Lot Shortage

Even as foreclosures continue to flood some of the worst-hit housing markets in the country, economists are beginning to sound the warning that today’s extremely low levels of new residential production could lead to significant housing shortages, especially among market-rate rental apartments, as household formation rates return to normal.

The housing downturn and economic recession have kept household formation rates at below-normal levels for roughly three years, said NAHB Chief Economist David Crowe. As the economy moves to higher ground, the housing market will begin to feel the pressure from new households, he said, and there will be a surge of demand from echo boomers, who comprise an even larger group than their baby-boomer parents.

NAHB economists project that the industry will need to deliver 16 million homes over the next 10 years to keep pace with demand. As the excess inventory is worked off, which is likely by the end of 2012, the long-run demand for new housing — based on population growth, immigration and the replacement of losses from the housing stock — will average approximately 1.5 million single-family and 300,000 multifamily units annually, or about 1.8 to 1.9 million total starts.

Coming off extremely low levels of construction, starts last month were running at a seasonally adjusted annual rate of 591,000, a level that is far below what will be needed.

When housing starts bottomed out in the first quarter of 2009, they were running at only 27% of average starts during the “normal” production period of 2000 to 2003, according to analysis by NAHB. This year, production is expected to rise to 45% of normal, with a further increase to 67% of normal next year.

The road back to normal levels of residential construction will be longer for some states than others. By the end of 2011, the top 20% of the states will see their production levels back to normal. Those states include Montana, Wyoming, North Dakota, New Mexico, Kansas, Oklahoma, Texas, Louisiana, Mississippi and Alabama.

So, how long will it take to bring new Lots on-line in the Puget Sound to meet our coming demand? The average nunber of years (from plat application to recording) in King County for single family lots has been 4.75 years!

Average processing time (in years): (Source, New Home Trends)
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King County: 4.75 years
Other Cities in King County: 3.26
Pierce County: 5.44
Other Cities in Pierce County: 3.25
Snohomish County: 3.09
Other Cities in Snohomish: 3.09
Thurston County: 3.09
Other Cities in Thurston County: 2.85

Permit & Plat Extension Ordinance

The Economic Stimulus Tracker is a matrix of all the permit and plat extension ordinances and other economic stimulus measures being pursued by the King & Snohomish County Master Builder's Association. The matrix is broke down by jurisdiction and is a good tool to follow how cities and counties are working with builders during this down economy. http://www.mba-ks.com/library/issues/esp_matrix.pdf

Vacant Land Checklist (Short Form)

There are many things to consider before choosing a property to develop or build a home on. My "short form" checklist is helpful to quickly evaluate sites. There is a much longer one that explores a host of additional issues but this one works well for an initial evaluation.

Remember, there are no perfect properties. The idea to keep in mind as you fill out the list is, "Can I build what I want to on this site without great difficulty?"

The Subdivision Process

While every City or County may have its own unique process of subdividing property, most follow a similar general format. I have tried to layout how a typical plot of property might make its way from raw land to finished residential lots.

From Wikipedia
Subdivision is the act of dividing land into pieces that are easier to sell or otherwise develop, usually via a plat. The former single piece as a whole is then known as a subdivision in the United States. If it is used for housing it is typically known as a housing subdivision or housing development, although some developers tend to call these areas communities.
Subdivisions may also be for the purpose of commercial or industrial development, and the results vary from retail malls with independently owned out parcels to industrial parks.

The Subdivision Process

Phase I: Feasibility & Preliminary Preparation
• Review and Research Existing Data & Maps. Recon by consultants as necessary (wetlands, soils etc)
• Initial review of Zoning, Access, Topography, Utilities, Market
• Meet with Jurisdictions
• Preliminary Proforma & Schedule
• Internal Feasibility Results. Proceed or Halt project
• Initial Planning, Hire Engineer
• Field Work (at least enough for submittal): Survey, Mapping, Prelim. Engr., Critical Area review
Action Item: Decide on project feasibility. Prepare Pre-App package, Schedule Pre-App mtg.

Phase II: Pre-Application Meeting
• Submit Pre-App package. Meet with Jurisdiction. Discuss initial findings, potential obstacles & options.
• Post meeting: review possible revisions, variances, or re-designs options
• Hire other professionals (geotech, wetland bio, traffic, landscape arch, etc)
• Applicant could skip the pre-application meeting and move straight to preliminary submittal depending upon jurisdiction and project type
Action Item: Submit Pre-App Package (Application #1). Prepare Preliminary Submittal Package

Phase III: Preliminary Submittal to and Prelim. Approval
• Plat Submittal package and review by agencies planning department
• Complete application  equals a vested project*
• Additional information requests and redline comments
• Work with other jurisdictions (Water & Sewer District, PSE, DOE, etc)
• SEPA determination* (DNS, MDNS, DS EIS)
• Public Hearing
• Issue Preliminary Plat approval with (subject to) conditions
Action Item: Submit Package (Application #2). Respond/Address Jurisdiction comments

Phase IV: Engineering Review
• Engineer will technically design plans for all roads, utilities and other infrastructure to serve project
• Enter development Extension agreements with purveyors
• Approved Engineering plans issued for construction
Action Item: Submit Engineering drawings (Application #3) & redlines

Phase V: Site work construction
• Infrastructure construction
• As-built work & final inspection upon completion with each jurisdiction (Bond as necessary)
Action Item: Hire contractor. Site Inspection & Approval

Phase VI: Final Review & Recording
• Prepare Final Plat maps
• Lot Corner staking
• Redline corrections
• Bond & Final Recording
Action Item: Prepare Final Plat map, Bond & Record

Thanks to Cramer NW http://www.cramernw.com/ for their contribution to this list.

