The talk in some corners of the real estate industry today is that the housing market may have reached its low point. Maybe soon it will show some signs of renewed vitality -- or maybe it will drag the rest of the economy into recession. Hovnanian Enterprises held a weekend sale, offering 1,000 luxury homes at discounts of up to $100,000. At least one early report indicated that the stunt was a success.
Like other luxury builders, Hovnanian has watched its fortunes dwindle in recent weeks, as "sub-prime" borrowers continue to default on homes, and houses remain unsold. Was the sale a part of the solution, or a symptom of the problem? The Federal Reserve has indicated it may lower a key interest rate that would help some hold onto their homes, and help others buy with a better mortgage rate. Will they make the switch? The answer will come Tuesday. What's in this story for the environmentally conscious on-looker? Plenty. The Daily Green here reprints its July 26 feature on four green ways to look at the turmoil in the housing market.
1. Big Homes & Big Bills: Energy And Subprime Lending What sent the real estate market spiraling upward is the same thing that pushed it toward a precipice: Risky mortgages made in the "subprime" market. That's a euphemistic way of saying lenders sold loans at pricey rates to people who simply could not afford them. News has also surfaced recently that even some so-called prime recipients with good credit are having trouble making mortgage payments, leading to even more delinquency and foreclosures. Here's the green angle: Maybe it wasn't just the mortgage bill, but the electric bill too.
People buy homes that stretch their incomes to the limit, and the most popular homes being sold are the biggies: The size of the average home has more than doubled in 50 years to nearly 2,400 square feet. Those big homes take more energy to keep lit, heated and cooled, which adds a perhaps unanticipated expense to already-strapped home owners. A solution? Give developers the incentive to build green. Green building has clear benefits for the homeowner, who saves on energy bills indefinitely, but none for the typical builder. It won't help those who have already lost their homes, but it may help the next generation of homeowners.
2. Motivated Sellers: Marketing Green Worried about the falling housing market preventing you from selling your own property? One potential way to beat the bust is to green up your castle. Sustainable design is taking off in both the residential and commercial sector. Economic incentives to going green are increasingly available, from state and federal tax breaks to green mortgage programs, and loans that take into account the cost savings that will be realized over several years of significantly lower utility payments.
For example, common-sense passive solar techniques, such as shade trees, awnings and good ventilation, can cut heating and cooling bills by as much as 50%, according to the U.S. Department of Energy. Just by buying Energy Star-labeled appliances and materials, the country saved $14 billion last year, or the same carbon reduction as taking 25 million cars off the road. Studies show people are happier in green homes, and that employees are more productive in green buildings. So green up your home to compete in a competitive housing market.
3. The Grass Is Greener: Invest Elsewhere With the world waking up to the realities of a low-carbon economic future, Congress talking about pumping subsidies into renewable energies, and cities investing in sweeping sustainability plans, the future is now for many green companies and technologies. In other words, the housing slump need not kill the economy or your portfolio. Just look at solar power, which has been basking in good press after several companies posted unexpected gains. Part of the reason for its success is California's 1 million roof initiative to install more solar panels.
SunPower, for instance, doubled earnings, and revenue rose 218% to $173.8 million, according to a recent Investor's Business Daily article. First Solar, meanwhile, shot up 435% in the first few months after its stock went public in November, according to Forbes.com, which gushed, "no, that's not a typo." Other solar firms to watch, according to Investor's Business Daily, are Trina Solar and JA Solar.
4. Breathing Room: Time To Plan For A Sustainable Future The red-hot housing market led to suburban population growth at a rate unparalleled since the post-War period in the 1950s. Unfortunately, much of what could have been learned from past migrations wasn't, and suburbia sprawled out into the countryside. It's an unsustainable model that leads to over-dependence on the automobile, increases in air and water pollution and a degradation of otherwise pristine wild lands or productive farmland. The housing slump gives overtaxed communities some breathing space to plan for the next wave of growth. Suburban sprawl has an antidote: Vibrant, walkable communities in a 19th century mold.
There, the road is secondary to the sidewalk, and the backyard secondary to the front porch. Consider just one data point reflecting the sprawl that has run rampant outside of hot metro areas in recent years: Farmland values doubled nationwide from 1996 to 2006, including a 40% rise in just the last two years. In communities at the suburban-rural interface -- so-called exurbia -- housing tracts have been carving up productive farmland as farmers capitalize on the real estate exuberance at the same time the value of many crops has diminished.
That has some advocates in those areas worried about the viability of "foodsheds" -- the area of land surrounding communities that can keep food on its kitchen tables. While the food system today is international, and New Zealand berries are often easier to find than those grown down the road, these advocates worry about a future when energy isn't so cheap, and the economics of worldwide food distribution make less sense. In other words, those farms may well be valuable beyond measure -- simply as farms -- in the future. Communities can plan now to preserve their farms and forests, and the way to do it is to make existing downtowns attractive.
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