Lead-paint Rule On the Horizon

The United States Environmental Protection Agency’s (EPA) recently issued lead-paint rule will substantially impact remodelers and maintenance professionals.

“It’s going to affect any house or structure built before 1978,” says Matt Watkins, an environmental policy analyst with the National Association of Home Builders (NAHB). “Remodelers will have to either prove that there is no lead paint in the area that’s being worked on or will have to incorporate lead-safe work practices in that area to prevent any additional lead hazard from being created in the dwelling.”

The EPA has put a price tag of $35 per job in compliance costs, but Watkins expects costs will exceed that estimate, citing additional time required for lead-safe work practices, additional materials such as disposable plastic or impermeable drop cloths, and the cost of a required eight-hour training course.

Concern over cost and compliance issues, aside Ada Duffy, president of the Milwaukee Lead and Asbestos Information Center, notes that the lead issue isn’t exactly a new one for remodelers; they’ve had to deal with Occupational Safety and Health Administration (OSHA) standards for worker protection for some time, as well as lead-safe practices when working on federally funded projects.

“A lot of contractors who are working smart are already using many lead-safe practices — they just don’t know it,” she says, referring to those contractors who maintain a clean jobsite as a matter of customer satisfaction.

Certification in lead-safe practices also can be employed as a sales tool, she notes, adding that lead-paint dust generated from the sashes of older windows can be a significant motivation for their replacement.

Covered facilities include residential, public or commercial buildings where children under age 6 are present on a regular basis as well as all rental housing. The rule applies to renovation, repair or painting activities. It does not apply to minor maintenance or repair activities affecting less than 6 sq. ft. of lead-based paint in a room or less than 20 sq. ft. of lead-based paint on the exterior. Window replacement is not considered minor maintenance or repair.

Certain work practices are prohibited for every renovation, including minor maintenance or repair jobs. These prohibited practices are: open flame burning or torching; sanding, grinding, needle gunning, or blasting with power tools and equipment not equipped with a shroud and high efficiency particulate air (HEPA) vacuum attachment; and using a heat gun at temperatures greater than 1,100 degrees F.

After the renovation is complete, the firm must clean the work area. The certified renovator must verify the cleanliness of the work area using a procedure involving disposable cleaning cloths.

One criticism of the rule involves the method for ensuring that lead dust is adequately cleaned up and removed. The Alliance for Healthy Homes and the National Center for Healthy Housing, both of which were generally supportive of the new ruling, would like to see a more stringent method employed. The NAHB, on the other hand, favored a no-visible-dust-and-debris-standard. The EPA standard is a compromise that requires a wet-cloth test in combination with a comparison standard.
Another area of concern is that the EPA ruling contains no safe-harbor provisions for remodelers who comply with the regulation, Watkins notes. Their liability protection under existing insurance policies, which may contain pollution exclusions, also is an area that warrants attention, he says.

Additional information is available at www.epa.gov/lead.

Remodeling Forecast

Recovery Will Be Slow

Falling consumer confidence and a weakening economy are inhibiting remodeling spending according to Harvard’s Joint Center for Housing Studies. The center’s Leading Indicator for Remodeling Activity (LIRA) reports that homeowner spending for home improvement activity will continue to decline, falling by an annual rate of 4.8 percent through the end of 2008.

“Spending on home improvements continues to be sluggish, as homeowners respond to falling home prices,” notes Nicolas P. Retsinas, director of the Joint Center for Housing Studies.

Data through January 2008, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, show declines in the family home prices across the United States continued into the new year.

Both the 10-city and 20-city composite indices are now reporting annual declines in excess of 10 percent. The 10-city composite set yet another new record, with an annual decline of 11.4 percent. The 20-city composite recorded an annual decline of 10.7 percent.

“Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007,” says David M. Blitzer, chairman of the index committee at Standard & Poor’s. “Home prices continue to fall, decelerate and reach record lows across the nation. No markets seem to be completely immune, with 19 of the 20 metro areas reporting annual declines in January and the remaining — Charlotte, N.C. — eking out a benign 1.8 percent growth rate.

“Looking deeper into the data, you can see that 16 of the metro areas also are reporting record low annual growth rates. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking five consecutive months. On top of that, the declines have increased through time, in general, as 13 of the 20 MSAs reported their single largest monthly decline in January.”

Las Vegas and Miami were the weakest markets in January, reporting double-digit annual declines of 19.3 percent, followed by Phoenix at -18.2 percent. In January, Washington and Minneapolis slipped into negative double-digit territory with annual returns of -10.9 percent and -10.0 percent, respectively.

The National Association of Realtors (NAR) Pending Home Sales Index, (PHSI) a forward-looking indicator based on contracts signed in February, slipped 1.9 percent to 84.6 from an upwardly revised reading of 86.2 in January, and was 21.4 percent lower than the February 2007 index of 107.6. “The slip in pending home sales implies we’re not out of the woods yet, though an era of successive deep sales declines appears to be over,” NAR chief economist Lawrence Yun says.

The PHSI in the Northeast rose 3.2 percent in February to 71.8 but remains 25.4 percent below a year ago, according to NAR. In the Midwest, the index declined 3.7 percent to 82.7 and is 17.4 percent lower than February 2007. The index in the South fell 5.5 percent in February to 85.0 and is 30.3 percent below a year ago. In the West, the index rose 2.1 percent in February to 95.8 but is 6.1 percent below February 2007.

“It looks unlikely that we will see any improvement in the remodeling market until 2009,” remarks Kermit Baker, director of the Remodeling Futures Program of the Joint Center. “Currently, the second half of this year is shaping up to be weaker than the first half.”

New Home Sales

Further Decline In February

Sales of new single-family homes fell by 1.8 percent in February to a seasonally adjusted annual rate of 590,000 units, according to newly released numbers from the U.S. Commerce Department. This sales pace was nearly 30 percent below a year earlier and down by 58 percent from the peak in July 2005.

Regionally, sales activity was mixed in February. The Northeast registered a 40.3 percent decline while the Midwest posted a 6.4 percent decline, the South posted a 5.7 percent increase and the West eked out a 0.7 percent gain.

Second Homes

Sales Decline for Vacation Homes

The combined total of vacation- and investment-home sales declined in 2007, but still accounted for 33 percent of all existing- and new-home sales, which is close to historic norms, according to the National Association of Realtors (NAR).
The market share of homes purchased for investment last year was 21 percent, down from 22 percent in 2006, while another 12 percent were vacation homes, compared with a 14 percent market share in 2006.

NAR’s annual Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.6 percent to 740,000 in 2007 from a record 1.07 million in 2006, while investment-home sales fell 18.1 percent to 1.35 million last year from 1.65 million in 2006.

Lawrence Yun, NAR chief economist, said the findings suggest different cycles for each of the sectors over the past two years. “Investment-home sales declined sharply in 2006 as speculators disappeared, leaving the market to serious buyers, with the pattern continuing in 2007,” he said. “Vacation-home sales rose to a new record in 2006 because there was a pent-up demand from buyers who couldn’t find a property as a result of tight supplies in preceding years.”

The overall sales decline in 2007 resulted from a combination of factors. “Certainly, second homes are discretionary purchases and there is a natural tendency to pull back from big-ticket items in periods of uncertainty,” Yun said. “The other factor is the disruption in the mortgage market.”

Yun said lifestyle factors and strong demographics remain positive for the vacation home market.