Nation's Building News Online: May 5, 2003Print All Articles Text Version |
|||
Sponsored by Countrywide
Home Loans National Builder Division
|
|||
Condominiums in Carmel Win Pillars AwardThere aren’t many places where a builder can put 20 homes and a hotel on a half-acre of land in a single-family residential neighborhood and sell each home for between $1 million and $1.5 million. But that formula worked for Viejo Carmel, a condominium development in upscale Carmel-by-the-Sea, CA, that was recently named a Pillars of the Industry Award Winner for Best For Sale Housing Community, by NAHB Multifamily. The infill site is near the scenic coastal village’s shopping district on Ocean Avenue, and is surrounded by expensive single-family homes. While Clint Eastwood is no longer Carmel’s mayor, the town’s many other high-profile residents were not about to accept a plan for a high-density multifamily development that didn’t fit the look and character of the adjacent homes. Multifamily architects McLarand Vasquez Emsiek and Partners, Irvine, CA, planned out five cottage scale buildings holding a total of 20 units, with the small-scale hotel sited atop the largest of the buildings. The units were modest in size, because the homes were designed to appeal to second-home and vacation home buyers. The smallest unit is a 545-square-foot studio, and one-bedroom units have either 660 square feet or 710 square feet depending on the floor plan. Buyers interested in more space could opt for either a 990-square-foot flat or a 1,160-square-foot, two-level townhome. The architects began their planning under the ground, where a one-level parking garage built into the sloping site would ensure that no home owner would have to cruise the streets to find parking — or take street spaces away their neighbors. Each of the four smaller buildings has the look of a large, single-family home. And to further complement the residential nature of the neighborhood, the designers opted to add variety to the exteriors of the homes. They gave the buildings on the north side a Spanish Colonial look, with clay roof tiles, copper details, wrought iron railings and small balconies. On the south side, the homes presented a French Tudor look, with wood shake roofs, brick chimneys and a smooth plaster and half-timber exterior. Interior appointments reflected the exteriors. The project, built by Lexor Builders, Los Gatos, CA, opened in the summer of 2001 — and the developers immediately had to deal with the disastrous impact of the Sept. 11 tragedy on the economy. In spite of the inauspicious timing, the project sold well; while prices softened somewhat, the residences continued to bring higher prices than comparable local homes. All the units sold, and the project lived up to the developers’ fiscal expectations. Building News Coast To CoastSan Francisco Eyeing Blueprint for More HousingThe San Francisco Planning Department has submitted a proposal to spur housing construction by allowing higher-density buildings in the Mission District, South of Market and transit corridors as well as apartments above stores and parking lots. In addition, builders would not always have to provide parking spaces for units built near public transit; and in-law apartments would be legalized. However, new development must complement existing homes and neighborhoods. To ease the concerns of residents opposed to higher densities, Adam Kruggel of the San Francisco Organizing Project suggests the city should offer more affordable units and spend more on public transit. The city is building just 1,130 housing units each year, though 2,717 are needed. Construction Builds MomentumThe U.S. Commerce Department's Census Bureau estimates that construction completed during March of this year reached a seasonally adjusted annual rate of $868.5 billion That total is about 1% below the revised February estimate of $877.4 billion but nearly 1.6% ahead of year-earlier figures. Census officials add that spending on new housing construction was up slightly to a seasonally adjusted annual rate of $328.5 billion in March, while nonresidential construction dipped a notch to a rate of $161.5 billion. Earth-Friendly, Energy Efficient Home Program StartsNebraska's energy office is working in conjunction with the state home builders group to promote energy-efficient and environmentally friendly dwellings. Under the Nebraska Certified Green Building program, state residents can have homes built by a certified green builder using such elements as recycled products and energy-efficient components. The approach reportedly results in up to $86 per month in savings on utility costs. In Regulation, Shades of GreenIn Massachusetts, developers say the Endangered Species Act — which forces builders to modify their plans if salamanders, dragonflies or spotted turtles inhabit a property targeted for development — and the accompanying Wetlands Protection Act can delay their projects for years and add tens of thousands of dollars in consultant and specialist fees to the cost. In response, Governor Mitt Romney hopes to streamline the process for developers either by eliminating the Department of Environmental Protection's part in wetlands appeals or by shortening the appeals process. Meanwhile, former state environmental secretary John DeVillars wants to establish a wetlands bank to focus preservation on larger areas, rather than smaller habitats. Despite builders' criticisms, Natural Heritage and Endangered Species program manager Henry Woolsey says compromises can be made — although efforts to protect both development and wildlife are costly. Projects in Sturbridge, Hopkinton, Concord and Groton already have been scrapped or shrunk by the regulations. According to Choate, Hall & Stewart attorney Hamilton H. Hackney, the state was supposed to have issued a map detailing various habitats and informing developers of potential problems; however, such a map would likely spark lawsuits from property owners concerned about land-use controls. As a result, each property currently is evaluated separately, and the developer must perform an analysis and inventory if endangered species are found. Study Hails the Value of Shade TreesResearch by Montclair State University and NASA's Goddard Institute for Space Studies reveals the cooling effects of shade trees — particularly in "urban heat islands," or crowded cities where buildings and roads absorb heat. Not only do trees counter that effect, the study concludes, but they also can improve the quality of life for residents. According to Montclair geography professor William