Building bust

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By Sherry Robinson

The daughter of a friend got a great deal on a house recently, buying on a short sale. My friend is happy – her daughter, a single mom, can stretch her budget farther.

These transactions are good for the buyer but not the seller or the bank and say something about real estate in general. In June, about 25 percent of home sales in the state were of distressed properties – foreclosures and short sales (lender and borrower selling a home for less than the balance owed).

Last week, listening to professionals whose colorful graphs showed lines heading in the wrong direction, I could understand the current furor over the state’s proposed new building code.

The Construction Industries Division wants to increase energy efficiency by 20 percent, an admirable goal.

But the CID went a little overboard by ratcheting up the model International Energy Conservation Code by 10 percent to create the New Mexico Energy Conservation Code. The new rules would make New Mexico a leader in the nation, says the CID.

The new rules would make New Mexico the most expensive place in the nation to build, say trade groups – home builders, Realtors and developers. They were quick to point out the state of their industry and the economy.

If this sounds like whining, return with me to the colorful graphs.

As the economy trailed off and long before the final implosion, construction was already in decline. During a four-year growth streak, New Mexico piled on 14,000 construction jobs.

We’ve lost most of them. In a slow economy with tighter lending standards, the inventory of new homes is up, and demand is down. An increased foreclosure rate now includes prime mortgages, not just sub-prime — a function of lost jobs.

There are a few rays of sunshine: New homes are going up at a better rate than last year, although they tend to be low-end homes.

Sales of existing homes are up statewide. And if you’ve owned your home for seven years or more, your home equity is positive.

“We can’t predict where housing stats will be this year,” said Katherine Carroll, of the Home Builders of Central New Mexico, speaking to a business group last week. “The loss to the economy is immense.” For every house sold, there are state and local taxes paid, and the new buyer will spend about $9,000 on furnishings.

She recalled a recent headline: “Housing Market Stumbles,” and observed, “The housing market doesn’t stumble, we all stumble.” Carroll sees “a slight sign of recovery,” but it’s a fragile recovery. Raise the cost of construction, and you delay the recovery.

In this climate, the state unveiled its proposed building codes.

To be fair, the CID didn’t just pull the new standards out of a hat; its year-long process did involve the industry. CID director Lisa Martinez seems mystified that industry representatives could nod their heads during meetings all year but now oppose the new codes.

One of these days, government people will learn that a business commitment made during better economic times can falter during a downturn.

But even now, the New Mexico Home Builders Association isn’t trying to kill the proposed code; the group asks that the CID delay implementing it until 2013. It’s a reasonable request.

Critics have a few other bones to pick. They particularly dislike a requirement that if an owner remodels more than half of an existing building, he or she must bring the entire building up to code.

This one is a cactus bed of unintended consequences.

Martinez allowed that the agency has now heard some “valid cost issues” and postponed its decision until July 30.

Supposedly, the new code is part of the governor’s legacy, but for a governor who rolled into office saying New Mexico was open for business, it doesn’t make sense.