In this issue of Home Base:

New Federal Help for Homeowners: A Trick or a Treat?
Easy Fall and Winter Home Energy Saving Tips
Deficit Supercommittee Struggles, While Tax and Spending Efforts Continue
Some Good Economic News on the Home Front for a Change
The Home of the Future: Small is Good

The first step in preparing to save energy is to find out where you are losing energy—and money. Energy assessments, also known as home energy audits, can be conducted in homes, apartments, multi-family homes, and small businesses. An assessment will show you problems that may, when corrected, save you significant amounts of money over time.

Some basic energy assessments are free and take very little time. The American Homeowners Foundations Free Ten Minute Home Energy Audit identifies some simple and inexpensive steps homeowners can take to reduce their energy consumption and costs. To receive a free e-copy just email AHF@AmericanHomeowners.org and put “Free Ten Minute Home Energy Audit” in the subject line.

Your local utility may also offer free or discounted energy assessment services. Contact them first to find out. You an also find a professional auditor in the Certified Rater Directory from the Residential Energy Services Network. Professional auditors aren’t inexpensive, but they can do a better job of identifying additional steps you can take to reduce long term energy costs.

AHGA’s Free Ten Minute Home Energy Audit includes many suggestions to help you reduce energy costs. The Department of Energy also suggests many simple strategies that will help you save energy during the cold winter months. Among them:

● Open curtains on your south-facing windows during the day to allow sunlight to naturally heat your home, and close them at night to reduce the chill you may feel from cold windows.

● Use a heavy-duty, clear plastic sheet on a frame or tape clear plastic film to the inside of your window frames during the cold winter months. Make sure the plastic is sealed tightly to the frame to help reduce infiltration.

● Install tight-fitting, insulating drapes or shades on windows that feel drafty after weatherizing. Investigate other window treatments and coverings that can improve energy efficiency.

● When you are home and awake, set your thermostat as low as is comfortable.

● When you are asleep or out of the house, turn your thermostat back 10°–15° for eight hours and save around 10% a year on your heating and cooling bills. A programmable thermostat can make it easy to set back your temperature.

● Seal the air leaks around utility cut-throughs for pipes ("plumbing penetrations"), gaps around chimneys and recessed lights in insulated ceilings, and unfinished spaces behind cupboards and closets.

● Add caulk or weatherstripping to seal air leaks around leaky doors and windows.

● Regularly service for your heating system. Replace your furnace filter once a month or as needed. Clean Wood- and Pellet-Burning Heater flue vents regularly and clean the inside of the appliance with a wire brush periodically to ensure that your home is heated efficiently.

● Keep your fireplace damper closed unless a fire is going. Keeping the damper open is like keeping a window wide open during the winter; it allows warm air to go right up the chimney. When you use the fireplace, reduce heat loss by opening dampers in the bottom of the firebox (if provided) or open the nearest window slightly—approximately 1 inch—and close doors leading into the room. Lower the thermostat setting to between 50° and 55°F.If you do use the fireplace, install tempered glass doors and a heat-air exchange system that blows warmed air back into the room. Check the seal on the fireplace flue damper and make it as snug as possible.

● Turn down the temperature of your water heater to the warm setting (120°F). You'll not only save energy, you'll avoid scalding your hands.

● Use light-emitting diode—or "LED"—holiday light strings to reduce the cost of decorating your home for the winter holidays.

There are many more free sources of information on ways to save energy in your home and in your life. We found 59 free publications for "Going Green" category on USA.gov's website . All can be downloaded. http://publications.usa.gov/USAPubs.php?selPubsPerPage=999&PHPSESSID=gg85n0uugrams0h7vn0dmda837&NavCode=R&PageButton=SHOW
 

Outlook for the Supercommittee is questionable, but other efforts may advance.

Despite encouragement from many sources (including the American Homeowners Grassroots Alliance), the Deficit Supercommittee may not “go big” and enact multitrillion dollar reductions in the deficit. It more likely will find it difficult to achieve its original target of more modest cuts of at least $1.2 trillion in cuts by Nov. 23, and stalemate is possible. Although changes in home ownership tax incentives are unlikely to be part of either mix, over the long term there is a need for a revenue neutral modification of those incentives that would encourage more young workers to buy their first home sooner and make homeownership more affordable for the large number of moderate income taxpayers who do not benefit from the current federal home ownership tax incentives.

Meanwhile separate legislative efforts continue. Some would help homeowners while others would hurt. Efforts to increase sales taxes on consumer’s online purchases continue. In mid October Representatives Steve Womack (R-AK) and Jackie Speier (D-CA) introduced the Marketplace Equity Act, which would expand the collection of sales taxes on consumers/ online purchases. Senators Enzi and Alexander are expected to introduce a similar measure in the Senate in early November. AHGA strongly opposes both measures.

“American Homeowners and other consumers overwhelmingly oppose the collection of sales taxes on their Internet purchases,” noted AHGA President Bruce Hahn. A 2008 survey by Parade Magazine, asked readers: “Should Internet sales be taxed?” Based on 3,125 survey responses, 85% opposed taxing Internet sales. This legislation would require consumers to pay a sales tax on even more of the products they buy online, despite the fact that the vast majority of voters oppose any sales tax on their Internet purchases.

