New Homes Making A Comeback

U.S. builders started construction on new homes in June at the fastest pace since fall 2008, though building permits fell, the government reported Wednesday.

Housing starts rose 6.9% to an annual rate of 760,000 last month from an upwardly revised 711,000 in May, the Commerce Department said. The data are seasonally adjusted.

Economists surveyed by MarketWatch had expected housing starts to rise to 750,000.

Yet permits to begin new construction dropped 3.7% to an annual rate of 755,000 from 784,000 in May, perhaps a sign that builders are turning more cautious in response to the latest slowdown in the U.S. economy. Permits give an indication of whether demand for new homes is growing or slowing.

New construction of single-family homes, which account for three-quarters of the housing market, climbed 4.7% to an annual rate of 539,000. Construction of single-family homes is 21.7% higher compared with a year ago.

Gradual pickupWork on buildings with five or more housing units rose an even faster 17% to an annual rate of 213,000.

Permits to build additional single-family homes edged up 0.6% last month to 493,000, while permits for condominiums and apartments declined 11.4%.

New construction increased 36.9% in the West and 22.2% in the Northeast, but housing starts fell 4.2% in the South and 7.3% in the Midwest.

The housing market is one of the few parts of the U.S. economy that has not slowed recently. Construction has picked up gradually over the past year and a half as the industry recovers from its worst slump in modern times. For the first time since the recession ended, housing in 2012 could contribute to the nation’s annual economic growth.

The effects of a healthy housing industry are widespread. Large amounts of raw materials and finished goods are required to build homes and furnish them after sale and the construction trade employs millions of workers directly or indirectly.

Yet the economy could act as a brake on housing if growth doesn’t speed up in the near future. Consumer confidence is waning and businesses are growing more nervous about a protracted slowdown.

Even at the current pace of construction, the housing industry is still very weak by historical standards. If the economy were operating normally, analysts say, housing starts should be closer to 1.5 million a year.

New Hospitality House

The $8 million facility is expected to be open by February or March of 2013 to house patients who are receiving treatment at the Proton Therapy Center, which is set to open this winter.

Construction for the 38,000-square-foot hotel-like building began Tuesday after about 100 community leaders, McLaren officials and volunteers gathered for a ceremonial ground breaking.

“It’s been kind of a dream of ours to not only have the (proton therapy) technology but to have the hospitality house to go with it,” said Donald Kooy, McLaren-Flint president and chief executive officer. “It makes it very different for patients to access (other therapy’s care) without a hospitality house. Half of the patients come from more than two hours away.”

The Hospitality House is just west of the $70 million Proton Therapy Center, which is currently under construction and being built next to the McLaren Cancer Institute at 4100 Beecher Road.

The Proton Therapy Center will be the 11th to open up in the country and the only one in the state of Michigan.

With an expected 800 to 1,000 patients a day being treated the 32-room Hospitality House will be designed to give the patients a home away from home while they are receiving their treatment.

So far about $3.3 million dollars has been raised for the facility.

The Hospitality House will have help from Central Michigan University hospitality management students as they become resident managers of the facility. Students have spent the past year working on the designs, as well.

Garrett Holmes, 20, of Flushing Township will be the first resident manager of the facility.

It feels great to have the opportunity, he said.

“It’s great to be able to finally call this something of my own,” said Holmes, a junior at CMU. “I want (the patients) to feel like they’ve known me for a very long time (and) that is their home away from home.”

About 25 to 30 McLaren volunteers will also be involved with the facility.

Kooy said the Hospitality House really is a perfect match to go with the Proton Therapy Center.

The new Hospitality House will be built to the west of the Proton Therapy Center, which is expected to open this winter.

“We need to have a world class patient experience to go with the world class treatment center,” he said. “My greatest hope is that it’s too small and that we have to add on to it later.”

Ben Hugan, 71, of Grand Blanc knows firsthand the benefits of staying in a hospitality house and is happy to see one in Genesee County.

When he was diagnosed with prostate cancer in 2008 he went to a Proton Therapy Center in Indiana and stayed at hospitality house there with his wife, Jean.

“All I can say is that I lived that experience and it made a difference in my life and in my wife’s life,” Ben Hugan said. “At first you think you might want to just be alone. … We found out that (living with other cancer patients and their families) is the best therapy you can have.”

Renovation, Construction, Remodeling, Handyman

From the Notepad to the Home

Renovation isn’t always the easiest task and finding a remodeling company in the Ann Arbor area can often be a challenge, but fear not,  T&B Construction is here to help give your house that much needed overhaul. We here at T&B Construction will personally assist you in any sort of planning or ideas that you’d like to take from the notepad directly to your home, and set to work before you even realize it. We want to make sure that your house looks exactly as you have imagined  and will not stop until the remodel is done. So, if you’re looking for an Ann Arbor remodeling company, think T&B Construction.

New Dog Park

Construction has begun for the new dog park at the old Wayne Interim Storage Site, off of Black Oak Ridge Road across from Pompton Plains Crossroad, according to Ryan Edge, supervisor of landscape and park development.

“We started the process with creating the parking lot,” he said. The development began last Monday and is expected to be finished this week.

No design plans have been changed. The park will be approximately five to six acres with enough room for a large playground, a walking and running path, and a dog run that accommodates both small and large dogs, according to Edge.

The parks and recreation department have been speaking with the department of public works about creating the dog run and playground internally, a step that is hoping to be completed within a few weeks. Edge would like to have a majority of the project done by fall.

The parks department is continuing to get positive feedback from the public, with excited residents calling and asking when the park will be finished.