Citizens' Alliance for Property Rights Meeting

Thursday, March 4th: I'll be speaking at the Citizens Alliance for Property Rights montly meeting. I'll be leading the discussion on innovative land use topics in King County. Come join us at 7:00pm

King County CAPR is dedicated to the protection of private property and the rights of property owners.
The King County Chapter meets at 7:00 PM on the first Thursday of each month at the Issaquah IHOP Restaurant located at 1433 NW Sammamish Rd. Issaquah, WA.

Starbard picked to direct DDES

March 2, 2010
Daily Journal of Commerce
SEATTLE — King County Executive Dow Constantine appointed former Newcastle City Manager John Starbard as director of the Department of Development and Environmental Services.
The appointment must be confirmed by the King County Council.
DDES issues building and land use permits for properties in unincorporated King County. Constantine said in a press release that he wants to reduce the processing time for permit applications.
While at Newcastle, Starbard worked on upgrading Coal Creek Parkway and making downtown into a walkable urban village. He helped manage incorporation of Maple Valley, and was its first city manager. Starbard worked as a planner and senior management analyst for Bellevue.
Starbard will manage a budget of nearly $22 million and a staff of about 150.

Builders Cash in on Tax Refunds

Extension of net operating loss carry-back provision to five years are returning millions of dollars to public builders, some of which are using the money to buy land at bargain prices.


Christmas came a little late, but with a huge satchel of gifts for many of America’s largest home builders: Nearly $2 billion in total tax refunds for the last three months of 2009.

On Tuesday, Pulte, the housing industry’s largest builder, reported that its earnings loss for the three months ended Dec. 31, 2009 had narrowed to $116.9 million. That improvement in no small measure resulted from a whopping $800 million tax refund that Pulte gained from a law change that now allows companies carry back net operating losses up to five years.

The net operating loss (NOL) carryback provision was one of the key lobbying points—the other being the extension of the federal tax credit for home buyers—that NAHB and its largest members pushed Congress hardest for to resuscitate the housing sector. Pulte’s tax benefit, which helped offset $925 million in quarterly land impairments and other writedowns, is the largest among the almost $2 billion in total NOL refunds that 10 of the industry’s publicly traded builders reaped in their latest quarters. (See chart below.)

Two other public companies, Hovnanian Enterprises and Toll Brothers, ended their latest fiscal years before the law went into effect, and therefore reported losses for of $250.8 million and $78.8 million, respectively, in their fourth quarters. Both builders, however, intend to take full advantage of the law change. Larry Sorsby, Hovnanian’s CFO, told investors that his company is “now expecting a $275 million to $295 million tax refund in our second quarter of 2010.” Toll believes it will recover $161.8 million in 2010 from filing its 2009 tax return.

Indeed, the tax refunds that large public builders have received so far could be just the tip of the iceberg. D.R. Horton, for one, has submitted a claim for a $352 million refund for the current quarter.

During their first quarters of 2010, Ryland Group is counting on refunds of $99.4 million, Meritage Homes $93 million, KB Home $190.7 million, and Standard Pacific $103 million.

Lennar is also banking on a $320 million tax refund in early 2010. “Our improved balance sheet enables us to continue to capitalize on distressed land-buying opportunities, which will improve our operating results in 2010 and beyond,” said its CEO Stuart Miller.

M.D.C. Holdings expects to do the same. As it was closing the books on 2009, the Denver-based builder raised new capital by issuing $250 million in new debt. M.D.C. also expects to receive a $143 million tax refund during the first quarter of 2010. “Given these enhancements to our liquidity, we are well-positioned to continue making investments in 2010 as we build our land pipeline to support future home closings,” wrote M.D.C.’s chairman and CEO Larry Mizel.

John Caulfield is senior editor for BUILDER magazine.

Company Quarterly net income for three months ending 12/30/09 Tax refund

_______________________________________________

Pulte $(116.9) million $800 million

Lennar $35.6 million $251.1 million

KB Home $100.7 million $191.7 million

M.D.C. Holdings $127.2 million $142.6 million

D.R. Horton $192 million $113 million

Beazer $50 million $101 million

Ryland Group $39 million $97.6 million

Standard Pacific $82.7 million $94.1 million

Meritage Homes $43 million $90 million

M/I Homes $7 million $31 million

TOTAL $560.3 million $1.9 billion