Solecki, "It was always the neighborhoods in the urban core, where there was block after block of rowhouses with black tar roofs and no tree coverage, where we recorded the highest temperatures." This finding was more true in newer suburbs than in older but similarly dense communities that are more likely to have trees. Oaks, maples and other shade trees can slash the temperature of a city block by five degrees, according to the research. Meanwhile, Lawrence Berkeley National Laboratory data shows that a single full-grown tree could shave $20 off home owners' yearly air-conditioning bills. As a result of the Montclair/NASA study, New Jersey's Department of Environmental Protection wants the Board of Public Utilities to spend $36 million to plant 100,000 trees in Camden, Newark, Trenton, Elizabeth and Patterson. However, the Philadelphia-based Energy Coordinating Agency Inc. argues that a better solution is to install white polymer and calcium carbonate roofs on rowhouses to reflect the sun. Top Funds Still Carry Torch For Home BuildersCentex and Ryland Group are among the home builders whose stocks are being scooped up by the country's top-performing funds. In fact, three funds — including CGM Realty Fund and Hotchkis & Wiley Small Cap Value Fund — recently purchased $27 million of Centex stock. The company is favored because of its diversified portfolio, which includes home building, investment real estate, financial services, and construction services and products divisions. Though the technology and healthcare sectors are being pushed to the forefront, IBD's Building-Residential /Commercial Group ranks 71st out of 197 industries. 'Green Roofs': Gardens Go to New HeightsAn increasing number of home owners in Seattle and the Northeast in general are embracing green roofs, which minimize storm-water runoff, create better insulation and reduce the urban heat effect. Roof gardens range from full lawns to trees and herbs. Despite the benefits, many home owners balk at the costs involved. Indeed, green roofs cost as much as $25 per square foot, versus $5 per square foot for a traditional roof. These roofs feature drainage layers to clean storm water, three to four inches of lightweight soil and a variety of drought-resistant plants. Casual Insurance Inquiry Can Be CostlyThe Comprehensive Loss Underwriting Exchange (CLUE), the insurance industry's electronic risk-prediction database, features five years of claims and property-damage information on home owners and their properties. Any negative marks on the report, including poor credit scores or even a call to an insurance agent regarding deductibles, can make it more difficult for home owners to sell their property because buyers will be unable to obtain coverage or will be forced to pay exorbitant premiums. In response, the National Association of Realtors® has established a task force, which will meet next month to suggest reforms. In the meantime, consumers are urged to obtain copies of the CLUE report before buying or selling a home and be aware that any inquiry could negatively impact the risk score on the residence. Lairs of LuxuryLuxury home buyers continue to spend hundreds of thousands of dollars on the most sophisticated options and upgrades, even as the high-end market overall has slowed. According to industry insiders, many spend 20% of the base price on these extras; and they have more to choose from than ever before. Popular upgrades include higher basement ceilings, waterfalls, in-shower stereos, walk-in refrigerators, master-bedroom fridges, cappuccino centers, heating coils in the floors, heated driveways that melt ice and snow, putting greens, chandeliers, mahogany handrails, stone tiles, molding and exotic or "reclaimed" wood floors. Long Island Builders Institute Chairman Cliff Fetner says affluent buyers usually get everything they want upfront because many extras are cumbersome to install later on. To avoid delays, subdivision builders keep upgrades to a minimum; but ultra-luxury buyers, whose homes take two or more years to complete, are given free reign to choose the most unique accessories. New Concepts in Real Estate IndustryTechnological innovation is driving the growth of a new breed of residential property brokerage firms that are designed to satisfy newly emerging consumer needs. Realty companies offering "one-stop shopping," meaning that they cover all facets of the customer's home buying and selling needs — including relocation services — have been around for years, for example; but they are becoming more commonplace in today's competitive environment. Not only do these entities promote aggressively to fend off competition from new sources — specifically banks — but, as sales associates demand an increasingly larger cut of transaction fees, they also provide a source of revenue to brokerages above the sales commission. Also rising in popularity, meanwhile, are "buyer brokerages," which help bring down liability risks by dedicating agents exclusively on behalf of home buyers, thus avoiding any conflict of interest. Additionally, many realty businesses are offering fee-based services for a competitive edge; while others still are experimenting with a compensation system that pays sales agents a salary instead of keeping them on as independent contractors. Finally, Web-based brokerages, or virtual real estate companies, continue to try to capture a niche of the market, although they have not garnered much attention to date given consumers' preference for dealing with a flesh-and-blood professional when making such a big-ticket purchase. Poll: Real Estate Values Have Room to RiseThe existence of a housing "bubble" continues to be a point of contention, with some economists warning that residential property values are about to burst and others calling the chance of a major price collapse slim. U.S. consumers, meanwhile, continue to put a rosy face on the outlook for the home market, according to a poll taken as part of Gallup's annual Economy and Personal Finance Survey. More than 80% of the 1,018 telephone respondents agree that now is the time to purchase a residence. While only a fraction of the group believe that mortgage rates have reached bottom, most concur that the ultra-low trend cannot be sustained; nearly half — 47% — expect interest rates to rise within the next six months. Remaking HistoryAlthough working with historic buildings involves unforeseen conditions and almost implied cost overruns, the marketability of such structures is worth the hassle for some developers, explains National Trust for Historic Preservation's