Improving home market lifts builder outlook – North Bay Business …

Building the North BAyBob Glover oversees local-governmental affairs as part of his duties as executive officer of the Building Industry Association of the Bay Area.

He came to the Bay Area chapter of the association in 2003 to work with governments and was promoted to executive officer in 2011. He earned a BA in rhetoric and communications from the University of California, Davis.

In 2010 Mr. Glover was elected to serve as a director for the Pleasant Hill Recreation & Park District for Pleasant Hill and parts of both Walnut Creek and Lafayette. He also serves on the board of directors for Homeaid Northern California, a nonprofit organization supported by the association and established to build or renovate shelters for temporarily homeless individuals or families.

Bob Glover

Bob Glover

Mr. Glover is set to be the keynote speaker at the 2013 Construction Conference, hosted by the Business Journal in Santa Rosa on May 15. To register, visit or call 707-521-5270. Registration ends May 10.

He spoke with the Business Journal about economic indicators that point to continued strengthening of homebuilding in the North Bay and the rest of the Bay Area as well as well as the headwinds builders continue to face seven years after the housing industry started a steep dive locally in shrinking sales, stalled and failed projects, and employment decline.

What’s different about Bay Area homebuilding in 2013 from the past several years?

Bob Glover: The decreasing number of foreclosures, combined with the substantially low number of new homes constructed over the past several years, has created a low inventory of homes for sale throughout the Bay Area.

Additionally, as consumer confidence increases and the job market continues to improve, sales prices are beginning to rise, making it more feasible for some projects to move forward. Bay Area builders remain cautious about moving too quickly with new projects, but 2013 should see a substantial increase in building-permit activity over the past several years.

What does the future look like for the industry locally?

Mr. Glover: The North Bay was hit hard by the economic downturn. Many projects were taken over by lenders, several companies went out of business, and the loss of local construction related jobs was substantial.

While some of those projects have been resurrected and are beginning to pencil out financially, the overall North Bay building climate remains on very shaky ground. While there should be an increase in activity this year, the North Bay building industry is a long way from from being economically sustainable.

How has the housing industry and general economic recessions affected residential development?

Mr. Glover: The recession essentially made housing projects infeasible. Land for many projects was purchased at the height of the market and dependent on higher sales prices. As sales prices dropped drastically so did the ability of projects to proceed forward.

There are many approved projects, large and small, throughout the North Bay. The ability of those projects to move forward depends on how the economics of each project work out.

Some projects have been bought from banks at substantially lower land values with proformas based on 2013 numbers. Other projects were purchased at the height of the market and need a number of factors — i.e., higher sales prices, lower fees and construction costs — to make economic sense.

How are the dramatic reduction in home foreclosures and big rise median prices affecting the pipeline of single- and multifamily housing projects?

Mr. Glover: Throughout the Bay Area, the decrease in foreclosures and lack of inventory on the resale market has created a demand that has caused a rise in sales prices. This is creating a demand for new units, and therefore, many new construction projects are beginning to move forward. Most of these projects currently being constructed in the Bay Area were approved many years ago.

As these projects are completed and demand continues to increase, there is a concern that, due to the regulatory environment in the Bay Area and the length of time it takes to get projects approved, there may be a shortage of buildable lots in the foreseeable future.

How have regional construction costs been changing?

Mr. Glover: Construction costs, both “hard” and “soft,” have continued to increase during the economic downturn. Many of those costs are being driven by an ever-changing regulatory environment and overall increase in costs to produce materials and services

Any increase in the cost to construct housing during this unstable economic time is extremely concerning to builders who are considering moving forward with projects.

How are regulations affecting residential construction locally?

Mr. Glover: The regulatory environment at the state, regional and local level continues to change, and we as an industry are constantly adapting to these changes. New homes in the Bay Area are the most energy-efficient homes in the nation.

Builders have been at the table during the planning process of the Sustainable Communities Strategy for the Bay Area and continue to support a plan that is feasible and creates much-needed housing and jobs for the Bay Area.

It is important to remember that an increasing regulatory environment leads to an increase cost to do business in the region. Issues such as affordable housing, energy-efficiency, greenhouse-gas reduction, etc., are not the just the responsibility of the construction industry. These issues are the responsibility of all.

Asking the building industry to, in many cases throughout the Bay Area, be the only ones contributing to the improvement of these issues is short-sighted, places an unfair burden on the construction industry and ultimately shows a lack of concern for these very important issues.