The cost of the park will be approximately $400,000 after a $99,000 grant received from the Passaic County Open Space Farmland Preservation Trust Fund, plus a generous donation left by a former Wayne resident who requested the donation go to a type of dog park.

Youth Facility To Be Renovated.

The Montgomery County Commission is considering a project that calls for major renovations and technology upgrades to the building that houses the juvenile detention center.

Bruce R. Howell, the juvenile court administrator, said the building was built in 1969 and renovated more than 20 years ago, but is now falling apart.

Howell sent a list of 17 priority projects that need to be taken care of to the County Commission last week.

“The infrastructure of the building is gone,” Howell said. “As far as square footage needs, we’re in pretty good shape.”

The 60,000-square-foot Montgomery County Youth Facility, at 1111 Air Base Blvd., includes the detention facility, the juvenile court, juvenile intake for abuse and neglect cases and staff offices. The court was moved to the youth facility in 2010 so renovations to the county’s Annex I building could take place, County Administrator Donnie Mims said.

Howell said he doesn’t know how much money is needed to do some of the renovations, but the commission is planning to hire an architectural firm at next week’s meeting to determine the cost.

The three highest priority projects include a new heating and cooling system, a new security system for the detention facility and new kitchen equipment that would put them in compliance with codes.

Howell said they have a company that comes out to make repairs to the HVAC system every two weeks, and it’s getting expensive. A new system would be more efficient and save money in the long run, he added.

“It could go at any minute,” Howell said. “Part of the building is too hot and (part) too cold.”

The security panels, which haven’t been upgraded in more than 20 years, are old touch pads that often don’t work. Howell said the whole system needs to be replaced.

“At this point, they’re working and we’re patching and fixing and calling the security company when we can’t fix it ourselves,” Howell said. “This is how we release folks to let them out of their rooms or during fire drills.”

Howell also said the sprinkler heads are obsolete and can only be replaced with new, different heads. He added that they’ve saved money to replace sprinkler heads as they stop working.

Other projects on the list include replacing lighting, replacing the roof, complying with the American Disabilities Act in the courtrooms and bathrooms, finishing refurbishing the ceilings and floors, creating usable space for private attorney/client meetings and providing additional capacity in the laundry room.

Mims said the architects will make a presentation to the commission after they review the cost and prioritization of the projects. The commission will determine what it can afford and establish a budget.

“We’re not asking for a new facility. We’re hoping we can just get this one functional for another 10 or 12 years,” Howell said. “That’s all we can do. In this economy, you can’t ask for new. And we wouldn’t.”

Home Building Turns Tough

Home builders are building on recent gains Tuesday following data showing new home sales rose in May, after two months of decline.

Americans bought new homes at a seasonally adjusted annual rate of 369,000 in May, up 7.6% from April, according to data from the Commerce Department. Year-over-year, sales were up 19.8% and have risen for eight consecutive months. The number of new homes on the market inched up 1,000 to 145,000 from a record low in April and March.

Additionally, the S&P/Case-Shiller 20-city composite home-price index gained 1.3% in April, with 19 out of 20 cities registering gains. Adjusting for seasonal factors, as spring is a popular time for house hunting, prices were up by 0.7% from March. On an annual basis, prices are still falling, but at a slower rate.

Home builders were higher on the news. The iShares DJ U.S. Home Construction Fund (ticker: ITB) rose 3.1%, while Lennar (LEN), which reports earnings Wednesday, led the pack with a 4.8% gain to $27.85, as The Wall Street Journal reported that it is close to securing nearly $2 billion in capital from China.

However, we think that even though home prices have stabilized, the rebound will be too modest and protracted to justify the current lofty valuations of Lennar and its peers. While the long, slow slog toward normalcy in the housing market continues, the data also indicate that the industry has a long way to go yet, making a bet on pricey homemakers likely premature.

To wit, May’s new home sales were a big gain from April’s numbers, but barely above the pace seen in February. Nor is the 369,000 figure as impressive considering that in the prebust era, Americans were snapping up more than a million new homes annually.

The tight inventory may seem bullish for homeowners, but homes in some of the most depressed markets are still being sold out of foreclosure for less than construction cost.

Lennar is one of the strongest and largest of the home builders, and trading at more than 20 times forward earnings, is one of the relative bargains in the sector, as many companies change hands for triple-digit valuations or aren’t expected to turn a profit in the near future. Yet even though it may get a temporary bump from its earnings tomorrow, the stock will likely have trouble maintaining such levels (not far from last month’s 52-week high), given continuing uncertainty.

Sadif Investment Analytics’ recent examination of Lennar found “a company with a below average quality and weak long-term business growth,” and noted that there was a slim likelihood that Lennar’s stock will outperform.

Moreover, even though many analysts prefer Lennar over peers, the average price target for its stock is $29, which is less than 5% above current levels.

Two weeks ago, Barron’s warned against buying into the frothy housing sector, noting that Lennar in particular might have a difficult time sustaining gains. (See Getting Technical, “Time to Move Out of Home-Builder Stocks,” June 11.)

The housing market will likely hold onto pricing gains through the busy summer buying period, but after that it will require a gradual supply increase combined with continued record low interest rates and sustained consumer demand — a trifecta that may not appear.

“In order for us to get more constructive on the builders at this point, we would need evidence that the housing recovery is continuing at a stronger pace than our current estimate of 10%-12% new-home-sales growth,” writes MKM Partners analyst Megan McGrath.

Therefore, if Lennar, one of the sector’s standouts, still seems like a pricey and uncertain bet, it doesn’t seem that shakier home builders will be able to hang onto recent gains.