Nation's Building News Online: October 11, 2004

Print All Articles Text Version

Sponsored by Countrywide Home Loans National Builder Division

President Bush Addresses NAHB Board in Columbus, Ohio, on Housing Industry Concerns

On a campaign swing to the battleground state of Ohio, President George W. Bush visited the NAHB Board of Directors in Columbus on Oct. 2 to thank the housing industry for helping to lead the economic recovery and to discuss the ongoing efforts of his Administration to increase housing opportunities for the workforce, minorities and others.

“It reflects very well on housing’s importance to the nation that the President was able to make time in his busy schedule to come and speak to us just one month to the day before the election,” said NAHB President Bobby Rayburn. “It also reflects well on our ongoing outreach efforts to both candidates in this important election year. NAHB has done everything possible to elevate housing as an issue in the presidential campaign.”

In his remarks, President Bush reiterated his commitment to making housing more affordable through regulatory reform and several legislative proposals, all of which are top priorities for NAHB.

“I understand that the regulatory barriers at the federal, state and local levels can add as much as 35% of the cost to the homes,” he said. “In order to make sure there’s more affordable homes, we must remove the regulatory barriers on our home builders.

“I understand there’s a need for sensible regulation, but when you have overlapping regulations that send confusing signals, when you have the federal government, the state government, the local governments creating obstacles for home building, it is time to reduce those regulations.”

Following the address, Rayburn met briefly with President Bush. “After he said to me, ‘We really need to break down these barriers,’ I assured the President that we’ll do everything we can to help him accomplish this,” he said.

Rayburn told the President that NAHB is delivering to Housing and Urban Development Secretary Alphonso Jackson a task force report on how HUD can help break down some of these regulatory barriers at the national level. (To read a related story in this issue of NBN, click here.)

During his address, President Bush took the opportunity to voice his support for the deductibility of mortgage interest on income taxes. “I believe that the mortgage interest deduction enables more Americans to achieve the goal of homeownership,” he said. “It is an important part of our tax code.”

President Bush said that his Administration has sent to the Congress several initiatives designed to help increase the number of American families who can buy homes. Among them:

• The Homeownership Tax Credit, which would provide tax credits to developers or investors who build or substantially rehabilitate housing in rundown neighborhoods for lower-income home buyers. To reach the Administration’s goal of building seven million more affordable homes in the next 10 years, the President has asked Congress to pass this legislation, which would result in the construction or renovation of 40,000-50,000 affordably priced homes annually.
• The FHA Zero Downpayment program, which would remove the 3% downpayment rule for first-time home buyers with FHA-insured loans. The President noted that this could help as many as 150,000 people become home owners in the first year alone.
• A request for $2.7 billion in loan guarantees and $1.1 billion for direct loans to low-income borrowers who can’t get bank loans “will help thousands in rural communities across America achieve the dream of homeownership,” President Bush said.

Bush said that he has doubled funding for education and counseling services “to help first-time home buyers navigate the lending process, understand the fine print and avoid predatory lenders,” and his Administration has seen the creation of 1.6 million new minority home owners only two years after setting a goal of adding 5.5 million new minority households to the nation’s homeownership rolls by the end of this decade. The overall homeownership rate and the minority rate are at all-time highs, he said.

Noting that 63% of the members of NAHB are either subchapter-S or sole proprietorships who pay their taxes at the individual income tax rate, the President said that by providing tax-cut relief, “we helped our small businesses; we helped our home builders. We helped you with resources to build or grow and expand and hire more workers. By cutting taxes on dividends and capital gains, we encouraged savings and investment, which is crucial to your industry.”

To further help home builders, President Bush touted his plan to allow small businesses “to join together through association health plans so they can purchase insurance for their employees at the same discounts that big businesses are able to do.”

Early on in his remarks to the NAHB Board of Directors, the President singled out the volunteer work of Karen Kindron in the Columbus affiliate of Rebuilding Together, which helps low-income, elderly and disabled home owners obtain services such as weatherization and repair work. Since it was founded in 1988, he said that the organization has enlisted more than two million volunteers who have rehabilitated 87,000 homes and facilities.

The President also cited the leadership of builders in Florida’s hurricane recovery efforts. “I want to thank you for the good work that the home builders are doing for people of that state,” he told the NAHB board. “Home builders have collected donations of cash and building materials for families that have lost so much. They’ve established an online disaster contractor network to help put home owners in touch with licensed contractors and with government officials who can help those people that have been hurt by these storms.”

President Bush said that his grandfather was born in Columbus in 1895, where he built a home on Roxbury Road. “The home builder they hired did a good job,” he said. “The house still stands.”

Building News Coast To Coast

Industry Aims to Make Homes Disaster-Proof

Building industry firms are developing techniques to make homes and businesses disaster-proof as more and more storms ravage regions across the nation. Building codes are being strengthened across the nation, and the Federal Emergency Management Agency notes that 75% of all homes in the U.S. experience some form of natural disaster damage. Metal and asphalt are being used in roofing to reduce impact damages, and some firms are developing window coverings that are easier to remove and install before hurricanes hit. Wayne-Dalton Corp. has begun selling a light-weight plastic-coated cloth called Fabric Shield, while SentryGlas, developed by DuPont, is impact-resistant and can withstand heavy winds. DuPont is also pilot testing a safe room kit from Kevlar, which is strapped to the home's foundation and allows home owners to ride out tornadoes and hurricanes in safety. In various states, insurers are being forced to provide incentives to home owners who install safer building materials, such as impact-resistant roofs.
Wall Street Journal (09/30/04) P. D1; Kim, Queena Sook: online.wsj.com/article_print/0,,SB109650730541032163,00.html

Realtors, Builders Target Growing Downsizers Market

Downsizing is hot in the real estate industry, as more and more empty-nesters seek smaller dwellings. Agents with the Senior Advantage Real Estate Council's seniors real estate specialist (SRES) designation can participate in comprehensive estate planning, collaborating with accountants, attorneys and financial planners. They note that today's seniors and empty-nesters want single-story homes in secure neighborhoods where they will not need stairs to access the garage or laundry room. Their list of preferences also includes a small yard, plenty of storage space and community-provided maintenance services. Furthermore, the homes should be accessible to the disabled.
Chattanooga Times Free Press (TN) (10/03/04); Reynolds, Jason M.: www.timesfreepress.com

In a Seller's Market, Home Builders in Charleston, SC, Turn to Lotteries

Home buyers in Charleston, SC, and other hot real estate markets nationwide may have to put up deposits and participate in blind lotteries to secure units in new communities. Trammell Crow Residential and Centex Homes are among the builders using lotteries in Charleston, as hundreds of buyers line up to purchase a limited number of lots and units. Developers in San Francisco, Massachusetts, Hawaii and other locales also have resorted to lotteries — which allow them to control prices by selecting random buyers over the highest bidders. Lotteries also let developers restrict speculative purchases. Before taking part in lotteries, buyers are urged to look into the developer's history and track local property values to avoid falling prey to marketing hype that aims to create a competitive environment.
RisMedia.com (09/28/04) Bresnahan, Beth; McDermott, John P.: www.rismedia.com