community partners program director John Leith-Tetrault. Developers must first decide to preserve, adaptively reuse or radically revamp the building, and then they should communicate with the local landmarks' commission about the project in order to avoid future hassles and extra expenses. Developers who effectively present projects to the historic review board will often ask to return a building to its original condition on one side in exchange for revamping the building on another side, says Tishman Construction first vice president Jeffrey Dodd. Future tenants of renovated historic buildings will pay more for a creative space with historic value. Self-Sustaining Homes Could Mean the End of Utility Bills or Even the End of UtilitiesHome builder Centex Homes incorporated a Sub-Zero refrigerator, iridescent black-glass photovoltaic panels, advanced water-heater design, digital utility meter and grid connectivity in the Los Olivos Pilot Zero Energy House in Livermore, CA. The house can generate up to 2.6 kilowatts by midday from its photovoltaic system, but can tap into the electricity grid during overcast days and at night. Builders used an insulated concrete foundation, cellulose-filled walls and double-panel glass for natural cooling, while a solar hot-water system and on-demand heater heats the house on cool days. The house also uses Davis Energy Group's Night Breeze, an experimental system equipped with sensors and a computer-controlled fan for heating, cooling and air circulation. Project manager Trece Herder credits all these factors, plus the orientation of the house and landscaping, with providing net-zero energy savings. Centex is participating in DOE's Net Zero Energy Homes program with other builders, such as John Wesley Miller, who is building 99 solar-powered homes that are 80% more efficient than conventional homes. Net-zero technology could lower photovoltaic costs and expand the market by encouraging home owners to install energy-efficient systems. Energy-efficiency upgrades increase the price tag of homes, but tax incentives available in some states help offset costs. Financing a Vacation Home? Getting a Loan Is No PicnicSecond homes are eligible for mortgage interest tax deductions just like a primary residence, as long as the property is not a rental. Even so, lenders typically require bigger downpayments, near-perfect credit, higher incomes and a higher interest rate for vacation-property purchases. A larger "spendable" income is especially important since the borrower will need to pay two mortgages as well as double the utility costs, property tax and insurance payments, among other expenses. Lenders will look at the home's location to determine whether the purchase is for rental or vacation purposes, which is necessary because home owners tend to forego payments on their second homes if they find themselves in a financial crisis. According to the American Resort Development Association, there are 7.5 million vacation dwellings nationwide, with Florida, Hawaii, California, Colorado, North Carolina and Arizona among the most popular locales. AOL Makes Anti-Virus Software Easy — For a FeeAmerica Online (AOL) will provide its users with an anti-virus service from McAfee Security Consumer for $2.95 per month. Though McAfee offers the service itself for $34.95 per year, customers are asked each month whether they wish to update the feature for new viruses. AOL's service, meanwhile, automatically updates when users log on. Research reveals that 50% of online users lack anti-virus protection, and an additional 25% fail to perform updates. According to Jupiter Research analyst Michael Gartenberg, “It takes anti-virus stuff from a more technology-aware audience to a more novice audience.” NBN Online Is Taking Next Week OffNation's Building News Online will not be published next week, May 12, following NAHB's Spring Board of Directors meeting in Washington, D.C. Publication will resume on Monday, May 19. We Want to Hear From You Housing SnapshotWith mortgage interest rates declining for the third straight week, almost touching the 40-year low they reached in March, housing remains a bright spot for the economy. On the darker side, the Commerce Department reported that manufacturers jettisoned 95,000 jobs in April and the nation's unemployment rate climbed to 6%. Federal Reserve Chairman Alan Greenspan told Congress that he is expecting economic growth to increase in the second half of the year, but it is still not entirely clear how much the business sector will do to make this happen. Mortgage Interest Rates30 Year Fixed Rate: 5.70\% Housing Starts: Mar. 2003Total: 1.78 million\% New Home Sales: Mar. 2003 *1.01 million Existing Home Sales: Mar. 2003 *5.53 million * Seasonally Adjusted Annual Rate There Are No Better Housing Advocates AnywhereIn most cases, when Americans count their blessings, housing is at the top of the list. Unfortunately, even when you are the best-housed nation on Earth, housing is not something that you can afford to take for granted. Housing needs advocates, and in Washington, D.C. and across the country, there is no better housing advocate than NAHB. On behalf of our members and the public they serve, advocacy is without question one of the most important missions of NAHB. Carrying a pro-housing message to the Congress, the Administration, the federal regulatory agencies, state legislatures, the local community and to our citizens at large is essential for accomplishing our mission of building the housing our country’s growing population needs. And it is essential for ensuring that “the voice of the housing industry” — our voice — resounds persuasively from coast to coast. On the frontlines of housing advocacy, there is no greater fighting force in this country than NAHB’s 205,000 grassroots members and their employees, their colleagues in a host of housing-related businesses, their families, their friends and their customers. Back at the National Housing Center in Washington, they are supported by a staff of professional advocates who are trained to attack the foes of housing on every front. They include lobbyists, attorneys, journalists, economists, land planners, scientists, specialists on the environment and on government regulation, experts in construction and codes, and more. They are working with you and for you to ensure that housing receives the priority it deserves in every walk of American life. When we make advocacy our mission, a bright future for housing is assured. Here are just a few of the achievements that are the direct result of focusing our energies on strategies designed to carry the day for housing:
And the list goes on. To see how well your NAHB is doing, continue to watch the information that is being brought to you electronically over our Web site and in our new streamlined online publications. In the housing business, there is no such thing as fate. That’s why our mission is to make things happen through advocacy. Advocacy is our strength. It is the foundation upon which together we build the American Dream. Urban Growth Boundaries Strike in San JoseUrban growth boundaries have struck housing affordability again, this time in San Jose, CA, according to a study by the Reason Public Policy Institute. The city’s housing prices zoomed an astronomical 936% from 1976 to 2000, the fastest increase in the country during that period, the institute’s study found, largely because urban growth boundaries drove up the cost of land. A similar phenomenon has occurred in Portland, OR, the country’s most notorious example of how the boundaries can lead to skyrocketing home prices. Land-use regulations that make it more time-consuming — and more expensive — to build housing subdivisions were another major factor behind San Jose’s meteoric rise in home prices, according to the study. “Today, a five-year-old, two-bedroom house that would be considered a ‘starter home’ in most cities sells for around $400,000 in San Jose,” the report says. “In October, 2002, the average sale price of a single-family detached home in Santa Clara County was $641,000, while the average condo or townhouse sold for $372,000. San Jose’s misbegotten growth boundaries have also snarled traffic, according to the study. And the city’s solution — a light rail system initiated in the early 1980s — hasn’t been much help. Today, that system suffers from chronically low ridership. The system carries 1,749 passengers per day per route mile, compared to San Francisco’s BART, which carries 17,074. The San Jose Freeway carries 29,950 passengers per day per lane mile. “Very few people can both live and work on a single thin line drawn by a planner for a light rail route,” according to the report’s author, Randal O’Toole. “Very few people are willing to take a bus to the train, the train to a bus, the bus to work, and vice versa on the way home.” As a result of poor transportation planning, the average San Jose commuter today spends three times as much time in traffic as two decades ago, the report finds. City Claims Impact Fee Is a ‘Tax’A case in Olympia, WA, will soon decide whether a city or municipality can claim that a regulatory impact fee is a “tax” in order to squirm out of stringent requirements to show that assessments on new development are proportionate to, and reasonably related to, the demands or needs created by the project. In 1998, Drebick Investments was assessed a flat-rate citywide transportation impact fee of more than $130,000 as a condition for the city’s approval of a four-story office complex located on the edge of town. Drebick argued that its project would have less impact on city streets than a typical project in the middle of the city and that traffic going to the development would use a nearby local freeway instead of going through town. A hearing examiner agreed with Drebick and noted that the impact fees paid could potentially be allocated by the city to individual transportation facilities that did not reasonably benefit the Drebick proposal. That was a violation of state law. However, a trial court later ruled that the impact fees were a “tax” and, as such, the city’s fees were not required to meet regulatory standards for “nexus” and “proportionality.” Drebick is arguing that if the assessment is a tax, then the city needs to prove that it was authorized. Otherwise, it needs to meet regulatory standards for imposing an impact fee. Olympia maintains that it has taxing authority under a state statute, and that it is authorized to raise revenue for transportation needed to support new development generally. The case, Drebick v. City of Olympia, will soon be decided by the Supreme Court of Washington. The Building Industry Association of Washington and the Pacific Legal Foundation have filed friend-of-the-court briefs supporting Drebick Investments in this case. Web Site Offers Help on EPA ComplianceAlong with three other national trade associations, NAHB has been working with the Environmental Protection Agency’s Office of Compliance for more than two years to develop a Web site that will help builders, developers and contractors comply with environmental regulations The site is organized by topic, with sections covering storm water, solid waste (construction debris), hazardous waste, air, wetlands, endangered species and green building. NAHB has provided the site with up-to-date information on Phase II permits by state. Visitors to the site can also find introductory information about Storm Water Pollution Prevention Plans. To share your opinions and ideas for improving the site, e-mail Amy Ericksen or Marolyn Parson, or call them at 800-368-5242 x8662 or x8157. NAHB Plays Key Role in Introducing Cost-Saving FoundationsNAHB staff and members and the NAHB Research Center played a central role in enabling home builders in colder climates to substantially reduce their foundation costs. In 1984, the Research Center began development of technology for Frost-Protected Shallow Foundations, building upon experiences in Scandinavia where the technique was already widely used. The research was funded by the Society of the Plastics Industry, and Dick Morris, who is now on the NAHB Construction, Codes and Standards staff, was the principal investigator. Research continued into the 1990s and in 1995 the American Society of Civil Engineers began writing a consensus standard for the design and construction of the foundations. That standard was published in September of 2001. Longtime NAHB builder member Gerald Eid, president of Eid-Co Buildings in Fargo, ND, chaired the consensus committee that wrote the standard. “Cold-climate builders,” says Eid, “will be able to use this green technology to reduce foundation costs by up to 40% because they’ll be able to reduce the foundation frost depth to 12 or 16 inches and save energy and resources.” The standard includes techniques for frost-protection of heated, semi-heated and unheated buildings. “I find the method to be especially useful for frost protection of handicap accessible slab-on-grade buildings,” says EID, “but there are also designs for crawl spaces and walk-out basements.” To purchase a copy of the standard, click here.
