For each of the last 14 Septembers, JD Power and Associates has published its annual report on homebuilder customer-satisfaction ratings. There will be no such report this year.
The company, whose ratings are well-reported and constitute a sort of gold seal of approval used heavily in marketing efforts, isn’t doing a survey on any market this year. It’s yet another sign of just how depressed the home construction industry has become.
Last year it was tough enough to get a report done on satisfaction with homebuilders and new-home quality, said Dale Haines, senior director of JD Powers’ real estate and construction group. This year, it turned out to be impossible.
“We were hopeful that based on the volume of closings in 2010, we had some early indications that it might not be too bad,” Haines said. “We operated under the assumption that there’d be enough closings for us to do our research, and as the year continued on, the picture became less and less optimistic.
“We were just not able to get a sufficient level of transactions to survey to meet our standards for research rigor.”
To get a true read on a market, the company needs at least 150 annual closings for a given builder and needs at least four to five builders that are generating that kind of sales volume. It also needs a sufficient number of customers to return its surveys.
If there had been any market that even came close this year to meeting all the criteria, it would have been Houston, Haines said.
The Chicago market was last included in the report in 2009, when JD Power reported survey results for 24 markets. In that report, Pulte Homes ranked No. 1 in customer satisfaction locally, and Del Webb took the top spot in the assessment of new-home quality.
In 2010, the list of markets surveyed was down to 17, and Chicago wasn’t one of them. However, JD Power noted that increased competition among builders, amid a shrinking pool of eligible homebuyers, caused customer satisfaction with homebuilders to improve for a third consecutive year and new-home quality to improve for a second consecutive year.
What makes Chicago difficult to survey is the same thing that affects reports on such markets as New York, Miami and Seattle, that being a product mix that’s heavy on high-rises. That means the overall sales volume numbers can be deceptive because they can include so many closings in one big building that delivers units to the market, and the consumer’s experience in shopping for and purchasing that type of home is so different from, say, a single-family detached home in another market.
Given the way that builders have either fallen by the wayside or have reinvented themselves by building fewer homes, taking over defunct builders’ projects or sprucing up foreclosures for sale, JD Power is figuring out how to reinvent itself in terms of how it looks at homebuilders.
“We haven’t given up on the industry,” Haines said.
Don’t sugarcoat it. Fannie Mae came out Monday with its monthly economic outlook, and its predictions largely are in sync with what consumers have come to expect of the housing market.
“The public doesn’t expect interest rates to go anywhere. Neither do we,” said Fannie Mae chief economist Douglas Duncan.
The rates on 30-year, fixed-rate mortgages are predicted to stay under 4.5 percent through the end of 2012. But just as those are staying low, so, too, are home prices, according to the agency’s forecast. Prices on newly constructed homes will have fallen about 4.7 percent between January and December.
Meanwhile, existing-home prices are expected to continue to fluctuate into next year, but the economists believe that any gains in home prices are due to seasonal factors and declines in distressed inventory. In other words, the gains are temporary.
Consumers, Duncan said, agree with Fannie Mae’s economists, who predict a decline in home prices, and that comes at the same time that consumers are dealing with higher expenses relative to their incomes.
“They’re basically saying they don’t know why this would be a good time to borrow $200,000, or something like that, to buy a house,” Duncan said.
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