Federal Officials Display Styrofoam Homes

Representatives from HUD, NAHB and the Manufactured Housing Institute recently spoke with the media in Port Charlotte, FL, about the benefits of Styrofoam homes. These dwellings are mold- and termite-resistant because they are built in a matter of days and are comprised of polystyrene, cement and steel. The structure is also wind-resistant, and those in Port Charlotte survived Hurricane Charley's 145-mile-per-hour winds. Styrofoam homes are also fairly inexpensive, priced between $75,000 and $100,000 plus the cost of land.
News-Press (FL) (09/24/04) Payne, Melanie: www.news-press.com

NC Company's Modular Homes Draw Interest in Hurricane Zones

Deltec Homes of North Carolina manufactures circular homes that withstand hurricane-force winds, with kits ranging in price from $25,000-$150,000 apiece. The properties resist winds because of a pitch angle on the roof that equalizes downward pressures or uplift that is characteristic of strong gusts; plus, the absence of flat wall sections wider than eight feet minimizes large ares where wind can build and create pressure. Additionally, manufacturing each section of the home by production line allows for quality control. A Deltec home owner in Rockledge, FL, says his is the only residence in the neighborhood that survived Hurricanes Frances and Jeanne without lost shingles and roof and water damage. Meanwhile, a pilot project conducted in Florida's Pinellas County by the Institute of Business and Home Safety reveals that hurricane-resistant dwellings cost the same as conventional dwellings in terms of labor; however, buyers will fork over an additional $15,000-$30,000 for stronger windows and doors. Meanwhile, Mercedes Homes and DiVosta Homes are among the builders currently marketing wind-resistant, concrete-walled houses, priced between $200,000 and $600,000.
Associated Press (09/29/04) Dalesio, Emery P.: www.ap.org

Straw Walls in Building Construction a Growth Industry

Builders constructing a 20,000-square-foot office building as part of a $15.9 million Transit Maintenance Facility project in Santa Clarita, CA, are using two-foot-thick rice straw bales to create walls that are both more energy efficient and more fire-resistant than traditional drywall. The bales are stacked like oversized bricks and held into place with steel rods, then further fastened with steel cables and covered in stucco. Heather Merenda, sustainability planner for Santa Clarita, says the city's decision to use straw walls in the construction of the public building is part of an ongoing effort to promote "green building" principles and energy efficiency. She says the city hopes to have the building certified by the U.S. Green Building Council. California is one of only a few states and regions — including parts of Arizona, Texas, Colorado and New Mexico — that have provisions for straw walls in their official building codes. Supporters of straw building note that straw bales have a much higher insulation rating — as much as R58 — than materials used in typical tract homes, which are rated around R19.
Los Angeles Daily News (09/27/04) Tong, Eugene: www.dailynews.com/Stories/0,1413,200~20949~2430686,00.html

Home Is Where the Future Is

The dream of the automated home, a concept that dates as far back as the late 1890s, has shown remarkable staying power, and the idea may be edging closer to reality thanks to the development of automated household technologies in many academic and corporate labs. The emergence and spread of sophisticated consumer networking technologies such as broadband and mobile phones over the last several years has also been a major factor in the drive toward the smart home. Wireless networks can establish communications among household devices as well as the Internet, while always-on broadband connections permit appliances to send and receive information whenever they wish. A home could be turned into a distributed computing system with the incorporation of wireless chips into every household device. Mobile phones could also become a key enabling technology for smart homes, with companies such as Nokia planning to use them as devices that can remotely control all household appliances. Before this can happen, the devices must be designed to support ease-of-use and simple interconnection, a challenge that will not be met until companies make learning the responsibility of the technology rather than the consumers, according to Robert Pait of Seagate Technologies. Incompatibility between devices from different manufacturers is another obstacle, one that must be overcome with the institution of a wireless-networking standard.  Standardization efforts include Carnegie Mellon University's Pebbles project, Europe's Digital Living Network Alliance and the Internet Home Alliance.
Economist (09/16/04) Vol. 372, No. 8393, P. S6: www.economist.com/printedition/displayStory.cfm?Story_ID=3171381

'Live Where You Work' Unaffordable for Many

At a recent summit sponsored by NAHB, the Maryland Coalition for Workforce Housing gave recommendations to making housing more affordable for working-class families. Maryland led the nation in home-price appreciation in 2003, according to the National Low Income Housing Coalition. The Meyer Group reports that the average new-home price in the Baltimore area rose 36.2% from the second quarter of 2003 to $506,779 during the same period this year, while the average new townhome price shot up 23.5% to $311,588. Soaring land prices, a population explosion, lengthy permit processes, conservation efforts and poor planning are cited by experts as reasons for the affordability crisis. Communities have been "made very car-dependent, very expensive and we've made them so jobs are far away from homes," remarks 1000 Friends of Maryland Executive Director Dru Schmidt-Perkins. The proposals made by the Maryland Coalition for Workforce Housing include approving denser residential projects; implementing an incentive program for developers of target areas; fast-track permitting in certain locales; and revitalizing under-used schools.
Baltimore Sun (09/26/04) P. 1L; Erle, Bob: www.baltimoresun.com

'Coving' Could Be Coming

Minnesota-based designer Rick Harrison plans to employ the so-called "coving" technique that he developed eight years ago in his design for a new 705-unit residential development in Venice, FL. Unlike traditional subdivisions, which feature identical lots plotted along a grid design, coved neighborhoods are characterized by winding streets as well as variations both in lot sizes and setbacks. The process has been dubbed "The New Suburbanism" and has been embraced for its cost-saving benefits, since it requires less paving and infrastructure. From a design standpoint, advocates of coving note that it allows for larger lots, separate sidewalks and bike paths and more public green spaces than the traditional grid pattern — all without limiting the number of homes planned for the space. Donald Leal of the Property and Environment Research Center in Montana notes that "not only does [coving] enhance individuality among home sites, it adds privacy."
Sarasota Herald-Tribune (10/02/04) P. BV1; Hackett, David: www.herald-trib.com

Backup and Recovery: The First Line of Defense for Disaster Recovery

Disaster recovery and backup systems are easily created and can enhance revenue, productivity, morale and consumer loyalty. Small and mid-sized businesses can easily create a disaster recovery process and strategy that integrates backup systems and data recovery, which often entails the reconfiguration of hardware, reinstallation of operating systems, the configuration of applications and other tasks. Experts suggest that small business owners invest in incremental backup systems that reduce the use of media storage space, index easier and take less time to perform. Moreover, the recovery and duplication systems can be set up to automatically perform their functions, but firms will still have to set up offsite systems in other locations so that data can be easily transferred to continue operations. Experts also note that businesses should set up a mirroring process to ensure that data is collected and running on another network simultaneously to speed up the recovery process.
AME Info (09/19/04): www.ameinfo.com/cgi-bin/cms/page.cgi?page=print;link=45500