Save Up to 69% With Viking Office Products NAHB and Viking office products are working together to bring members more than just low prices through the NAHB's Member Advantage Program. Viking advantages include fast overnight delivery, same-day delivery in major cities nationwide, savings up to 69% from manufacturers' list price, free delivery on orders as small as $25 (continental U.S. only), one-year guarantee on everything, complete delivery (virtually no backorders) and friendly, courteous, helpful people. Call 800-421-1222 and mention code 'HB' for the standard 10% member discount. Order online at www.VikingOP.com and use code 'HB' in the comments box to get your discount. To order online and for details on more than a dozen other money-saving Member Advantage discount programs click here, or send a blank e-mail to membersavings@nahb.com. NAHB Works With Census on Property Tax DataWorking with the U.S. Census Bureau, housing policy economists at NAHB have been able to compute valuable information about residential property taxes, a tax that remains unpopular in communities across the country but one that local governments rely on significantly for their revenue. For prospective home buyers, property taxes can make it more difficult to qualify for a mortgage, because lenders typically require the costs of the mortgage payment plus property taxes and insurance to stay under a certain percentage of the buyer’s income. At NAHB’s request, for the 2000 Census the Census Bureau included aggregate property taxes paid by single-family home owners on its summary data files. Combined with the aggregate value of the specified homes reported by the Census, this enabled NAHB analysts to compute an average effective property tax rate down to county subdivisions with roughly 1,5000 to 8,000 residents. Detailed results were published in the December issue of NAHB's Housing Economics. Among the findings were:
For further information, e-mail Paul Emrath or call him at 800-368-5242 x8449. For information on NAHB's monthly Housing Economics publication, click here. Impact Fees Grow as Property Taxes DeclineState and local governments are relying less on residential property taxes for their revenue, according to NAHB housing policy economists, but that can be a mixed blessing when new impact fees on housing become an alternative revenue source. For example, California’s Proposition 13, which freezes the assessment of a home’s value until the property is sold, has also helped create some of the highest fees on housing in the country, according to many analysts. Although most of the large statewide property tax reforms were adopted before 1985, a few states revisited the issue in the 1990s. In 1994, Michigan enacted Proposal A, which shifted a large share of the burden for local government finances in the state from the property tax to the sales tax. An article in the December 2002 issue of NAHB’s Housing Economics report contains some interesting background information on residential property taxes:
For further information, e-mail Paul Emrath or call him at 800-368-5242 x8449. For information on NAHB's monthly Housing Economics publication, click here.
Home Building Rises in California, But It's Still Not Good EnoughUsing building permits as a gauge, the California Building Industry Association (CBIA) says that they expect new-home construction in 2003 to be the highest in 14 years. Statewide, 10,901 single-family permits were issued in March, bringing the total for the year to 32,182 — a 25.8% increase over 2002, according to statistics by the Burbank-based Construction Industry Research Board (CIRB). Permits are a strong indicator of actual housing starts in California, because they are very expensive and home builders generally wait until they are ready to actually begin construction on a new home before they obtain one. Behind the rise in residential construction, said Robert Rivinius, chief executive officer of the CBIA, is “strong demand for housing in California combined with low interest rates.” Housing is adding more than $40 billion a year to the state’s economy, Rivinius said. Single-family home construction so far this year has been up in 17 of the state’s 25 metropolitan areas. Riverside-San Bernardino continues to lead the state with 9,286 single-family home permits being issued, up 57.2% from the same period a year ago. That is followed by the Sacramento area (4,340), San Diego (2,641), Los Angeles (2,203) and San Joaquin County (1,479). Construction remains weakest in the San Francisco Bay area. Through March, 15,005 multifamily permits were issued, running ahead of last year by 57.5%. The CIRB now projects that 176,800 new homes and apartments will be built this year — the largest number since 1989. While good news for the industry, Rivinius said that this is still below what is needed to meet the state’s growing population. According to state officials, 230,000 new homes a year should have been built over the last decade to meet demand. In the meantime, Rivinius said that his association is watching debate on several pieces of state legislation that would make it even more difficult than it is already for Californians to become home owners. On the association’s list of “dream killer” bills are a measure that would require all new homes to use solar energy, adding some $25,000 to the price of a typical home; a new tax on lumber that would add more than $130 to a home’s price; and a mandate for urban growth boundaries across the state. Spotlight on: Santa FeLocal HBA: By Gary Ehlert, EO of the Santa Fe Area Home Builders Association Vital Stats:
Outlook for 2003: Demand for new homes will probably always be strong here, due to the favorable climate, the availability of a slower pace of life, and the history and cultural amenities that Santa Fe has to offer. Historically speaking, the City of Santa Fe grows at about 2% annually, the county at about 4%. What is questionable is the city’s and county’s ability to find new sources of water to maintain economic sustainability amidst our current drought conditions. Biggest source of concern for builders: Market trends: Remodeling is the wave of the future, along with high-end housing. Both continue to do exceptionally well. The Kitchen Is the Most Important Room in the HouseThere’s no place like the kitchen in today’s homes, according to Joan McCloskey, editorial marketing director for Better Homes and Gardens magazine, and there is no other room in the house “as pivotal to family happiness.” Based on discussions with her magazine’s editors in the field, observations at the Kitchen and Bath Show and NAHB’s International Builders' Show and what 7,300 readers sent into Betters Homes and Gardens’ Home Improvement Contest, McCloskey says that trends in new home design and remodeling all reflect that, “Home is the place where people matter to one another.” “Our search for comfort and reassurance leads directly to the kitchen,” she told the NAHB Construction Forecast Conference in Washington on April 24. “This is the place where we strut out stuff and show off our cooking prowess, good taste in design and sophistication about fine wines.” Focusing on what the upper end of the market is doing because this will “eventually trickle down to the rest of us at lower price points,” McCloskey made several observations about what’s cooking today in the kitchen:
Harvard Index Shows Gains in Remodeling ActivityHome owners increased their spending on renovations and improvements at a 6.1% annual pace in the first quarter of this year, according to the Remodeling Activity Indicator. This was up from a 5% rate during the final quarter of 2002. “A recovering economy has helped accelerate the annual growth rate for remodeling spending,” said Kermit Baker, director of Harvard University’s Joint Center for Housing Studies' Remodeling Futures Program. “As long as mortgage rates stay in favorable ranges, home sales and the resulting home improvement projects will remain strong.” Further declines in residential mortgage rates this year, which fell to a 40-year low in March and have lingered close to that level since, have fueled refinancings and enabled home owners to cash out some of their equity, helping to sustain the economy. About 35% of this extra cash is spent on home remodeling, said Baker. The remodeling index’s quarterly reading of national remodeling expenditures takes into account manufacturers’ shipments of floor and wall tile products, sales at building materials and supply stores, sales of existing single-family homes and the prime interest rate. The index provides information on residential improvements and repairs a full two quarters before data is released by the Commerce Department. The index for this year’s second quarter will be released during the third week of July. Does Your Planning Software Match Your Project's Sophistication?
