Oh Canada!

I’m in Victoria, British Columbia, at the Canadian Home Builders’ Association (CHBA)conference. I was the luncheon speaker yesterday, in a session sponsored by the Canadian Wood Council (CWC). My presentation and message were warmly received, but perhaps only because our country was properly humbled with the Olympic hockey loss. After I acknowledged their hockey superiority, everything else I had to say sounded a little wiser, or at least worth politely listening to. I can’t imagine any words from an American would have been appreciated had the hockey gold not been won by Canada.

It’s not just in hockey that we’ve been humbled, however. The average Canadian home is better than the average American home*. The CHBA has consistently sought to raise standards, lead the research into better materials and methods, champion good innovations, and support education and training. They take pride in the quality of Canadian housing, and are dedicated to continually improving it. In the discussions and meetings I’ve had with the builders here—and in all the CHBA reports I’ve been reading—there’s a consistent theme about raising the bar, whether the subject is energy, durability, safety, or construction efficiency. It’s what trade associations are supposed to do and they do it with diligence.

The U.S. homebuilders’ association (NAHB), on the other hand, gives lip service to standards improvements, but spend much of their leadership effort in lobbying against code or regulatory changes that would help to enact what they say they are for. Instead, they fight hard to minimize standard upgrades with the might of their “experts” and attorneys, using funds from their membership dues. If we were scoring a game of homebuilders’ associations in a competition of doing what is right for their consumers and their country, this one is not nearly as close as the hockey game.

But that’s not all. The Canadian banks didn’t get caught up in the sub-prime lending disaster. They have constraints built into their regulations that prevent that kind of wild, free-for-all gaming of homebuyers. Since Canada is so affected by what goes on south of their border, their economy and market was deeply influenced by the bubble mania, but the builders I’ve been talking to didn’t let it steer their business plans into risky territory.

On the other hand, the U.S. economic collapse in late 2008 did pull the Canadian homebuilding industry down with it. They were, and are, innocent victims. Still, the Canadians have been buffered from deeper problems by their stronger banks, by the lack of foreclosures, and by the wisdom of the building community to stick to building homes rather than chasing baseless profits.

Yesterday, in one of the conference reports, an economist said that they are already in a “post recession growth phase.**” Though the recovery is somewhat fragile (again, mostly due to U.S. problems), the mood at the conference has been upbeat and optimistic. Several of the builders I talked to said they actually haven’t suffered much. Because they didn’t get greedy on the upside, they didn’t get unduly punished on the downside. Overall, the Canadian housing start numbers are currently down about 30% from the pre-recession peak.

That sounds pretty bad, but the recenthousing news from the U.S. is much, much worse. According to the following chart, we’re now at the very lowest point in the last 45 years.

Homebuilding Downturn ChartWe’re down to a seasonally adjusted annual housing start rate of 309,000, which is a full 80% off our peak in 2005, 2006. And with this news, there is absolutely no discussion in the U.S. homebuilding industry about post-recession anything. In fact, on our side of the border, we are clearly in the throes of a homebuilding depressionthe likes of which not many living builders have seen before. So score this one for Canada too, but pity them as well because this wasn’t a game of their choosing or creation.

It is time for us to recognize that in many things we are not the best. Really. We don’t have the best hockey team. Our economic policies are not guided by the best policies or the most common sense. Our citizens can’t expect to have the best homes that can be built for the money they spend. Our trade associations don’t always strive for better because they tend to get caught up in striving for more.

It’s time to show a little humility. We would do well to go north of our border and listen to a little Canadian wisdom.

*This is a subjective statement and I’ll stick to it, but my caveat is that U.S. homebuilding right now is very slow, but the quality standard is pretty high for those that are being built. The low-skilled labor is off doing different low-skilled jobs, or they’re unemployed. The quick-buck builders aren’t building because there are no quick-bucks slipping from anyone’s fingers. The good and dedicated builders and tradespeople are hanging on and continuing to do good work. So the quality of the average American home may be equal right now.
**Here’s a stark difference that helps to explain the quicker turnaround: In the U.S., only 10% of homeowners have fully paid for their homes and 1 in 5 of those still paying are “underwater” on their mortgage, with many of those heading for foreclosure; in Canada 42% of homeowners have fully paid for their homes and the underwater problems aren’t significant because home values weren’t as seriously affected.

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