Bathrooms Becoming Home Spas

Bathrooms have evolved into relaxation spaces. They have grown in size to accommodate home-spa accessories, such as spacious tubs, whirlpools, steam baths and shower systems with an assortment of massaging sprays and jets. Barbara Langan of Brandon, FL-based Castle Plumbing Supply has dubbed them "human car-wash showers." Home owners can even buy mirrors with built-in LED TVs and a so-called "Chromotherapy" whirlpool from Kohler Co. that emits light in various shades to create a relaxing atmosphere. Vessel sinks, claw-foot tubs, aromatherapy compartments and faucets of various shapes and sizes are also popular.
St. Petersburg Times (FL) (09/24/04) Bettendorf, Elizabeth: www.sptimes.com

Close-Up on Closets

Home owners want several spacious closets in their abodes and they are willing to shell out thousands to organize them. In fact, Washington, D.C.-based custom builder Jim Gibson says some closet projects have hit $100,000. A total of $2 billion was spent on closet remodels in 2003, according to Closets magazine Editor-in-Chief Helen Kuhl. In search of functional and aesthetic closets, residents are opting for darker woods that match the rest of the home, crown molding, lights, dividers, various drawers and shelves, hanging rods, island seats and spaces for hidden telephones and safes, among other things. Closet-organization systems appeal to Americans of all incomes, from condominium owners who need to make the most of small spaces to luxury-home owners who wish to customize the space to meet their needs. Pulte Homes Inc. Architectural Services Director Dave Griffiths says large closets are especially important to empty-nesters who have recently downsized. Multiple linen closets and cedar closets that allow home owners to store out-of-season clothing also are gaining in popularity.
Washington Post (09/25/04) P. F1; Deane, Daniela: www.washingtonpost.com

Liability Insurance Most Critical Concern in NAHB Survey

Results from NAHB’s most recently conducted Critical Issues Survey (information on this link is available to NAHB members only) show that the cost and availability of general liability insurance topped builder concerns between July 2003 and June 2004.

On a scale of one to five, where one equals not at all critical and five equals very critical, general liability insurance cost scored 4.49 and availability scored 4.26. These results parallel results from the past three survey periods, where general liability insurance cost and availability also ranked as the top two most pressing issues for the home building industry.

The survey, which asked executive officers or their designees to rank 75 issues according to how important or critical they are to their members, had a response rate of more than 20%.

Rounding out the top five issues were lumber price and supply at 4.25, development approval process at 4.22 and development costs at 4.18.

Notably absent from the top 10 list of issues was mold, which peaked at fourth during the 2002-2003 survey period. The issue dropped from 11th during last year's survey period to 29th this year.

Labor availability — which was ranked as one of the industry’s most critical issues for several years — dropped to 11th place during 2002-2003 and 14th during this survey period.

Critical Issues Survey results are used to help guide NAHB's work. To have complete survey results e-mailed to you, e-mail Sam Leyvas in NAHB's State & Local Government Affairs Department, or call him at 800-368-5242 x8326.

Housing Snapshot

Mortgage interest rates have been pushing slowly up again in the past couple of weeks as the economy has shown signs of stronger growth ahead along with the possibility of greater inflationary pressures, according to Amy Crew Cutts, deputy chief economist at Freddie Mac. The Labor Department last week announced that 96,000 jobs were created in September, down from 128,000 in August. This was the fourth straight month in which there were fewer than 150,000 new jobs, which is the level that some believe is needed for jobs to keep pace with population growth. Unemployment for the month held steady at 5.4% and nearly 2 million new jobs have been added in the last 13 months. Another ongoing concern for the economy, oil prices climbed above $54 a barrel. Encouraging news continues to emanate from the lumber front, with the cost of framing lumber declining to $392 per 1,000 board feet, down from $398 on Oct. 1, according to Random Lengths. The price of 15/32-inch 3-ply sheathing has been sliding precipitously in recent weeks, falling to $350 per 1,000 square feet, down from $385 on Oct. 1 and $435 on Sept. 24. Oriented strand board has held at $285 for the past two weeks. Demand for panels has been on the decline as the peak building season has been winding down.

Mortgage Interest Rates

30 Year Fixed Rate: 5.82\%
15 Year Fixed Rate: 5.24\%
1 Year ARM: 4.08\%

Housing Starts: Aug. 2004

Total: 2.0 million\%
Single Family: 1.667 million\%
Multi Family: 333,000\%

New Home Sales: Aug. 2004 *

1.184 million

Existing Home Sales: Aug. 2004 *

6.54 million

* Seasonally Adjusted Annual Rate

Your Workforce Housing Efforts Deserve an Award

Housing America’s working families is one of the most serious challenges facing our nation today. Millions of working families find it almost impossible to purchase or rent a decent home in or near the communities where they work, and many are forced to look for housing 50 miles or more from their jobs. Unfortunately, in many markets the gap between those who can afford to buy a home and those who can’t is widening rapidly.

In response to this challenge, dedicated builders across the country are working hard to devise innovative solutions and build products that make homeownership affordable for nurses, police officers, schoolteachers, retail workers and other moderate-income families.

To recognize outstanding examples of workforce housing communities and encourage builders, developers and others in the housing industry to incorporate innovative solutions into their own projects, NAHB has created the Innovation in Workforce Housing Awards (IWHA).

These awards are open to builders, architects, designers, developers and land planners, and judging criteria will include exterior design, interior architecture, sales success, construction quality/cost efficiency, successful management of any impediments such as regulatory and/or financial challenges, and the level of cooperation among various stakeholders.

Winning entries will be selected by a panel of builders, multifamily and land development experts and other industry professionals, and the winners will be announced at the 2005 International Builders’ Show in Orlando.

If you have a workforce housing project that you have been working on between Jan. 1, 2002 and Oct. 29, 2004, I urge you to enter this exciting new awards program. Not only is it an opportunity to be recognized for your innovative approach to workforce housing, it’s an opportunity to share your winning strategies with builders in other markets who are also committed to making housing more affordable.

For more information about the program, click here. Or e-mail Blake Smith at NAHB, or call him at 800-368-5242 x8583. And don’t wait too long. The application deadline is at the end of this month on Friday, Oct. 29.

BUILD-PAC Working to Elect Pro-Housing Candidates to Congress

BUILD-PAC, NAHB’s political action committee, reached a key milestone earlier this month when it surpassed its $2.8 million fundraising goal for the 2003-2004 election cycle.

The mission of BUILD-PAC is to help elect pro-housing candidates to the Congress. Having already set an all-time record, it is on pace to raise more than $3 million by the end of the year.

“With the November elections less than a month off and control of the House and Senate in the balance, NAHB will be working very diligently to ensure that Congress maintains a pro-housing agenda,” said BUILD-PAC Chair Barbie Wickman-Byrd.

“Regardless of party affiliation, our job is to elect federal lawmakers who will make it a priority to elevate housing as a top national priority and who are committed to providing affordable housing for working Americans.”

In the 2001-2002 election cycle, BUILD-PAC ranked as the fifth largest business donor to Democratic candidates and sixth largest PAC donor to Republican candidates.