The third in a series of tech talks for builders Project planning requires doing plenty of upfront work before software even enters the picture. Issues such as market research, buyer demographics and financial conditions need to be nailed down in advance of any computerization effort. Once that is done, you can look forward to sifting through the many software options available to find the product or products that meet your requirements. Here are a few pointers to help you get started. A working project plan generally assumes one of four levels of budget sophistication, and there are tools and software available for each level to ensure that you can be as accurate — and profitable — as possible. Depending upon the level of sophistication necessary, your project may require:
Then there are the project plans that progress through each of the four levels. Start by Mapping Out Your Costs No matter what level or levels your project planning requires, a good resource that will enable you to begin mapping out your project’s basic framework of projected costs and how they will be allocated is the NAHB Chart of Accounts. To download a free copy from the NAHB members-only Web site, click here, or request a copy by e-mailing NAHB’s Business Management Department by clicking here. With this in hand, you must now consider the direct costs likely to be associated with your project. Software products can provide various levels of project planning sophistication.
Stand Alone vs. Integrated Systems The advantage of stand-alone products such as DealBuilder is their flexibility and relative simplicity. Users can set up as many project plans as needed, replicate them, expand or contract the cost centers or accounts, set up constants and formulas, and produce a summarized pro forma for interested parties like lenders and investors. A large, integrated system builds the project plan off the project database, charts of accounts, supporting schedules and company structure. Integrated systems offer virtually limitless flexibility. Unfortunately, they are very expensive to license and maintain. A product like DealBuilder can be installed for as little as a couple of thousand dollars. A product like J.D. Edwards’ Project Management package can run as high as six figures. Project planning should involve demographic analysis as well as project overhead budgeting, and cash flow and warranty reserve projection. “Industry average” costs of sales can be found in publications such as NAHB’s “Cost of Doing Business Study,” available through BuilderBooks.com. In addition, you need to nail down non-formula related factors like market potential, absorption and product pricing. The More Data In, the More Accuracy Out Good market research is vital for project planning, especially if you intend to build a different product or build in a different location or price range. Companies such as the Meyers’ Group, Metro/Study and Market Perspectives Group offer online subscribers detailed reports on market trends for most metropolitan areas of the U.S. These firms also track sales versus existing inventory for various price ranges. First American Real Estate, which profiles the resale market, is another potential resource for market research. In addition, municipalities can furnish facts about future infrastructure for communities, confirming where growth is planned. Accessing information and services (electronic permitting, zoning requests, etc.) on municipal Web sites and on chamber of commerce sites can save you lots of time and trips to city hall. Thinking through the due diligence steps required to get a project ready to build and estimating the associated costs and timing is crucial to project planning. Not surprisingly, that upfront work becomes more complex for projects involving land acquisition and development and/or phase development. Simple, stand-alone products like Microsoft© Project do a fine job of tracking due diligence tasks. However, Project is a generalized tool, not an industry-specific scheduling product. Primavera Schedule Project Planner, another stand-alone product, is more adapted to the construction industry. Many back-office systems such as the True Line Homebuilder System, Timberline Office, Mark Systems Integrated Homebuilder Management System and Newstar Real Estate Management Suite offer budgeting and job costing capability for land development contracting. Because they’re completely integrated to purchasing, payables and general ledger functions, these systems can be effective stepping stones from stand-alone products. Earlier Articles in This Series To read, “Know Your Technology Needs Before You Invest,” Part 1 of this series, published April 14, click here. To read, “Strategic Planning Software Can Help Focus Your Business Model,” Part 2 of this series, published April 21, click here. Next: product design and development
Bill Allen is president of W.A. Allen Consulting and a member of NAHB’s Business Management & Information Technology Committee. His company, headquartered in Redmond, WA, provides information technology consulting services and process management assistance to the home building industry. Allen can be reached at 425-885-4489 or via e-mail. Or visit the W.A. Allen Consulting Web site.