One of the reasons that Internet commerce continues to grow dramatically is that hard-pressed consumers in today’s economy increasingly buy more of the things they need on the Internet in order to save money. Many can only afford to buy used or refurbished products and they also save the cost of driving to the mall. This bill would increase the tax burden on those least able to afford it and would deepen the recession.

Many consumers buy the things they need on the Internet because the product selection is much greater and it saves them time. Environmentally conscious consumers also prefer to leave their car in the driveway in order to reduce automotive emissions. The products will be delivered by the U.S. postal carriers, UPS and FedEx trucks that go through our neighborhoods every day anyway. The reduced demand for gasoline will also help reduce gas prices, and this benefits everybody.

Increasing taxes in this economy is a bad idea, and state and local governments have far less objectionable alternatives if they need additional tax revenues. Public opinion polls show that taxpayers object much less to increasing sin taxes or temporary surtaxes on the wealthy if needed to plug revenue shortfalls. A better solution would be a permanent Internet sales tax moratorium, which would also add needed stimulus to our ailing economy.

All is not bad news however. The House is expected to vote in early November on bipartisan legislation that would place a five-year moratorium on new taxes on mobile phones and other wireless devices. The Wireless Tax Fairness Act of 2011 would stop the growth in taxes on wireless products that are increasingly important to the daily lives of homeowners and other consumers. The average wireless consumer currently pays 16.3% in taxes.

In other good news on the communications front the Federal Communications Commission has approved initial plans to reconfigure the Universal Service Fund (USF) on October 27. Part of the 16.3% in telephone taxes supports the USF. The changes would in part help migrate phone subsidies for rural communications from land lines to broadband. Those subsidies help offset the high costs of providing service to homeowners and other consumers in unserved areas. The 500 page proposal creates a “Connect America Fund” for wired broadband subsidies and a Mobility Fund to build out 3G networks in areas of the country lacking the service. Another part of the proposal would revamp the rates carriers pay each other to connect local calls. The current intercarrier compensation system was designed for last century’s phone service and is thwarting today’s agenda of a universally competitive broadband marketplace. The devil will be in the details as the plan is revised, but on balance the likelihood of improvements which will benefit homeowners and other consumers are excellent.

top

Most of the good news relates to the overall economy, but there are glimmers for housing too.

The Commerce Department recently reported that new home sales rose 5.7% in September to a 313,000-unit annual pace. This is up from 296,000 in August, and larger than the 300,000-unit number that many economists projected. Data through August 2011, released in late October by S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed increases of .2% for August versus July in major cities.

It is also noteworthy that these modest improvements are occurring during a period of very tight mortgage lending standards. When those standards return to more traditional levels we’ll see more buying activity. Unfortunately the large inventory of distressed properties continues to hold down the housing recovery. Sales remain slow largely due to our weak economy, and overall housing prices are likely to drop again in 2011.

Despite the bad part of the news more economists are coming to believe that we’re at or near the bottom of the housing market. The Administration’s recently announced changes to the HAMP program should also help, although the limited success of earlier HAMP initiatives suggests that we shouldn’t expect any miracles. There’s also nothing to suggest that the current low mortgage interest rates will face significant inflationary pressures in the near term. Also encouraging is that home ownership still remains a popular goal despite a decline in housing values than began five years ago. Hanley Wood's Housing 360 Survey recently revealed that 89% of owners and 59 percent of renters believe home ownership is important to the American families. One third of renters and about 20% of existing homeowners believe it's a good time to buy a home and plan to buy a home in the next two years, according to the survey.

The Commerce Department recently reported that the economy grew 2.5% in the third quarter, not enough to suggest a roaring recovery, but enough to demonstrate that the economy isn’t backsliding. Spending by consumers also grew, reinforcing that conclusion. There’s good reason to believe that recovery of the housing market can begin if other economic factors turn positive.

More recent signs for the overall economy are encouraging, and could contribute to the recovery of the housing market next year. The stock market has done well in recent weeks, buoyed by progress in Europe to address its debt woes. New orders for durable goods rose 1.7% last month. Orders for nondefense-related capital goods increased 2.4%. These are indicators of business investment and typically presage new job creation.

Significant challenges still remain. The Hanley Wood survey also revealed that many homeowners and renters are in no great hurry to buy because of the soft economy. If Congress fails to make significant progress on reducing the deficit, a real possibility, the stock market and consumer confidence could plunge. Most economists believe that the nation needs a sustained growth rate of about 3% before we start generating the new jobs that will be critical to the recovery of the housing market, and we’re not there yet. Still, there are enough positive signs at this point that next spring could be the turning point for the US housing market.

top

Donald Trump, meet Father Knows Best.