BUILD-PAC has a long track record of helping candidates win tight elections to federal office. During the last presidential election year, BUILD-PAC-supported candidates won 319 out of 348 races for the U.S. Senate and House of Representatives, for a success rate of 92%.

To learn more about BUILD-PAC, NAHB members can click here, or call 800-368-5242 x8470.

Election Night Shaping Up as a Nail Biter, Political Analyst Tells NAHB Leaders

Who captures the White House in the Nov. 2 elections is likely to be determined by 11 swing states where the two presidential candidates have been running neck and neck, Charlie Cook, of the Cook Political Report, told a meeting of NAHB leadership during the association’s fall board of directors meeting in Columbus, OH, on Oct. 2.

To determine “where it will be really, really close,” he said to look at the places where the candidates are spending the most money on television advertising.

The states where the outcome is currently too close to call, Cook said, are: Colorado, Florida, Iowa, Minnesota, Nevada, New Hampshire, New Mexico, Ohio, Pennsylvania, West Virginia and Wisconsin.

Sen. John Kerry is ahead in Maine, Michigan, Oregon and Washington, but President George Bush is close behind in those states, he said.

The first presidential debate on international issues and the war on terrorism has kept the race going, said Cook, at a time when the Kerry candidacy was getting clobbered by the Bush campaign, which is the best he has ever seen.

Bush needs to be worried about parts of the country where “the economy has not come back all the way,” said Cook, and some of them are the battleground states.

With casualties jumping back up in recent weeks, Iraq is also a possible source of growing voter discontent, he said. “There is no clear evidence it is hurting Bush yet, but it is getting worse.”

Another “mind-boggling” disadvantage for the Bush campaign, he said, is that it has been outspent by the opposition. “A financial advantage for Bush hasn’t materialized,” he said.

Kerry, on the other hand, could stumble because of his “inability to connect with people on a personal level,” an undistinguished record in the Senate and the Swift Board ads, Cook said.

There is “no chance” that the Republicans will lose control of the U.S. House of Representatives in November, Cook said, but they should be worried about prospects for 2006 when there are expected to be an inordinate number of GOP retirements.

He predicted that there is a 70%-75% chance that the Republicans will hold onto their majority in the Senate.

A good reason to stay up late watching the returns on election night, Cook said, is the race between Senate Minority Leader Tom Daschle in South Dakota against Republican challenger John Thune. The final tally “will come down to 1,000 votes either way,” he predicted.

Builders Caution Canada Not to Settle With U.S. on Softwood Lumber Dispute

With the prospect for free trade on softwood lumber near, NAHB met with Canadian government officials in Ottawa last week to urge them to abandon efforts to negotiate a settlement with the U.S. on the protracted dispute over import duties.

Representing NAHB at the talks, Barry Rutenberg, a member of the NAHB Executive Committee and president of Gainesville, FL-based Barry Rutenberg Homes, told International Trade Minister Jim Peterson and other government officials that a settlement could result in quotas, taxes or other border measures that would raise lumber prices in the U.S. and force builders to turn to other materials or to lumber from other countries.

“The goal of the National Association of Home Builders is not to have subsidized lumber,” Rutenberg said. “The interest is fair trade that is determined by market forces and not by some export agreement.”

Last month, the U.S. International Trade Commission agreed to comply with a North American Free Trade Agreement decision that unequivocally concludes that U.S. lumber producers are not threatened with material injury from Canadian imports.

That response, as required under U.S. and international trade laws, paves the way for the removal of the punitive 27.2% percent lumber tariffs that have been in place since May of 2002. Canadian firms also stand poised to receive a 100% refund of the more than $2.8 billion in duties paid to date.

Although a final resolution of the case is expected in March, Peterson indicated that Canada was also leaving the door open to a negotiated solution.

In comments widely circulated by the Canadian media, NAHB President Bobby Rayburn said that in light of Canada’s strong legal standing in this case, this is the wrong time to be offering new concessions.

“With free trade in sight, negotiating a settlement in a misguided bid to stave off future litigation would play right into the hands of the U.S. lumber firms,” said Rayburn. “Giving the money to U.S. producers only gives them an incentive to keep seeking protection. Such protectionist measures are bad trade policy and bad economic policy, and they are not in the national interest of Canada or the United States.”

For more information, e-mail Jason Lynn at NAHB or call him at 800-368-5242 x8307.

Florida Rebuilding Efforts Add New Sense of Urgency to Solving Cement Shortages

Florida’s monumental rebuilding challenge following Hurricanes Charley, Frances, Ivan and Jeanne has brought a sense of urgency to housing industry efforts to overturn costly tariffs on Mexican cement imports that are needed to alleviate spot shortages of the building material around the country.

When cement shortages first appeared this spring in Florida and the Southeast, NAHB President Bobby Rayburn warned Commerce Secretary Donald Evans that the situation could jeopardize the nation’s economic recovery and he urged the secretary to repeal duties on cement from Mexico.

In addition, NAHB Executive Vice President and CEO Jerry Howard recently participated in three meetings with Commerce officials, including one session with Secretary Evans, to discuss the issue and seek quick action to resolve the scarcity of cement, which is driving up prices and affecting construction projects around the country.

Secretary Evans has acknowledged the gravity of the situation, but said that it will be difficult to get the duties lifted without an agreement from U.S. cement producers.

NAHB responded that consumers of cement must be considered in any negotiations to end this dispute, and the Commerce secretary has indicated that home builders will be included in any discussions that take place.

During NAHB’s Summer Executive Committee meeting in Montreal in August, builders sent more than 400 letters to members of Congress calling on them to contact the Commerce Department to express concern over cement shortages and to urge the department to take action to address the problem.

Due in part to these efforts and a strong push from the Florida Home Builders Association, nine U.S. Representatives from Florida on Sept. 23 urged Secretary Evans to “at least temporarily lift the tariffs on the importation of Mexican cement until the current shortage has eased. This action is necessary for the reconstruction of Florida.”

Taking the message to the media that the best solution is to suspend the prohibitively expensive anti-dumping duties in order to increase the supply of cement, NAHB’s Howard appeared in major news outlets in recent weeks, including CNN, National Public Radio, Bloomberg and USA Today. This helped to generate favorable editorials calling for the lifting of Mexican cement tariffs in The Wall Street Journal, the Los Angeles Times and the Orlando Sentinel.

These developments have spurred the Commerce Department to remain actively engaged in seeking to work out a deal with Mexican officials to lift the onerous tariffs that have been in place since 1990.

“The Bush Administration has continued informal talks with the Mexican government and with representatives from the U.S. and Mexican cement industries,” said Evans. “We have and will continue to work to identify an alternative solution to continued operation of the anti-dumping order.”

During this month’s NAHB board of directors meeting in Columbus, OH, John Bloom, an economist with the Mexican-based global cement firm CEMEX, said that the growing dependence of the U.S. cement industry on imports from Asia and Europe is resulting in shortages that are adverse for commerce in the U.S.