Want more information about using technology in your business? Check out the online resources available from NAHB’s Business Management Department: “Tools for Running Your Business.” There are also articles about human resources, financial management, sales, production, customer service and other business-related topics. In addition, visit the NAHB Software Users Network Discussion Forum (SUN) to ask technology consultants and other builders what they think of various software packages and applications. BuilderBooks.com also offers a variety of publications about strategic planning and business management. To view or purchase these publications online, click here. Early Warning Signs Point to Possible Business FailureWith business hurting these days, commercial builders are making an especially concerted effort to avoid mistakes in running their companies. Equally applicable to small residential builders, who need to watch their businesses in both good and hard times, Davidson & Golden, P.C., a Tennessee-based accounting firm, has identified 10 early warning signs that a company may be headed for failure:
The accountants say businesses don’t necessarily need to panic if they match up with two or three of the above. Their experience with failed firms shows that these are among the most common mistakes they made. Just be cautious about falling into too many of these traps, Davidson & Golden advises. To read the entire article on which the above was based — “Ten Most Common Causes of Construction Contractor Failures,” by Robert A. Davidson, CPA, and Martin G. McGuire,CPA — click here, and go to page 6. Seniors Buy Maintenance-Free Homes Close to Current AddressThree-quarters of prospective home buyers aged 50 and up are looking for a home that provides yard or grounds service and takes care of exterior home maintenance, according to a new survey of home builders by NAHB and Countrywide Home Loans. “Debunking the common perception that seniors prefer to move to traditional warm-weather retirement destinations,” the study also found that the majority of older home buyers are likely to choose a location that is close to their current address, noted NAHB President Kent Conine. The survey found several significant characteristics of the marketplace for home buyers in age-restricted, age-targeted or independent living communities:
“Builders need this type of information to meet the diverse needs of the growing seniors market,” said Jack L. Haynes, executive vice president of the National Builder Division of Countrywide Home Loans, based in Plano, Texas. “The survey gives builders a better understanding of the demographics and tells them what type of home older Americans want and how these buyers can afford it.” The study results were presented at last week’s NAHB Seniors Housing Symposium in Indian Wells, CA. It is sponsored by the NAHB Seniors Housing Council. Nursing Homes on the DeclineThe need for nursing homes for today’s aging World War-II baby boomers is at least 20 years away, and won’t peak until after 2030, according to a research study by AARP. A 2002 study by AARP's Public Policy Institute, “Before the Boom: Trends in Long-Term Supportive Services for Older Americans With Disabilities,” revealed 14 trends that are reshaping this sector of the industry, with repercussions for the types of seniors housing that will be needed over the next few decades. Among the trends are:
Wearable Computers a Possible Solution for Reading BlueprintsThe University of Illinois is studying the possible use of wearable computers on the construction site, according to a March 5 story in The Daily Illini. Construction workers often have problems with conventional blueprints that are too large to manage while working and with faxed documents that are unclear. Worn with a belt, vest, suspenders, shoulder pack or backpack, the computer devices would provide workers with a way to keep their hands free while having access to design information at the touch of a button, according to George Elvin, an assistant professor of architecture at the university who is leading a study on their possible uses. The computers consist of a central processing unit and a flat panel display. Although they cost about $5,000 each, Elvin indicated that they would more than pay for themselves in a construction industry where inefficiency costs more than $30 billion a year. Before they become widely used, possibly within five to 10 years, Elvin said that the devices would need extra security protection and researchers will need to find a way to ensure that wireless connections are not blocked by steel, concrete and other construction materials. Researchers also need to find a screen that is visible both indoors and outdoors. The Xybernaut Corp. is one of only a handful of companies that manufacture the computer, the article says. Carpenter Bees Can Be Stopped From Tunneling Into WoodInformation that can be found in the Log Home Library of the Log Homes Council, a member of the NAHB Building Systems Councils, tells home builders how they can get rid of wood-boring carpenter bees. Sometimes aggressive but unlikely to sting, the bees drill round holes into logs, fascia boards, eaves, decks and other unpainted wood surfaces. Softwoods such as cedar, redwood or cypresses are preferred, but spruce, pine and fir, and sometimes even pressure-treated wood, can be attacked. Painted wood surfaces discourage infestation because the bees have difficulty recognizing wood unless they can see or feel its grain. Big and black, and resembling bumble bees with shiny instead of hairy backs, the solitary carpenter bees don’t eat wood, but drill into it to nest and lay eggs, excavating tunnels that can run for several inches. If left unattended, over several years the wood can become severely damaged as the bees enlarge old tunnels. In the spring and sometimes the late fall, when they are most active, spraying pesticides such as Bayer Advanced Home/Lawn & Garden Insect Killer, Spectracide Bug Stop and Ortho Home Defense System can deter bees from attacking unpainted wood. The treatment needs to be repeated every seven to 14 days. Before filling holes with caulk or putty, it is important to check for bees, larvae and eggs inside the tunnel because they can dig new holes from the inside back to the wood’s surface. Know Your Competition and Increase Your SalesSheri T. Jackson, MIRM The following real-life case study shows how a thorough knowledge of the competition can increase home sales. A few months ago, Builder A asked me to find out why his competitor, Builder B, was outselling him in the same community. Their products and services were similar and Builder A was satisfied that his sales associate was doing a good job. I was familiar with both builders, and I was intrigued that Builder B was outselling Builder A because his construction delays, mistakes and poor service had created many unhappy home owners. Builder A, on the other hand, had a good reputation for delivering a quality home in a timely fashion, had an excellent service program and was regarded as one of the area’s leading builders. I received a prompt greeting at Builder B’s sales center. Names were exchanged and I explained to the sales associate that I was from the area and had just sold my home. A thorough presentation followed and after discussing the site plan, the associate suggested a driving tour so he could further describe how the community would look once completed. I could tell he had spent a great deal of time with the developers and his knowledge was impressive. He drove me to the entrance of the community, which was still under construction, and explained how it would look when it was finished. At the end of the tour, we stopped at a home that would be closing soon, and he showed me all of its features and assets. After the demonstration was over, I asked the associate his opinion of Builder A. He acknowledged Builder A’s success in the marketplace and in a comparison of Builder A and Builder B seemed equally knowledgeable about both. He showed me how Builder A constructed his foundations compared to Builder B. We next looked at homes in the framing stage, and he explained how Builder B used larger headers and floor joists than Builder A. Moving on to completed homes, he showed how Builder B used more extensive exterior trim. The sales associate was highly complimentary of Builder A and he noted that differences between his homes and those of Builder B would not cause any structural problems. But he had planted a seed of doubt in my mind about the quality and workmanship of Builder A’s homes. On the basis of the sales presentation, I came away with a new respect for Builder B’s homes. If I had been a genuine prospect, there would have been a good chance that I would have bought one of his homes. And the sales associate had made it easier for me to decide whose home to buy because he knew his competitor’s product extensively.
