Nation's Building News Online: February 28, 2005

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DOE Study Confirms Wall Insulation Requirements Don’t Deliver Enough Bang for the Buck

A Department of Energy (DOE) report released last week confirms that controversial changes in the International Energy Conservation Code (IECC) require increased insulation in wood-framed walls but, depending on climate, take between 40 to 90 years to pay for themselves in energy savings. NAHB opposes the increase in wall insulation requirements.

The changes, which were initiated by proprietary interests in late 2003 and approved last year, add at least $600 to the cost of an average new home while saving only about $15 a year in energy costs.

The modifications increase wall insulation requirements — or R-values — in all climate zones for all types of wood-framed construction.

“NAHB supports building codes that promote energy efficiency, but home buyers should not bear the burden for expensive new requirements that provide little benefit,” said NAHB President David Wilson. “Seven to ten years, the average time a new home buyer lives in his new home, is a more appropriate payback period for energy cost savings.”

The primary effect of the change, according to the DOE report, has been “instantly prohibiting products that would otherwise maintain market share interests and could be compliant within the original DOE RICC code change proposal if other energy efficiency measures within the building code exceed code requirements.”

Many insulation types, including sprayed cellulose and expanding foams, cannot achieve the prescribed ratings without going to more expensive two-by-six walls.

The modifications were made at the last minute during a hearing on a proposal by the Department of Energy to simplify compliance with the IECC; and the onerous insulation requirement was added by the International Code Council as part of a 2004 supplement to the IECC. The change was opposed by both NAHB and DOE.

Last year, NAHB and other groups asked DOE to conduct a cost-benefit analysis of the modifications because stakeholders did not have a chance to study them before they were adopted.

“We applaud the Department of Energy for conducting this important analysis and making their non-biased findings public, despite pressure from interest groups to change the results,” said Wilson.

NAHB is using DOE’s data to advocate reasonable, appropriate reforms during the current round of hearings by the International Code Council being held in Cincinnati from Feb. 22 to March 4.

“NAHB will continue its work to support appropriate code changes that promote energy efficiency and protect housing affordability,” said Wilson.

For more information, e-mail John Loyer at NAHB, or call him at 800-368-5242 x8303.

Building News Coast To Coast

Luxury Trends: Hungry for Convenience? Get a Kitchen in a Bedroom

The latest amenity for owners of 10,000- to 12,000-square-foot homes who have a craving for a Perrier at 2 a.m. is the master bedroom kitchen, according to Rick Goodwin, publisher of Unique Homes magazine. Sometimes called morning bars, breakfast bars or coffee bars, the mini-kitchens can range from an alcove with a small fridge to an elaborate room complete with wine storage. Although NAHB has no data on bedroom kitchens, it reports that the number of two-kitchen houses is on the rise, although the extra kitchen is usually in the basement or outdoors. In a two-year-old survey by Unique Homes and the Institute for Luxury Home Marketing of owners of homes valued at more than $2.5 million, 11% of those responding said they had mini-kitchens in their master-bedroom suites.
USA Today (2/18/05); Maria Puente: www.usatoday.com

Local Contractors, Anticipating Needs of an Aging Population, Learn to Modify Homes for Seniors

About a dozen local contractors spent three days taking classes through the Arrowhead Builders Association in Minnesota to earn NAHB’s Certified Aging in Place designation for expertise in modifying homes to help older people live independently and safely in their own homes. Among problems confronting builders in this fastest-growing segment of the remodeling industry, says Mike Weiss, an NAHB instructor, is finding ways to minimize background noise for people who are losing their hearing. “Each person’s needs are individual, and solving them requires an individualized approach,” he says. Properly directed, adequate lighting can help people with visual problems. Natural gas and smoke detectors can be installed to help people with a reduced sense of smell. Efficient hearing and cooling can help older people whose body temperature is not easily regulated. Other solutions require major projects, such as modifying counter height in the kitchen, building a wheel-chair-accessible bathroom or constructing an elevator.
Duluth News-Tribune (2/25/05); Jane Brissett: www.duluthsuperior.com

Peak Attraction; Second Homes at Ski Resorts Provide Opportunity for Fun, Investment

With the baby boom generation now in its peak home buying years, “The real estate boom has touched second homes in a very, very big way,” says National Association of Realtors® (NAR) Chief Economist David Lereah. The typical second-home owner is 55 to 64 years old, according to Gopal Ahluwalia, director of research at NAHB. “As age rises, so do the chances of having a second home,” he says. “After 65, it slows down.” Also fueling the second home market is the escalation of primary home values, which is giving buyers more access to money than they used to have. In 2003, NAR estimated that there were 6.6 million second homes in the country and that they were responsible for 5%-6% of total home sales. A new report from the association next month will show that the number is much higher.
Washington Post (2/19/05); Daniela Deane: www.washingtonpost.com

