke's choice of topics in his address accentuates the importance of the U.S. housing market in the global economy as well as the importance of the subprime mortgage issue in global financial markets. His comments on the current condition of the U.S. housing market and the near-term housing outlook were a bit more sobering that other recent Fed statements on housing. Builders Are Facing Reluctant Home Buyers The subprime-related tightening of mortgage lending standards certainly has pushed large numbers of prospective home buyers back to the sidelines, and the timing of their return to the market is highly uncertain. There also has been widespread reluctance among consumers who have good access to credit to go ahead with home purchases at a time when affordability remains well below conditions prevailing prior to the 2004 to 2005 housing boom. There are plenty of new and existing homes to pick from and home prices are weakening in many areas. Housing Will Be a Drag on the Economy Throughout 2007 NAHB's current forecast shows a slight upturn in sales of new and existing homes by the fourth quarter of this year. The forecast also shows a modest increase in total housing starts by the first quarter of 2008, following a resounding 36% decline from the cyclical peak in the first quarter of 2006. Our projections for home sales, housing starts, manufactured home shipments and residential remodeling result in stabilization of real Residential Fixed Investment (the housing production component of GDP) by the end of this year and lead to modest positive growth by the first quarter of 2008. The Housing Upswing May Be a Long Climb Back to Trend The projected beginnings of the housing recovery in the early part of 2008 represent small steps back toward our estimate of the demographically based trend of housing production — close to 2 million new housing units per year, including about 1.85 million conventional housing starts. After all, the inventory overhang will be relatively heavy for some time and the swing of the mortgage credit pendulum still will be weighing on effective demand, keeping the initial stages of recovery rather modest. Builders Are Pulling Out the Stops In May, NAHB conducted a nationwide survey of single-family builders to track the kinds of incentives being offered to bolster sales and limit cancellations, and we also solicited builders' assessments of the degree of success being achieved. On the home price front, we found that 52% of builders had reduced prices during the previous month. For those cutting prices, the average reduction was 7% — similar to the magnitudes revealed by a series of surveys conducted by NAHB since mid-2006. Nearly three-fourths of builders said their price cuts were at least somewhat effective in bolstering sales or limiting cancellations. Subprime Mess Threatens Home Sales April 2, 2007 - The dramatic housing market correction has been a major factor in the evolving macroeconomic picture since early last year - exerting strong drags on growth of both real GDP and payroll employment while putting strong upward pressure on measures of core consumer price inflation through the imputed "owners' equivalent rent" components. The Fed Changes Its Tune on Housing - Again As widely expected, the Fed held monetary policy steady at the March 20-21 meeting of the Federal Open Market Committee (FOMC). The FOMC statement recognized recent mixed signals on the economy and noted that "the adjustment in the housing sector is ongoing" - in sharp contrast to the "stabilization" judgment expressed in the Jan. 31 FOMC statement. While the March statement continued to highlight inflation risks, it's clear that the Fed's confidence in the ongoing economic expansion has eroded and our central bank now apparently views the risks to growth and inflation as essentially balanced. In this regard, we're still expecting a quarter-point rate cut at mid-year, assuming that core inflation recedes about as expected by the Fed, and more cuts may be in the cards. Green Building to Skyrocket by 2010 to Half of New Homes More than 1,000 housing industry professionals in St. Louis last week to attend the ninth annual NAHB Green Building Conference heard that sustainable building products and techniques are advancing quickly into the mainstream and that NAHB is moving aggressively to bring the movement to national prominence. Based on a survey of NAHB home builders conducted last year by McGraw-Hill Construction , between 40% and 50% of the homes built in 2010 are expected to be green, containing at least three of five green building elements. That represents a major upsurge of activity in the green market. Last year, according to McGraw-Hill estimates, an estimated 2% — or $7.4 billion — of the residential construction market was green. “It is interesting that people are really starting to commit to building green homes, moving away from just adding energy-efficient appliances,” said Harvey M. Bernstein, McGraw-Hill Construction's vice president of industry analytics, alliances and strategic initiatives. “Though it's still a small number, builders are already getting it when it comes to the value of green homes, and it appears home owners are too.” Fed Chief Sees Uncertainty in Near-Term Housing Outlook Mortgage interest rates remained low last week as housing analysts pondered mixed-signals about the direction of the industry and Federal Reserve Board Chairman Ben S. Bernanke warned the Joint Economic Committee of the Congress of the possibility that problems with subprime loans could make the current market correction worse than expected. “The near-term prospects for the housing market remain uncertain,” Bernanke testified. “Sales of new and existing homes were about flat, on balance, during the second half of the year. So far this year, sales of existing homes have held up, as have other indicators of demand such as mortgage applications for home purchase, and mortgage rates remain relatively low.” However, he noted that new-home sales have declined and the slowdown in production has still not worked down the unsold inventory to levels that will support a resurgence in activity. Housing's Impact on Jobs Seen Spreading Falling home prices in some markets and rising defaults on subprime mortgages have raised concerns that housing problems may spread to mainstream lenders, hurt consumer confidence and affect the broader economy. Job cuts in real estate and construction rose in the first two months of the year compared with a year ago, according to the outplacement firm Challenger, Gray & Christmas. U.S. construction companies announced 10,000 job cuts in January and February, more than in all of 2005 and 2006 combined. About 45,000 jobs were lost last month among specialty contractors, according to the Bureau of Labor Statistics, which attributed part of the drop to winter weather. Bernard Markstein, NAHB's director of forecasting, said that layoffs don't immediately follow slumps, since many builders try to hold on to their skilled workers, or shift them to nonresidential sites, where prospects are brighter. The full impact hasn't been seen yet, he said. “We expect further declines in