“Due to the anti-dumping order against Mexican cement, the U.S. cement industry has become more dependent on more distant and less reliable countries for imports,” he said.

Bloom noted that explosive growth in the economies of China and other Asian nations has overtaxed the world’s shipping capacity, doubling freight rates since last year. “It has become very difficult to line up vessels to ship cement, especially when the trip from Asia takes over 40 days,” he said.

By contrast, the average delivery time is only four days from Mexico, but duties on cement from that country are more than 60%.

Imports of cement are needed to meet U.S. demand. Domestic cement production totaled 85 million tons during 2003, while domestic consumption was nearly 108 million tons.

Since U.S. producers are no longer losing sales because of imports, NAHB is telling lawmakers on Capitol Hill that the levies are no longer necessary because U.S. producers are no longer losing sales to imports. Because the U.S. is a net importer, domestic cement firms will continue to be producing at maximum effective capacity for the foreseeable future.

Even before this year’s unusually brutal hurricane season, the state builders association reported that local builders in Florida were seeing the demand for cement exceed supplies by as much as 20% while prices increased 12%. The state relies on imports for about 40% of the cement it uses annually. Builders now fear that the daunting repair and rebuilding projects that lie ahead will cause demand to soar and make the existing cement shortages even more severe.

Survey research by the Portland Cement Association indicates that cement demand in most states remains strong, that many producers currently hold lean inventories and the shortages that first impacted Florida and the Southeast this spring are now spread over 29 states.

“These factors, coupled with the curtailment in imported cement, have raised the likelihood of shortages,” the PCA stated.

For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.

New ‘HousingEconomics Online’ Provides In-Depth Analysis of Housing Market

“HousingEconomics Online” is a new online publication from the NAHB Economics Group that provides the latest housing economic data, trends and key events that shape the economy. NAHB’s leading economists analyze and synthesize the housing and economic information to provide in-depth analyses of the niches and nuances of the home building market.

Launched on Oct. 1 and available only by subscription, “HousingEconomics Online” can be accessed directly at www.housingeconomics.com.

“HousingEconomics Online” replaces and consolidates NAHB’s three print monthly economic newsletters: “Home Builders Forecast,” “Housing Market Statistics” and “Housing Economics.” Subscribers now can receive the economic data and information they need from one reliable source.

Dynamic, Interactive and Updated Regularly

“HousingEconomics Online” is a dynamic, interactive Web-based forum that is updated regularly in order to provide rigorous economic, demographic and government policy analysis of market-driven macroeconomic factors including GDP, employment, interest rates and more. Subscribers have the opportunity to study the latest economic and housing data using the Desktop Analyst. Its easy-to-read tables and graphs provide monthly, quarterly and annual data for more than 250 variables.

“HousingEconomics Online” combines scientific research with practical applications in order to provide housing-oriented insights that are written in terms that builders, manufacturers and housing finance professionals can understand and apply to their own businesses.

Available at Two Subscription Levels

Available at two subscription levels — Pro and Executive — “HousingEconomics Online” includes the following features and functions:

• Seiders’ Report — A monthly economic and housing overview by NAHB Chief Economist David F. Seiders; the Seiders’ Report tracks the health of the housing industry (new construction) with analyses of major legislative, regulatory and executive actions as well as the impact of important technology. The report incorporates the results of the monthly NAHB-Wells Fargo Housing Market Index (HMI) survey, the High Production Builders’ survey, NAHB leadership meetings with the Federal Reserve and feedback from more than 800 local associations.

• NAHB Economic & Housing Forecast — An in-depth monthly forecast of economic activity, prices, interest rates and housing activity from the NAHB Economics Group.
  • The Pro-level forecast contains historical data with annual and quarterly forecasts for all indicators.
  • The Executive-level forecast contains an executive summary; in-depth details plus historical data with annual and quarterly forecasts for all indicators.

• Housing Activity — A monthly review of production, sales and prices for both the single-family and multifamily housing markets from Senior Economist Dean Crist.

• Housing Policy Focus — Monthly features from NAHB’s Federal Regulatory and Housing Policy Group.

• Multifamily Housing Quarterly — A quarterly review of news and trends affecting the multifamily housing market.

• State Metro Focus — Building permit and employment statistics broken-down by state and metro regions.

• Housing Market Statistics — All of the key data and primary indicators of the housing industry in one easy-to-navigate location, Housing Market Statistics compiles information from the Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve Board, Office of Thrift Supervision, National Association of Realtors®, Mortgage Bankers Association, Department of Housing and Urban Development, Coldwell-Banker, Freddie Mac and other public and private agencies.

• Economics Calendar — A schedule of release dates for principal economic indicators and a calendar of upcoming events sponsored by, or including members of the NAHB Economics Group.

• The Archives — An extensive PDF archive of past issues of NAHB Economics Group’s newsletters: “Housing Economics,” “Home Builders Forecast” and “Housing Market Statistics.

In addition, subscribers at the Executive-level receive the following features:

• Home Builders Forecast — Home Builders Forecast, released 10 times a year, offers six unique forecast types of varied geographic/sector focus. Forecasts include a remodeling, long-term, state, metropolitan region, multifamily and non-residential sector forecasts. An economic forecast focused specifically on the housing industry, Home Builders Forecast incorporates NAHB’s survey results as well as the feedback of more than 800 local associations around the country.

• The Desktop Analyst — The source for sorting and viewing housing and economic statistics, NAHB’s Desktop Analyst allows you to view current and historical data, create custom charts and graphs and download the results for later use.

• NAHB Staff of Economists and Researchers — Access to personal insight from the NAHB economics team members who are on call to answer your forecasting questions, help you apply forecasts to your business situation and produce special tabulations of historical and forecast data.

Subscribers can choose the subscription level that best meets their business needs. To learn more about “HousingEconomics Online” or to subscribe, visit www.housingeconomics.com.

Eye on the Economy

By David F. Seiders, NAHB Chief Economist
Revisions to recent economic history bode well for the near-term outlook …

On Sept. 29, the Commerce Department raised its estimate of second-quarter growth in real GDP to 3.3%, up from the preliminary reading of 2.8%. Thus, the second quarter was essentially on the economy’s long-term potential growth path, softening the widely held view of a mid-2004 “soft patch” in economic activity.

The upward revision to second-quarter GDP reflected improvements to business inventory investment, the trade balance and residential construction. Indeed, residential fixed investment grew at an annual rate of 16.5% and accounted for more than one-fourth of total GDP growth. That’s quite a growth contribution from a component that accounts for only about 5% of the level of GDP.

Available data suggest that GDP growth picked up to about 4% in the third quarter, largely reflecting ongoing strength in both nonresidential and residential fixed investment as well as a pickup in consumer spending following a sub-par performance in the second quarter (1.6% annual rate). Consumer spending was flat in August, in both nominal and real terms, but July was revised up substantially and strong sales of light vehicles bode well for the September consumption numbers. Thus, the third quarter is on pace to show a solid gain (around 4%) despite the August flatness.

