The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better.

NEW YORK (Fortune) -- The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it's an almost certain sign that the path to a housing recovery is finally in sight.

If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That's the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida.

Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.

Slideshow: Summertime poolside living

As a result, the market is now swamped with one million new and existing homes for sale that aren't occupied, and hence need to sell quickly. That's a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.

"For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S.

The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly.

Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
The return of the first-time buyer

The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses.

But when the first-timers are absent, the entire buying chain gets frozen.

Today, newbies are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than the McMansions of the boom, selling for far lower prices. KB Home's average selling price dropped to $248,0000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.

So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they're paying a landlord. Call it the New Affordability.

Here's how the numbers play out: Single-family housing starts are now running at fewer than 500,000 a year. The normal demand for housing, based on immigration and household formation, is around one million units.

We won't get back to that figure for a while because so many people rushed to buy homes during the boom.

But with first timers returning, sales should rise to almost 700,000 units by the end of next year, according to Bernard Markstein, senior economist for the National Association of Home Builders. That means sales will soon exceed new production by as much as 250,000 units a year.

That margin forms the foundation of the housing revival that comes in four steps.


Step 1:
First, the return of first-time buyers will shrink the overhang of new houses for sale.




Step 2:
Second, because so few new homes are being built, first-timers will start buying existing homes from owners who want to move up but have been trapped by the dearth of buyers. Their improved fortunes, though, come with a big caveat: The prices of new homes are now lower than comparably-sized existing homes. It's as if used cars are selling for more than new ones. That can't last. So move-up buyers are going to have to accept less than they had hoped to get for their current homes.



They'll get a big break as they trade up, however. Unless they bought at the height of the boom, they'll still sell at a profit. They can then use that equity to buy bigger homes at bargain prices. During the bubble, homebuilders started pushing up home sizes to 3,500 square feet or more. It's those behemoths that are selling for the steepest discounts today.


Step 3:
Next, housing starts should start rising, probably next year. The increase, however, will be slow and gradual. For the next two years at least, homebuilders will compete ferociously with existing home sellers for customers.




Step 4:
Eventually, the glut of existing homes will disappear as well. The excess of new-home buyers over new homes being built makes that inevitable. But the oversupply is so enormous that the healing process could take as much as three more years. Only then will prices in former bubble markets start rising again.


What could go wrong?

One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. Right now, the first-timers are gorging on 6% loans guaranteed by the FHA. But rates may not stay there.

If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable.

The New Affordability is now in place. But if rates rise, we'll have to establish a New New Affordability - at even lower prices.

6,000 kontraktor kritikal

KUALA LUMPUR 29 Jun - Kira-kira 6,000 kontraktor Melayu yang terlibat menjayakan projek-projek rakyat di bawah Rancangan Malaysia Kesembilan (RMK-9) menunggu masa untuk menghentikan pembinaan ekoran kenaikan harga bahan binaan yang tidak terkawal dan melampau.

Timbalan Presiden Dewan Perniagaan Melayu Malaysia (DPMM) Terengganu, Abdul Razak Yaacob berkata, pihaknya menjangkakan antara 60 hingga 70 peratus projek tersebut akan terbengkalai jika masalah kenaikan harga itu dibiarkan berlarutan.

Menurutnya, keadaan akan lebih kritikal sekiranya kerajaan tidak mengambil sebarang tindakan dengan kemungkinan besar jumlah projek yang terbengkalai boleh mencecah 90 peratus menjelang hujung tahun ini.

''Kontraktor terbabit memerlukan suntikan tambahan daripada kerajaan iaitu dalam bentuk ex-gratia iaitu 20 peratus daripada harga tender asal. Ini disebabkan harga bahan binaan semakin tinggi terutama sejak kenaikan harga minyak baru-baru ini.

''Jika permintaan ini tidak diambil perhatian oleh kerajaan, mereka terpaksa menghentikan projek kerana tidak sanggup lagi dibebani kenaikan kos pembinaan yang melampau,'' katanya kepada Utusan Malaysia di sini hari ini.

Peningkatan harga barang binaan menjadi isu sejak awal tahun ini dan ia menjadi kritikal apabila berlakunya kenaikan minyak seperti mana yang diumumkan oleh kerajaan baru-baru ini.

Keadaan yang serupa berlaku di Johor apabila sebahagian besar kontraktor bumiputera di negeri itu tersepit dengan masalah kenaikan harga bahan binaan.

Yang Dipertua Persatuan Kontraktor Melayu Malaysia Negeri Johor, Ir. Mahmood Amir berkata, kontraktor di Johor serta di seluruh negara secara amnya memerlukan bantuan segera daripada kerajaan bagi menangani masalah yang amat kritikal itu.