Sheri T. Jackson, MIRM, is vice president/sales manager for Fonville Morisey Builder Marketing Group. Inc.
For additional cutting-edge sales and marketing information, subscribe to NAHB’s Sales and Marketing Ideas magazine. Call 800-368-5242 x8192 or click here to subscribe or order a copy. Click here to learn about membership benefits of the National Sales and Marketing Council and the Institute of Residential Marketing. BuilderBooks.com offers a variety of sales and marketing publications online. To view or purchase these publications, click here.
Training Program Graduates Its First Class in NashvilleThe Home Builders Institute's Project CRAFT/Nashville has just produced its first graduating class — eight young men who now have the tools to pursue promising careers in the home building industry. HBI, the work force development arm of NAHB, was awarded a $1.5 million grant last year by the U.S. Department of Labor’s Youth Offender Demonstration Initiative to bring Project CRAFT (Community Restitution Apprenticeship-Focused Training) to Tennessee. “The Home Builders Institute’s work to help young people get a second chance in life is inspiring to see,” said Labor Secretary Elaine Chao in her announcement of the grant. “We hope young people will find jobs and become valuable citizens in their community.” The hands-on training received by the program’s graduates included the renovation of several homes for the Affordable Housing program, which facilitates the production and preservation of affordable housing and the development of sustainable communities in Nashville and Davidson County. The graduates received their completion certificates from Jerry Strebel, an HBI trustee. “For some of these young men, the feelings of accomplishment and self-worth are a triumph of the spirit. They will remember this moment for the rest of their lives,” Strebel said after the ceremony. “The housing industry needs their skills and has the jobs to help them rebuild their lives.” HBI is a partner with several local and state organizations in providing the vocational training and educational and social support systems that are hallmarks of the program’s ongoing success. These organizations include: Goodwill Industries of Middle Tennessee, Bethlehem Centers of Nashville, the Davidson County Drug Court, the HBA of Tennessee and the HBA of Middle Tennessee. Fiber Glass Insulation Addresses Air Quality ConcernsFiber glass building insulation products manufactured by CertainTeed minimize pollutants and VOCs in the home such as formaldehyde, respirable particles, carbon monoxide and nitrogen oxide. Headquartered in Valley Forge, PA, CertainTeed is a member of the National Council of the Housing Industry — the Supplier 100 of NAHB. The company’s insulation products are certified by the GREENGUARD™ Environmental Institute, which means that they contribute very low levels of pollutants to the indoor environment. The GREENGUARD Air Quality Certification on home products indicates that they have been independently tested using stringent environmental protocols based on standards of the Environmental Protection Agency, the Occupational Safety and Health Administration and the World Health Organization. Building products are tested when they are manufactured, which is when possible emissions are at their highest. Best in American Living Awards Accepting EntriesThe Best in American Living Awards (BALA) give professionals in the home building industry an opportunity to enhance their reputation as a leader in the residential design arena. Co-sponsored by Professional Builder magazine and NAHB, the annual Best in American Living Award is the foremost residential design competition in the country, recognizing individuals who produce homes that illustrate design quality and success in the marketplace and exemplify the best in American living. Now in its 20th year, BALA has grown to 38 categories, ranging from single-family attached and detached homes in a variety of sizes, to rental developments, custom homes, best community and one-of-a-kind spec homes. The competition also includes the Best Affordable Home category, the U.S. Department of Housing and Urban Development Secretary’s Award for Excellence and the Best Smart Growth Community award. Thirteen interior design categories have been added for the 2003 competition — including best kitchen, best bath, best specialty room and best detail. Entries are judged on: exterior design/curb appeal, interior architecture and interior design, sales success of the product, construction quality and cost efficiency, and the site plan. Entrants are advised to submit good photographs along with their entry notebook so that the judges can evaluate architectural elements of the project. Floor plans are evaluated for their livability; considered are such elements as accessibility of the kitchen from the garage, the flow of the traffic in the home, the relationship of formal to informal space and how adult areas relate to those for guests or children. Entrants are also asked to identify their market; judges consider the plan within the context of the identified market to ensure it makes sense for the region and has market acceptance. Entries should be clear and concise, yet detailed. Builders, developers, architects, land planners, designers and those working through cooperative public/private efforts to expand homeownership opportunities are encouraged to enter. The registration deadline for the awards is July 1, and entries are due by July 15. For information, visit Professional Builder’s Web site. Or e-mail Michelle Persinger at NAHB or call her at 800-368-5242 x 8343. Or call Professional Builder at 630-288-8184. Charlotte Builders Exemplify Ethics in BusinessA Charlotte, NC, home builder has been recognized for exemplifying and promoting ethical conduct for the benefit of the workplace, the marketplace, the environment and the community. Simonini Builders, Inc. owned by Alan Simonini and Ray A. Killian, Jr., last week received the 2003 Charlotte Ethics in Business Award for a small business with under 100 employees. The Society of Financial Service Professionals sponsors the awards. The awards were made based on these criteria:
Over 60 companies in Charlotte were nominated for the award. Rodgers Builders, Inc., won in the category for a medium-sized business and Goodrich won in the large category. Photo by Scott Teel |