The labor market picture also has brightened, despite some obvious (and temporary) negatives from the recent rash of hurricanes. Revisions to the employment reports for both June and July confirmed that the mid-year “soft patch” was not as bad as earlier estimates had suggested. Furthermore, preliminary data show solid improvements in the job market during August, and weekly data on unemployment insurance claims point toward a good September as well (adjusted for the hurricanes).

In general, payroll employment is on the rise, the unemployment rate is edging down, average hours worked are on the rise and increases in average hourly earnings are contributing to growth in labor income. These developments, naturally, are positives for housing demand.

House prices accelerated upward as housing demand strengthened during the spring and summer. Repeat-sales price measures accelerated to nearly 10% (year-over-year) in the second quarter, and median prices for sales of new and existing homes in July and August remained at an elevated pace (7%-10% range).

This price performance has resurrected strident charges of house price “bubbles” in various markets around the country, and the bubble charges have been fueled by strong shifts toward adjustable-rate home mortgages, particularly in new-home markets located in the highest-priced areas of the U.S.

The shift toward ARMs should wane as the Fed raises short-term interest rates, and house price inflation should decelerate to a more sustainable pace before long. Indeed, anecdotal reports from some of the nation’s hottest housing markets suggest some buyer resistance, even at the recent low interest rate levels.

Strong rates of new-home production, a strong pace of remodeling activity and strong rates of house price appreciation have combined to push the market value of the owner-occupied housing stock to higher and higher records. The Federal Reserve estimates this value at $15.7 trillion at mid-2004, up by 12% from a year earlier and the largest component of household sector assets. Home owner equity was a record $8.6 trillion at mid-year, up by 12% from a year earlier despite heavy borrowing against it.

The aggregate housing debt-to-value ratio was 45% at mid-2004, up only slightly from the late 1990s despite massive cash-out refinancings and heavy home equity lending during the low interest rate environment of 2001-2004. Furthermore, the Fed’s financial obligations ratio for America’s home owners — defined as the ratio of debt payments, auto lease payments, payments for home owner insurance and property taxes to disposable personal income — was only 15.76% in the second quarter. That’s down from recent highs in late 2002 and early 2003 and well below a corresponding ratio for renter households of 30.09%.

It’s clear that the typical American household is not laboring under a heavy debt load, despite a rash of opinions to the contrary. Indeed, low mortgage delinquency and foreclosure rates show that mortgage credit quality is in very good shape.

World oil markets obviously pose a threat to our favorable outlook for the U.S. economy and the housing sector, even though the economy is not nearly as vulnerable to oil price shocks as in past decades. Unfortunately, oil prices are very difficult to forecast, in view of the vulnerability of oil supplies to political instability and terrorism in key oil-producing regions of the world.

Fortunately, the Federal Reserve presumably is prepared to adjust monetary policy to help absorb any negative impacts of oil price shocks on U.S. economic growth. Fed tightening to head off inflationary consequences of oil price increases seems out of the question this time through.

NAHB Chief Economist David Seiders analyzes the economy from the point of view of the housing market every other week in the free e-newsletter, “Eye on the Economy.” The preceding is a reissue of his Oct. 6 edition. To subcribe to “Eye on the Economy,” click here.

Register Today for NAHB's Fall Construction Forecast Conference

Get the latest forecasts on housing starts, project budgets and other economic bellwethers of the housing industry at NAHB's Fall Construction Forecast Conference at the National Housing Center in Washington, D.C. on Oct. 27. Click here for more information and to register.

Now Available: HousingEconomics Online

HousingEconomics Online is the new online publication from the leading economists at NAHB.

Available at BuilderBooks.com, HousingEconomics Online combines unique scientific research with practical applications providing insights that are original, useful and written in terms that builders, manufacturers and housing finance professionals can understand and apply to their own businesses.

This interactive Web site at the executive level provides critical data and information quickly, easily and frequently and includes the following features:

• Home Builders Forecast
• The Desktop Analyst
• Seiders' Report
• Housing Activity
• Housing Policy Focus
• Multifamily Housing Quarterly
• Housing Market Statistics

For more details, go to HousingEconomics Online at BuilderBooks.com.

Customer Service Makes the Sale

Customers want more than a fine product. They want service.

Service means taking care of the customer with consideration, integrity, attention to detail, sensitivity, timely follow-up, positive mental attitude and enthusiastic communication.

More sales will occur when you take the time to care about your customers.

Everything Starts With Good Preparation

Take the time to hire the very best sales team. Never have mediocre salespeople selling your homes if you expect to meet your goals. Settle only for the finest salespeople — the most knowledgeable, enthusiastic, problem-solving, sensitive, results-driven salespeople available — to ensure the best results.

Then, after you hire them, train them. Conduct sales meetings in which you teach the art and philosophy of sales techniques. The purpose of these sales meetings is to educate and motivate your sales personnel, so don’t muddle the meetings with policy and procedure.

Evaluate Your Salespeople to Make Them — and Your Product — More Effective

Salespeople are on site with minimal supervision throughout the day. Therefore, it is essential to have meetings, training sessions, one-on-one visits by sales managers and several phone calls per day from the sales manager to the sales personnel to review prospective buyers, actual buyers, specifications, inventory, financing, incentives, etc.

Additionally, it is also necessary to evaluate the performance of the sales personnel through consumer surveys in order to determine how to improve the product, the company and, of course, the sales personnel.

It is also advisable to evaluate the performance of the sales personnel by "mystery shopping." This form of evaluation is most helpful; but, you must also realize that one analysis does not always provide a true picture of how an individual is performing.

Everyone has good days and bad days — hopefully, more good than bad. If an evaluation report is not good, then review the information with your salesperson and "shop" them again within two weeks in order to see if there is improvement.

Every salesperson should be evaluated a minimum of two times per year. Remember, the "mystery shop" is not to be used to fire employees, but to help educate and train them to sell and serve each buyer more efficiently.

The Critical Path: Greet Customers With a Welcoming Environment and Attitude

Customer service begins prior to the prospective purchaser walking through the door. Salespersons are responsible for making sure that they are prepared to greet and meet everyone.

It is also important for salespersons to establish a positive selling environment. Sales centers should be neat and clean, and salespersons should be fully aware of their product — from every price and home specification to every policy and procedure — in order to ensure customer satisfaction.

Every customer who visits your sales center is a buyer — if not today, then tomorrow.

Upon greeting customers, make sure they feel comfortable and welcome. Customers determine whether they will consider purchasing a product from you within the first four minutes of meeting you; so, it is important to give each customer your undivided attention. Yes, this is where you begin to put yourself into true customer service.

Be Attentive and Show Interest in Your Customer

Be attentive to the customer’s needs by asking the questions of who, what, why, where, when and how. Each of these questions will provide you with answers about customers to better qualify them to purchase your new home.

Take plenty of notes. Use a pen and pad vigorously — it will demonstrate and reinforce your interest in the customer.

Everyone wants attention and consideration. Make eye contact with your customers when they are speaking or when you are speaking.