employment within the construction industry because nonresidential construction and remodeling is not going to pick up all of the reduction.” ( www.reuters.com ) Reuters (3.30.07); Nick Zieminski All-New Wholesale Distribution Industry Trends Report Released WASHINGTON DC, March 7, 2007 - Today, the NAW Institute for Distribution Excellence and Pembroke Consulting released their flagship industry report titled Facing the Forces of Change ® : Lead the Way in the Supply Chain . The report is available for purchase at www.naw.org/ftf07 or by calling 202.872.0885. Facing the Forces of Change ® : Lead the Way in the Supply Chain draws upon a broad set of data, including in-depth interviews with senior distribution executives, manufacturers, customers, analysts, professors, and association executives. The report also includes survey data on nearly 1,300 wholesale distribution and manufacturing companies. “The executives running the best wholesale distribution companies recognize that innovation is the cornerstone of their success,” said Pembroke Consulting President Adam J. Fein , Ph.D., who authored the new report. “Our study outlines strategies and tactics that will help executives lead the way in their industry's supply chain.” The study examines four key business-to-business trends: private label brands, demand-driven channels, new distribution profit models, and Internet trends for business customers. The new report also includes never-before-published data on industry segmentation, emerging trends affecting the supply chain, sales management, supply chain technology forecasts, and much more. The National Association of Wholesale-Distributors Creates NAW Institute for Distribution Excellence February 12, 2007 , Washington , DC — At last month's NAW Executive Summit, it was announced that the work of the Distribution Research and Education Foundation (DREF) is now being carried out by a new organization: the NAW Institute for Distribution Excellence . “The NAW Institute Board of Directors decided to make this name change to more clearly identify our research activities with NAW, which our market research showed as having very high and positive brand awareness among wholesaler-distributors and other interested parties,” said Byron Potter, Chairman of the NAW Institute for Distribution Excellence and President and CEO of Dallas Wholesale Builders Supply Inc. “We've created the NAW Institute to more clearly focus on the intended outcome of our research — excellence in distribution.” The NAW Institute combines the research-focused work of DREF with the output of the NAW Publishing Program. The result will be a single, focused unit that provides the highest level of industry-wide research and education to complement and supplement the educational efforts of NAW's member associations. December Rise in Home Sales Bodes Well for 2007 Upturn Heading into 2007, housing demand showed further signs of stabilizing, with sales of new single-family homes rising 4.8% to a seasonally adjusted annual rate of 1.12 million units in December, according to figures released on Jan. 26 by the U.S. Commerce Department. "The December housing report squares with our most recent builder surveys, which show that traffic of prospective buyers is up and consumers are responding favorably to price adjustments and widespread sales incentives," said NAHB President David Pressly. On an annual basis, 1.061 million new home sales were registered in 2006. While this represents a 17.3% drop from an all-time high in 2005, the sharpest percentage decline since 1990, the actual sales level was about the same as in 2003, just as the industry was entering into the unsustainable boom of 2004 and 2005. Housing Production Should Bottom Out Soon Growth of U.S. economic output (real Gross Domestic Product) has slowed to some degree in recent quarters as the housing production component (residential fixed investment) has contracted substantially. However, the housing contraction has not generated serious spillover effects in other sectors of the economy (including personal consumption expenditures), and strengthening activity in some sectors, including nonresidential construction and foreign trade, has helped offset the negatives from housing. As a result, the economy has not skated close to recession and the probability of an economic downturn in 2007 is not high. Economic resilience also is evident in the labor market. The housing downswing certainly caused job losses in residential construction during most of 2006, and further losses are virtually inevitable during the first half of this year. However, overall job growth was well maintained in 2006 and we’re expecting a solid performance in 2007 as well. The unemployment rate is likely to gravitate upward from recent expansion lows, but remain in a historically low range. The U.S. Economy Is Performing Well Despite the Housing Downswing Growth of U.S. economic output (real Gross Domestic Product) has slowed to some degree in recent quarters as the housing production component (residential fixed investment) has contracted substantially. However, the housing contraction has not generated serious spillover effects in other sectors of the economy (including personal consumption expenditures), and strengthening activity in some sectors, including nonresidential construction and foreign trade, has helped offset the negatives from housing. Core Inflation Has Begun to Recede, Right on Schedule Key measures of core consumer price inflation (excluding prices of food and energy) firmed up during most of 2006, moving well above the upper bounds of the Federal Reserve’s apparent “tolerance zones.” This inflation pattern naturally raised concerns about economic “overheating” at our central bank and prompted financial market participants to anticipate some tightening of monetary policy in the near term. The Interest Rate Structure Remains Historically Low The Federal Reserve has held its target for the federal funds rate at 5.25% since mid-2006, a level that’s around a “neutral” monetary policy stance in the prevailing inflation environment. We expect the Fed to maintain this funds rate target until the late-June meeting of the Federal Open Market Committee (FOMC), and we anticipate a quarter-point rate cut at that time — in order to keep the “real” funds rate from rising as core inflation recedes. Housing Demand Apparently Stabilized Late Last Year A healthy job market, good growth in household income and a favorable interest rate environment certainly provided support to housing demand in the latter part of 2006. Furthermore, widespread price cuts and deepening nonprice sales incentives (documented by NAHB surveys) gave further support as the year drew to a close. Seasonal adjustment difficulties generally complicate interpretation of housing market data during the winter months, and this time is no exception. Weather conditions were unusually harsh last October and unusually mild in both November and December. Even so, it appears that housing demand stabilized in fundamental terms toward the end of 2006, and some improvement may now be underway.
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