02 July 2013

SNL Kagan

Cable nets build on housing market's resurgence
Practically everyone benefits from a resurgent housing market.
Homeowners feel a bit richer knowing chances are better they could sell their homes and not come out in the red. Realtors feel better knowing they can once again earn a living from their chosen profession. Even the president is undoubtedly relieved.
The cable industry is no different, as distributors rely on new housing formation to grow the number of multichannel subscribers, and several networks rely on home improvement and real estate programming to bring in viewers. The most notable among those networks, of course, is Scripps Networks Interactive Inc.'s HGTV.
 SNL Image
"The market has certainly seen a really robust uptick," Kathleen Finch, senior vice president and general manager of HGTV and DIY Network told SNL Kagan. "And certainly, when the real estate market heats up, the interest in HGTV heats up as well."
While Finch noted that HGTV does not make programming decisions based on breaking news out of the housing market, such as the latest home sales reports or interest rate movements, it considers some of the more notable trends and reflects those in its lineup.
For instance, with the home prices rising again, HGTV has seen a renewed interest in flipping houses.
"We actually have a number of shows that are about flipping," she said, adding that many are less about making a profit and more about restoring a neglected home.
"We have a series on both HGTV and DIY that does incredibly well called 'Rehab Addict,' and in it a builder and Realtor ... buy homes that oftentimes are for sale for $1," she said. "They're so old, they're so beaten down that it really takes a special type of person to come in and bring the homes back."
A more recent addition to the HGTV lineup is "Flip or Flop," which premiered in April. The show follows a husband-and-wife pair described by HGTV as "novice flippers" as they purchase homes at auction, renovate them and then list them on the market.
 SNL Image
"'Flip or Flop' tells the story of something that a lot of people are doing, which is buying homes that have been priced very favorably with mortgage rates that are very favorable, and then fixing them up, increasing the value of the home and selling them as the market picks up," Finch said. "So it's certainly something that we are putting on our air more and something that production companies are bringing to us more. It's amazing how many husband-and-wife teams and small businesses and individuals are doing this, and many of them are being brought to HGTV to build shows around. It's fun to see that it makes a great television concept, and our viewers like to watch it."
Walter Maloney, spokesman for the National Association of Realtors, told SNL Kagan that it is important to note that the "flipping" HGTV is talking about now is different than that which occurred during the recent housing bubble. For a few years prior to 2007, investors could buy a home and then almost immediately resell it for a profit.
"Obviously, we're not doing that anymore," Maloney said. "Property flipping is an abnormal behavior, and true property flipping as it was in the boom period isn't really occurring. What you are seeing is people purchasing homes and adding value by renovating and getting them up to the market standards or doing whatever they think is going to maximize the profitability of that home and then reselling. That's not really flipping. That's investing, renovating and then selling."
While the market may be seeing more investors now that housing prices are back on the rise, Maloney said the behavior overall is not new. "Long term, one out of five buyers is an investor, and a lot of them are doing that to make a living," he said.
Yet the NAR spokesman warned that buying homes and fixing them up to sell is not for the faint of heart nor the shallow of pocket. "If you're an individual, you've really got to know what you're doing," he said. "You have to do your homework on the neighborhood — what are the vacancy rates, what are the rental rates for comparable properties — so you can get an idea of, realistically, how much you can [sell or] rent the property for and how quickly. But then again, things don't always work out as you'd hoped. Sometimes it takes more [money] to get a home ready to rent or it takes longer than you think, so conventional wisdom is for an individual investor to have six months of cash reserves in case things don't work out. So it's not something for individuals to do casually."
He added, "You've got to really know what you're doing because you can easily get burned otherwise."
Still, it is easy to understand the growing interest in the improving housing market.
 SNL Image
"We've got six months of double-digit [year-over-year] price increases by our measure ..., and that's because there is inadequate supply," Maloney said, citing NAR data.
Indeed, total existing-home sales — which include completed transactions involving single-family homes, town houses, condominiums and co-ops — rose to a seasonally adjusted annual rate of 5.18 million in May, up 4.2% from 4.97 million in April. On a year-over-year basis, the figure is up 12.9% from 4.59 million in May 2012.
Additionally, the national median existing-home price for all housing types was $208,000 in May, up 15.4% from May 2012.
"We've got a pent-up demand with people's confidence up and their wherewithal up," Maloney said. "So sales have risen strongly and prices are now rising at an abnormal rate, and the only thing we can really do to alleviate that pressure is for homebuilders to increase construction activity 50% above current norms. We think construction is rising at sharp double-digit rates, but it needs to rise another 50% over current levels to temper long-term price growth. But we'll have stronger-than-normal price growth for the balance of this year."
Amid rising prices, HGTV has a show ready to help homebuyers afford a nice home. "Power Broker," which will launch in late July, follows two real estate experts as they tour fixer-uppers, foreclosures and short-sales with clients to show them the best buying strategies to get a great deal.
"It's a broker and a renovator and they work together. They help couples who have a certain budget in mind but of course want more than their budget will allow," Finch said. "He helps them uncover these kind of diamonds in the rough — sort of these old, dilapidated homes in really good neighborhoods, usually — and then with the money that he saves them by driving a really good bargain ... he puts it into renovating the home. So by the end of the show, these people with a limited budget end up with a really terrific and newly renovated home that they didn't think they could afford."
 SNL Image
Finch added, "It's a really great way for homebuyers, especially new homebuyers, to be smart about the market because they buy in the right neighborhood ... but they put the sweat equity into the house and they end up with a house that's really worth a lot more money."
Looking ahead, Finch is feeling optimistic about the prospects for both HGTV and DIY. She noted that both networks have seen solid ratings recently — May 2013, for instance, ranks as HGTV's highest-rated May ever among viewers 25 to 54 with a 0.5 rating, marking a 9% increase over May 2012.
Moreover, for the majority of the first half of 2013, HGTV was averaging an 8% ratings gain among prime-time viewers aged 25 to 54 compared to the year-ago period.
As for DIY, Finch said 2012 was a year of major growth at the network as the channel is continuing to find its audience. "One of the ways I like to think of it is HGTV is a little bit more for mom and DIY is a little bit more for dad. But both networks complement each other — DIY is a little more roll up your sleeves, get projects done, a little more landscaping and do-it-yourself projects, where HGTV is more focused on bigger projects and other people doing those big projects and real estate purchasing," she said. "We're really proud of DIY."
Asked what it would mean for HGTV and DIY if the real estate market continued to improve, Finch said the networks were obviously glad to see the current trends, but that HGTV and DIY try not to get too concerned with the status of the market. "We try not to be too literal in exactly what's going on in the market, especially because our audience is a broad, nationwide audience. So while the market may be red-hot in California, that doesn't necessarily mean that it's red-hot in Illinois," she said. "So we try to give a very broad view of what's going on in the U.S. housing industry."
Additionally, Finch noted that HGTV viewers are not always buying or selling a house. "[Our viewership] is made of people who are living in homes right now and who are interested in homes right now," she said, adding that the network tries to make content that will still seem relevant months down the line, whatever happens in the market.

<< Back