Don’t Forget to Involve the Children in Your Presentation

If there is more than one prospective purchaser present, make sure to pay attention to all of the concerned parties. It is best to involve children in the presentation. They are the parents’ greatest asset. By asking the children questions, they will provide you with unbiased and clear-cut answers. Also, the children will not try to distract you or their parents if you are involving them in the presentation.

The next step in the service process is to present and demonstrate your product. Many salespeople believe that customers should determine what they want on their own and that the salesperson is around to sell a home when the customer is ready. Wrong!

Be Animated When You Present and Demonstrate Your Product

This is the time to become more animated. Explain your product using the exhibits in your sales center. Then, after you have both determined which product best suit your customer’s needs, demonstrate it. It is best to show the amenities, the land, the speculative built inventory and then the model homes from least expensive to most expensive.

As you demonstrate the product, it is essential that you listen to what the customer is saying. If you do not know the answer to a question, tell the customer that you will research the information and get back to them with an answer.

Make sure you do so, because each time you make good on your promise, you further ingratiate yourself with your customers. You are demonstrating that you care enough to want their business.

Of course, as you handle each objection positively and reinforce the customer’s decision to purchase a home, it is important to ensure that the customer is comfortable with you and the product you are selling.

Ask for the order; and, if you have earned the sale, then you will receive it. It is better to have asked for the order and know the customer’s current thinking than never to have asked for it at all.

Before customers leave your sales environment, make sure that they areleaving with as much information as necessary in order to feel comfortable with you and your product.

The Follow Up: Use It to Demonstrate That You Want Your Customer’s Business

Prospective buyers are waiting to be sold. It is up to you to guide the customer in a positive direction.

Several hours after customers have left, call and provide them with any additional information they may need, or simply thank them for visiting. Ask a few more questions, answer questions or leave at least one question unanswered so you can call them back and continue building trust and credibility.

Within 24 hours of the visit, send them a letter that includes information and your thanks. If you should want the customer to meet a specific mortgage broker, Realtor®, subcontractor or even the builder — arrange the appointment and be there with all of the concerned parties. Demonstrate to your customers that you want their business.

It may take several visits before the customer purchases a new home. Industry statistics indicate that it may take as many as eight visits and meetings before a customer makes the final decision to buy a new home. With so many choices to consider and decisions to make, it is important to follow-up with the customer on a periodic basis to stay in touch and provide your customer with a "helpful hand" and "gentle shove" in your direction.

A Realtor® may also be responsible for introducing a prospective customer to your community. Treat that Realtor® with as much respect as possible. Every time you follow-up with a customer, let the Realtor® know about your conversation. Invite Realtors® to meetings. Correspond with them. Copy them with your customer correspondence. The more service you provide Realtors®, the more business Realtors® will provide you.

The biggest fear a Realtor® has in any transaction is how payment of commission is earned. The more contact you have, the more you are reinforcing the idea that you will honor your commitment to the Realtor® and the Realtor's® real estate brokerage company.

Be Sure to Continually Explain the Home Buying Process

Throughout the follow-up process, it is essential to explain the home buying process. You need to explain each step in the buying process thoroughly so that everyone understands it. Just because you know the real estate industry doesn’t mean that everyone else does.

The steps in the process include:

• Home site selection
• Home selection
• Price
• Production schedules
• Construction substitutions
• Optional changes
• Decorator changes
• Financing
• Closing procedures
• Warranty

Each must be explained thoroughly prior to and after the signing of the agreement.

Do your best to keep your customer advised of the building process. All customers, at one point or another, will tell you that they can purchase a product less expensively than you may be charging them. Answer them by explaining the process so that they understand the value of your process. For example:

"Yes, you can probably purchase products here and there, but are they the same quality? And who would install these products for you? In addition to the purchasing aspect of the individual parts, ‘Mr. Customer,’ we are not selling you individual parts. We are selling you a completed and finished home that is assembled with the agreed upon specifications in accordance with the construction standards of the local municipality."

By explaining these points in advance, you will further enhance your positive relationship with the customer and he will quickly appreciate the value of his investment.

What About Site Visits?

Due to safety standards, it is advisable to never let your customer visit the home site or home without you or a representative of your company present to answer questions and explain the construction process. You may also include a paragraph in your agreement emphasizing this point.

You should also have your construction management team advise all subcontractors to only talk about the "weather" or some insignificant aspect of life if a customer should visit the site. Subcontractors can do verbal damage by talking to the customer about construction techniques and scheduling matters, especially when they are not informed about the entire process.

It is recommended to have various sales/construction meetings with the customer prior to the purchase of the home to explain to the customer what is actually purchasing being purchased. Prior to or at the signing of the agreement, it is further important to provide the customer with a general schedule of construction events including:

• Foundation
• Framing
• Rough-in of all mechanical equipment
• Drywall
• Finish trim
• Completion

Several weeks prior to finalizing each of these phases, you may give your customer an opportunity to make changes. If you do, have the customer attend a scheduled visit with you and the responsible construction management person so you can explain how the home is being built to specification and if certain changes can be accomplished.

Many companies do not give their customers the opportunity to make any changes at all, but if you can develop a positive change order system, then you can create additional profits for your company.

It is not recommended to make more changes after a phase has been completed and reviewed because changes would be more costly to make at that time.

If a problem arises, try to handle the situation in person rather than through the mail or with a telephone call. This will further enhance the customer’s trust in you.

Prior to Closing

Your construction management team should have actually completed the home one week prior to closing. At this time, you should schedule an appointment with the customer to walk through the home with you and a construction management representative to determine what needs to be completed prior to the formal closing of the home.

Take notes. Make sure all of the customer’s questions are answered properly. If the customer does not understand a point, review it again. Explain the final completion process.

It is advisable to meet again two days prior to the actual formal closing to review the completed process and so the customer can learn how to operate all of the equipment in the home.

At the time of the closing, deliver a warranty manual and an operational manual for the home to the home buyer and review these materials.

The day after the customer has moved into the home, make sure a construction management team member visits the home to ensure customer satisfaction. You may have construction management personnel visit the first two or three days after move-in when the customer may need more assistance.

Customer Relations Post Closing

Customer service is extremely critical during the first three months after the customer has moved into a new home. This is the time period when most problems will arise.

You and your construction management team need to be responsive, reliable, reassuring, honest, sensitive, empathetic — and helpful.

Successful Customer Relations Breeds More Success

There is no better measure of success for you and your company than happy and satisfied customers. And a happy customer base generates more referral leads. Earn your customer’s respect and you will earn more business.

S. Robert August, MIRM, is president and founder of S.Robert August & Company, Inc., a national marketing and public relations firm based in Denver that specializes in providing home builders, developers, Realtors®, manufacturers and lenders marketing/management consultation and sales training. August is an owner of Colorado-based RealtyWorks, Inc. and is the principal owner of Adaré Homes. He is also past chairman of NAHB’s National Sales and Marketing Council. For more information, contact August by phone at 303-220-8480 or via e-mail.