One of the most pronounced trends in housing is the decline in the size of the typical new home. According to the Census Bureau, the average size of single-family homes completed in 2010 was 2,149 square feet, off from 2,248 square feet in 2006. Despite the decline the average new home built today is still twice the size of the home that the Anderson family might have bought during the popular 1954 – 62 TV series “Father Knows Best” starring Robert Young and Jane Wyatt. Jim Anderson was the father in this idealized Midwestern American family, and the plots typically involved his sage advice whenever one (or more) of his children had a problem in this pop culture classic.

Jim Anderson’s advice always reflected the prudence that was reflective of the era, and today’s trends in housing suggest that prudence seems to be displacing opulence in home buyers’ choices. This is true in part, and in part also reflects the current economy. What may be escaping many is that the trend towards smaller homes will likely continue even after our economy recovers. This is because real incomes in the U.S. are declining, except at the highest levels. Overall household incomes dropped almost 10% between June 2007 and June 2011, according to www.Sentierresearch.com . No doubt the decline is in large part due to the recession. Because of globalization and other factors, real income declines are likely to continue even after that recovery. The cost of building a home is unlikely to decline, so the inevitable result will be smaller and more modest homes.

Data from the National Association of Home Builders shows that the trend is already underway. The number of bedrooms in new homes has declined. The peak was 2005 and 2006 when 39 percent of all new single-family homes had four bedrooms or more. It dropped to 34 percent in 2009. The share of single-family homes completed with three or more baths peaked at 28 percent in both 2007 and 2008, and then fell to 24 percent in 2009. Data on remodeling projects reveals that bathroom additions or upgrades remain more popular, so it may be that new home buyers are opting for more nicely optioned bathrooms at the same time as they are cutting back on the total number.

The share of new homes with at least one fireplace declined from 60 percent between 1986 and 2000 to 51 percent in 2009. Porches are the most popular outdoor feature today, present in 62 percent of new homes completed in 2009, and significantly more common than in 1992, when only 42 percent of new homes had them. Conversely the share of new homes with either patios or decks has declined (from 51% in 2006 to 45% in 2009 for decks). Although the share of new homes with decks also declined, deck additions remain a popular remodeling choice for existing homeowners.

What will a typical new home look like in 2025? The National Association of Home Builders’ Economics and Housing Policy Group conducted a survey of over 3,000 home builders in the fall of 2010. The survey focused on the likely preferences of the average, new single-family detached home in 2015. Extend those trends for another ten years and you’ll probably get a fairly good idea of what a new home will look like in 2025.

When builders were asked to rate the probability of five broad trends taking hold between now and 2025, two trends stood out as the most probable to occur: the single-family home will get smaller and it will have more green features. They thought it less likely that there would be growth in the trend for more technology features, more universal features and more outdoor living features. More than half of the respondents expected the living room will merge with other spaces in the home, another 30 percent report that the living room will vanish to save on square footage, and 13 percent expect it will become a parlor/retreat/library or music room. In an average home, the only area that more than half believe is likely to increase as a share of a home’s total space over the next five years is the family room (54 percent of respondents thought so).

What does this data suggest about the size and features of a typical new home in 2025? If sizes were to continue to drop at the 2006-10 rate (about 25 square feet per year) it would be about 1,775 square feet. However, the American Homeowners Foundation believes that the average will not drop that much for several reasons. The wealthy are likely to remain wealthy (or get wealthier) and they will continue to buy larger and nicer homes, which will help keep the average size up. Retiring baby boomers are less likely than younger home buyers to be affected by economic trends and the size of their retirement homes are unlikely to shrink very much. They are also more likely to continue to gravitate towards one-story units.

Younger new home buyers are more likely to give up luxury features in their homes than they will be to give up floor space. They’ll give up many of the external architectural features that add to costs, including skylights and other roof and design features, as well as more costly external sheathings such as brick and stone. Fireplaces and garages will become less common. They’ll still prefer larger kitchens and 2.5 baths, but they will give up more expensive appliances and expensive treatments such as granite countertops and cabinetry. They’ll continue the trend towards multifunction spaces such as great rooms, so foyers, dining rooms, sunrooms, hobby rooms, media rooms, and home offices will probably become less common. Three bedroom homes will become even more common. The bedrooms may have to be slightly smaller, but most won’t be willing to give up master bathrooms.

Construction costs will continue to increase because of inflation and other factors such as more energy efficient building codes and/or consumer demand for greener homes. To keep costs down builders will continue to gravitate towards two story designs because they cost less to build per finished square foot. They’ll also maximize the usable interior space by designing homes with fewer and smaller hallways. The location of homes on lots will also take future expansion potential into consideration more frequently. The ability to add a carport, garage, deck or patio when they can afford it will be a growing consideration to more future new home buyers. Many will also want to finish their basements at some later date, so new homes that come prewired and preplumbed to make those future improvements less expensive will also be more attractive to new home buyers.

While the typical new home of 2025 will likely be more boring from the outside, it will be affordable to the 2025 new home buyer. It might be 1,900 – 2,000 square feet, but it will still have many of the features of today’s new home and it will be every bit as livable. More compact designs will help keep energy costs down, an important benefit since these will almost certainly increase at rates that are faster than inflation. Other costs that relate to home size, such as real estate taxes and insurance, will also be lower.

top