Inman News

When you’re ready to go shopping for building materials for your next home, you may not need to go any further than the nearest hay field. Straw-bale houses are becoming increasing popular and accepted in many areas of the West and Southwest, and this method of construction can offer an interesting alternative to conventional building.

There are a number of methods employed when constructing a straw-bale house, depending on the size and design of the house, local building codes, and a variety of other factors. Essentially, though, the house is constructed by using bales of straw for the exterior walls, which are then typically covered with stucco on the outside and plaster on the inside. Construction usually begins with a poured concrete footing, and the bales are then stacked up in courses with a running bond, similar to the laying of bricks, so that the mid-point of the bales on one course fall over the butt joints between the bales in the row below.

The tightly bound bales of straw have a good amount of compressive strength, meaning that they will support quite a bit of the weight of the roof. However, some sort of wooden or metal plate is used on top of the bales around the perimeter of the house in order to equalize and spread the roof load, and wood or metal posts are usually employed at set intervals between the bales for additional support.

At window and door openings, wood or metal support framing — called bucks — are installed first, then the bales are cut out and conventional windows are doors are installed. The thick bales result in some very deep window sills, and some builders will “splay” or angle the interior wood or plaster interior window openings to allow even more natural light to enter the rooms.

Once the bales are in place, conventional hand- or machine-applied stucco is used over the exterior. The stucco can be colored by painting or by adding cement dyes to the raw material prior to application. The interior of the bales is covered with plaster, again hand- or machine-applied. Interior walls are typically built with conventional framing methods, and finished with drywall or plaster to blend with the plaster finish on the exterior walls.

Being a relatively new and different construction process, one hurdle for the straw-home builder may come in the form of building code compliance. In the Southwest, for example, where this type of construction originated, many local codes have provisions that allow straw-bale homes and set the standards for their construction. Other jurisdictions may not have them in place as yet, so some solid research and communication with your local building department will be required before the first bale is ever set in place.

Two of the most common questions regarding straw-bale construction are how well the home will resist fire, and whether it is an invitation to insects and other pests. However, numerous studies and test homes built in a variety of locations have shown that once the bales are stuccoed and plastered, they are extremely resistant to both fires and pests. The U.S. Department of Energy quotes tests showing that straw-bale homes actually outperform conventionally framed homes when exposed to fire, and that the plastered walls so limited access to pests that they again outperformed conventional framing.

Another concern is rot, and this is something that needs to be addressed throughout the construction process. Straw-home builders look for bales of straw made up from thick, long-stemmed straw that is free of seeds, typically from the harvesting of wheat, oats, rye, barley, rice or flax. The straw needs to have been baled dry and then protected from the weather while stored at the construction site and also during construction. Moisture meters are typically employed to test and monitor how dry the bales are.

Click to read the rest of this story.

COLLEGE STATION, Texas – Is there a housing price bubble in Texas that is about to burst? Researchers at the Real Estate Center at Texas A&M University are standing by the position they took a few years ago – no bubble here. A new study by a Center researcher has the numbers to back them up.

While the housing appreciation bubble may burst in some markets in the country, Texans need not worry.

Homeowners have seen their property grow in value, but not to the extreme, and Center researchers continue to say homeowners and real estate professionals need not worry about the bottom falling out. A worst case scenario would be a flattening out of home prices.

From 1999 to 2004, the average price of existing homes sold in Texas rose 24 percent to $164,400, and the median price rose 28 percent to $129,600.

Dr. M.A. Anari, a research economist with the Center, devised two measures to help determine if Texas home prices were dangerously high. These ratios are similar to the price-to-earnings ratios of stocks, which investors use to determine if a stock is overpriced.

Anari studied home price-to-rent ratios in Texas markets and in other areas of the country. These were compared to the growth rate of home prices. He found that there is a maximum home price-to-rent ratio that depends on the local economy. When this number is exceeded, home prices generally fall.

Current home price-to-rent ratios for all Texas metro areas are below the maximum ratios. So the risk of a price bubble in the state’s residential market is very low.

For example, if the price-to-rent ratio in Austin exceeded 24, it would be a signal of future price declines. But Austin’s price-to-rent ratio was 20 in 2003 and fell to 18.1 in 2004, so a steep decline Austin home prices is not likely.

Click for the rest if this article

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won’t happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what’s going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That’s the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won’t stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they’ve been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one’s income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today’s house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets’ perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets’ perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

Click for a link to the original article from the Wall Street Journal

By M.B. Taboada
AMERICAN-STATESMAN STAFF
Tuesday, April 01, 2008

Austin-area builders continue to cut back on the construction of homes, with first-quarter starts falling to their lowest levels since 2003.

Starts for new homes declined 33 percent to 2,271, compared with first quarter of 2007, according to the latest report from Residential Strategies Inc., which tracks real estate trends.

The number of new-home closings dropped 24 percent to 3,125. But the number of closings exceeded the number of homes being started, helping to prevent a glut of unsold new homes on the market.

Continue Reading Article

Read full article

Read full article

Read full article

Read full article

Read full article