Subscribe to 'Sales + Marketing Ideas' Magazine for Cutting-Edges Information

For additional cutting-edge sales and marketing information, subscribe to NAHB’s "Sales + Marketing Ideas" magazine. Call 800-368-5242 x8192 or visit www.smimagazine.com 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.

The Institute of Residential Marketing Offers Courses and Designation Programs for Sales & Marketing Professionals

The Institute of Residential Marketing (IRM) offers four designation programs for sales and marketing professionals:

• The CMP and MIRM designation programs for new home marketing professionals
• The CSP and MCSP designation programs for new home sales professionals.

For more information on these designation programs, click here.

BuilderBooks.com Offers Sales and Marketing Publications Online

BuilderBooks.com offers a variety of sales and marketing publications online. To view or purchase these publications, click here.

Liposuction for Your Growing QuickBooks® File

Another in a series of articles about getting maximum mileage from QuickBooks® financial software.

The Challenge

I read a brief article in Nation's Building News Online regarding the size of QuickBooks® files. We are currently using QuickBooks® and do not have the Audit Trail preference selected, but our file size is still 41,940 kilobytes. What steps can I take to help prevent data loss?

Jennifer Perez
FineLine Custom Homes, Inc.

Diane’s Advice

In the first QuickBooks® Challenge article, I discussed ways to keep your QuickBooks® file from growing out of its britches. But if your data file already exceeds 30, 40, 50, 60 or 100 megabytes, it’s time to consider more drastic measures. As discussed in the previous article, you are now at a higher risk for:

• Data loss or corruption
• Slower transaction entry and report processing
• Faulty backups (especially if you are backing up to diskettes)

A few notes about backups: Larger files present more opportunities for data corruption. That’s why it’s extremely important to keep layered backups. “Layering” means that you keep dated versions of your backup files (e.g., Monday, Tuesday, Wednesday, etc., accompanied by Last Month, Last Quarter, Last Year, etc.).

Additionally, floppy drive backups are notorious for failing during the QuickBooks® “restore” process. The more diskettes required, the higher the likelihood of failure during a restore process. Avoid backing up on 3.5” diskettes if at all possible. Zip drives, tape drives, CDs and memory sticks are all relatively reliable backup devices.

Remember to move some of those backups off-site so that if there is a fire, flood or theft, you will still have your financial records.

Surgical-Style File Reduction Strategies

There are a variety of reasons why your file may be too large; you should thoroughly explore the situation before proceeding further. Once you understand how your file grew so large, consider the following strategies for dealing with an overgrown QuickBooks® file.

Warning: Although you may be tempted to take on this project in a do-it-yourself mode, I recommend that you undertake the following measures only with professional assistance. I’m sharing these approaches primarily to let you know that there are viable ways to move forward once your data file has become too large. These fixes can be tricky and, if not properly handled, could leave you with undesirable results.

Do a file rebuild. You can close all open reports and windows in QuickBooks®, then go to File, then Utilities, then Rebuild Data. You will be asked to create a backup and the rebuild will begin. I have seen client file sizes reduced significantly simply by re-building. (I often tell clients this is similar to re-packing a messy suitcase after you’ve been on the road for a week or so.)

Even though you haven’t reduced the actual amount of data in your file, you will now have a better picture of your exact file size.

Open a new QuickBooks® company file. You can create a new company file, enter opening balances and roll forward. This requires some focused startup time, but if your prior file structure didn’t provide the results you wanted, you now have the opportunity for a clean start. Remember to keep your prior file on your computer so you can access it as needed.

Perform file archive and condense. This process condenses all “closed” transactions that have posted to an account, removes all details (such as Vendor, Customer Job Assignment and Item) and posts them as a journal entry (one per account per month for the time frame you indicate). You’ll still be able to run reports that show account balances from prior periods, but the condensed periods won’t display detailed transactions. You will, however, have an archived file to access for prior-period details.

Warning: After the archive and condense process, you will no longer be able to see job cost details from any archived period. If it’s important to you to be able to see all of your job costs on one report (from your current file), be especially careful of your condense dates.

Here are some file archive and condense tips:

• Leave at least a full fiscal year’s worth of detail in the current file. For example, you might only want to condense through Dec. 31, 2002 right now so you will still be able to see all details for 2003. Then next year, you can condense through Dec. 31, 2003.
• Immediately after you complete the archive and condense process, go into your file and run various reports. Check them for completeness and accuracy. If you notice any problems, immediately restore your original file and look for professional assistance for the archive and condense process.

Upgrade to QuickBooks® Enterprise Solutions. Intuit offers an enhanced “middle market” edition of QuickBooks® called QuickBooks® Enterprise Solutions. It looks and acts just like QuickBooks® Pro and/or the Premier Editions and has improved performance. In addition, up to 10 users can access the file simultaneously, the list limits have doubled and key reports run up to 50% faster.

I queried technical support about file size limitations and — although I haven’t personally experienced anything close to this file size — they indicated that it could handle up to four gigabytes. This represents a significant improvement in file size capacity.

Simply install the system and open your prior QuickBooks® file. At $3,500, it may seem a bit pricey, but in the world of accounting systems, if it gives you the fire power you need, it may still be a bargain.

Consider other software options. If your operations have expanded rapidly and you find you continually need other construction accounting solutions, it may be time to consider buying and implementing integrated software solutions.

Be sure to investigate your options thoroughly: Talk with other users and project the immediate and long-term benefits and costs of making a change. From the costs side, be sure to include staff training time (and travel costs — if required), training and consulting fees and ongoing upgrades and maintenance fees. (For more advice on evaluating integrated processes and software, read Tech Talk 15. In addition, read about a builder’s experiences with integrated software. Both are in the Business Management Tools section of the NAHB Web site.)

Send your QuickBooks® challenge to Diane Gilson at QBChallenge@InfoPlusAcct.com. If your challenge is selected for this series (as Jennifer’s was), you will receive a free copy of Gilson’s book, "Accounting with QuickBooks® Pro for Home Builders & Remodelers" (available through www.infoplusacct.com or BuilderBooks.com).

Diane C.O. Gilson, CPA, CIA, is a Certified QuickBooks ProAdvisor and MasterBuilder ProAdvisor, author, trainer and construction accounting coach, as well as a frequent speaker at The International Builders’ Show and the Remodeling Show. Her firm, Info Plus Accounting PC/CPA, offers bookkeeping and support services to help construction companies do more accurate and timely job costing and run better management reports. Contact Gilson via e-mail, or call her at 734-544-7620.

Please Note: This article is solely for informational purposes. Reference herein to QuickBooks® software or Intuit, Inc., or any specific commercial products, process or service by trade name, trademark, manufacturer or otherwise, does not constitute or imply its endorsement, recommendation, warranty or guaranty by NAHB. The views and opinions of the author expressed herein do not necessarily state or reflect those of NAHB. NAHB and the author expressly disclaim any responsibility for any damages arising from the use, application or reliance on any information contained in this article. We recommend that users exercise their own skill and care with respect to its use. Because software is continually modified and upgraded, please consult an accountant or information technology advisor before using the information in this article.