Dalam pada itu, ketika mengulas pengumuman Perdana Menteri, Datuk Seri Abdullah Ahmad Badawi pada Khamis lalu berhubung peruntukan pembangunan tambahan, Abdul Razak mengakui ia boleh dianggap melegakan.

''Namun begitu apa yang perlu dilakukan sekarang kesemua kontraktor berkenaan perlu dibantu segera kerana keadaan mereka semakin tersepit,'' katanya lagi.

Beliau berkata, mereka terbabit dengan projek-projek rakyat seperti pembinaan balai polis sekolah, hospital, masjid, klinik dan jalan kampung yang bertujuan untuk memberi kemudahan kepada orang ramai.

''DPMM Terengganu amat bimbang melihat perkembangan ini kerana akhirnya yang menjadi mangsa adalah rakyat sendiri kerana projek-projek itu gagal disiapkan.

''Kami juga sedih apabila melihat nasib kontraktor Melayu yang semakin menderita disebabkan masalah kenaikan minyak yang secara langsung memberi kesan kepada harga barang binaan,'' katanya.

Dalam pada itu, beliau berkata, masalah itu berpunca daripada harga tender yang ditawarkan tidak lagi relevan dengan keadaan semasa.

''Mereka mendapat tawaran kerja pada awal tahun lalu iaitu selepas melalui proses tender terbuka dan sebutan harganya pula adalah berdasarkan harga lama.

''Apabila berlaku kenaikan harga bahan binaan sudah tentu mereka tidak boleh menampung peningkatan yang berlaku itu apatah lagi jika peningkatannya berlipat kali ganda,'' katanya.

Ditanya mengenai bentuk kenaikan harga binaan, Abdul Razak berkata, antaranya simen naik 60 peratus, besi (60 peratus), kayu (15 peratus), sewa jentera (40 peratus), batu (50 peratus) dan konkrit (30 peratus).

''Sebagai contoh harga simen sebelum naik RM11 tetapi sekarang telah jadi RM18. Dahulu harga besi RM2,000 setan tetapi sekarang sudah jadi RM4,000 setan.

''Begitu juga dengan sewa jentera. Dahulu kadarnya ialah RM8,000 sebulan tetapi kini naik RM12,000 sebulan. Jika kontraktor sewa selama 18 bulan berapa yang mereka terpaksa bayar?'' katanya.

House prices up 30%

Developers: We've no choice due to higher building cost

HOUSE prices need to be raised by 30% due to the hike in building materials and petrol prices, Nanyang Siang Pau reported.

Master builders Association of Malaysia president Patrick Wong said Middle-range house prices had been increased from RM150,000 to RM190,000.

"The developers have no choice but to raise the price as the cost of building the houses has increased. The price of houses was adjusted two weeks ago," he said.

Dr Mahathir Mohamad: A Weak Government is not good for Multi-racial Malaysia

Dr Mahathir Mohamad: A Weak Government is not good for Multi-racial Malaysia

It is true... In construction industry or any other industry, if the government is weak... So many people will suffer.

Just imagine if the government cannot decide the best solution on controlling the increment of petroleum prices. How many people will suffer? 'Rakyat' was over loaded by increasing of food prices. The industry that needs supports from lots of trades surely got problems. Developer -> contractor -> sub contractor -> trading house -> supplier -> production -> raw material -> supporting industry(machine) and lots more.

If it was done by a single company... sure so many unemployed people in this country. Unless they willing to work as general labour who are paid just for their family dinner (RM20)... fasting 7 days a week.

The finish product will be selling under the cost or abandoned at all... who will absorbed the loss? Not a big boss... it was a grass root... your 'rakyat'.

Lets 'Rakyat' become more leisure on their lives, got better homes, driving best malaysian car and lives with their family after pushing their limits ... study at university to spend lots of money for books, work harder to pay taxes...

Don't just setup Agency KPK to help bankers that was gains billions to generate another billions... please help the people that needs.

Kick out the people that was not loyal to government. Let them suffer in lives and work as a labour... be a replacement to foreign workers.

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CONSTRUCTION WITHOUT STRUCTURAL DESIGN

Practice of construction without considering safety factor or without endorsement by structural engineer...

The owner only ask for good finishes... they might not consider the strength of the structure.

Ever heard about the whole roof collapse?

Some example that i ever seen...

• Additional 1st floor slab , column, roof beam and roof... sitting on single storey low cost shop 'roof beam'...
• Intermediate lot Steel Structure bolted to neighbor '20 years OLD brick party wall'... not support by foundation/column from ground.
  

Is it cost saving or 'Anti SAFEty'... Both premises are open for public...who shuld be blame?

DO WE NEED FOREIGN WORKERS?

Why foreign workers work harder?

• challenging to get similar job in their country
• lower cost of living in their country
• we pay them higher compare with what they get at their hometown