Overcoming Home Buyer Selling Tactics — Common Signals Hint at Intent to Purchase

Sales agents, especially inexperienced ones, miss out on the opportunity to close the deal because they don’t recognize the signals that indicate when a prospect should be asked if they want to buy the house, according to Howard Brinton, a real estate sales motivational speaker. Common buying signals include lingering on the property, sitting down on the furniture, choosing children’s bedrooms, discussing where the furniture will go, discussing changes to paint or carpeting colors, taking notes or measurements, becoming protective toward the house or the yard and using the word “when” instead of “if.” Buyers who procrastinate should be advised by the agent that the house might not be available by the time they finally decide it is what they’re looking for.
Inman News (2/22/05); Howard Brinton: www.inman.com

House Giveaways Are Popular, But It Seems the Houses Aren’t

Days before the contest deadline, viewer participation in this year’s $1 million HGTV “Dream Home Giveaway” for a lakefront mini-mansion near Tyler, Texas, was running about 8% ahead of last year’s contest, and 39 million entries were expected. However, only one winner in the nine-year-old series has kept the house. For one thing, the local property taxes alone on the fully furnished $1.5 million Texas house are $20,000-$30,000. And the Internal Revenue Service requires the winnings to be reported as income on Form 1040, Line 21. The previous winner of a mountain lodge in Wyoming got a $250,000 tax bill but was able to sell the place for $668,000. Recognizing the tax realities, the Naperville, Ill., Rotary this year is selling $100 chances for a $1 million home that can be built anywhere by a member of NAHB, but the winner will be given the option of taking $800,000 in cash.
Chicago Tribune (2/20/05); Mary Umburger: www.chicagotribune.com

Elevator Business Going Up

Increasing their annual sales from $60,000 in 2002 when they went into business to more than $1 million last year, Mike and Lisa Koch, co-owners of Koch Elevator Co., say that elevators are becoming the hottest upgrade in luxury residences. Home elevator sales doubled between 1998 and 2003, according to NAHB. Part of the growing popularity of the elevators stems from the larger square footage and increased technology that are commonplace in upscale homes; more three-story homes are being built to accommodate baby boomers who want bigger houses but smaller yards. Elevators also provide a solution for elderly residents who are facing mobility issues. The cost of a home elevator has remained around $18,000 for the past 20 years, but today’s models are quieter, faster, more reliable and more efficient. For those on a tighter budget, stairchairs, which attach to a staircase banister, start at about $4,000.
Reno Gazette-Journal (2/19/05); Jeanne Lauf Walpole: www.rgj.com

Gas Vs. Wood

At least 640,000 of the nearly 1.1 million homes built last year — or 59% of the market — feature a fireplace, according to NAHB. That’s up from 58% of the market in 2002 and 35% in 1970. While many die-hard home owners say it’s hard to beat a wood-burning fireplace, improved gas products have enjoyed growing popularity. Gene Kanode, owner of Kanode’s Hearth Shop in Salem, Va., says he is a big fan of direct-vent fireplaces, which are highly efficient and give off a lot of heat, but emit less odor and don’t allow contaminants into the home. But they have a sealed front, such as a glass door, that makes the fire less accessible. They can be used 24 hours a day and as a main source of heat, and cost $2,000 and up. Despite the benefits of direct-vent fireplaces, Al Silverstein, owner of Dixie Products in Roanoke, Va., says that ventless products account for about 80% of his gas fireplace sales. They’re much cheaper and easy to install, although they are not meant to be used as a primary heating source.
Roanoke Times & World News (2/18/05); Elizabeth Hock: www.roanoke.com

Developer Uses Unusual Amenities to Lure Tenants to Upscale Apartments

With apartment vacancy rates running 10%-12% in central Ohio, double the rate of the mid-1990s, developer Peter Edwards has built an unusual clubhouse for tenants of his six upscale apartment complexes, where rents range from $625 to $1,600. Built at a cost of $3 million, Edwards' red-and-white, 13,000-square-foot barn contains a fitness center, a fancy pool and a bar that’s staffed five nights a week. The structure features interior paneling salvaged from a nearby barn, support posts from another barn built in 1834, a bar top made from walnut, several pieces of leather furniture, old flags that once flew in Paris, a 19th-century table that was once used in an English monastery, slate roof tiles salvaged from an old roof and an antique clock face from a small French town. Company officials think the concept is working. Occupancy in the apartments closest to the clubhouse rose from the mid-80% range to 96% last year after the property opened in May.
Columbus Dispatch, Ohio (2/25/05); Mike Pramik: www.dispatch.com

Quarry Doesn’t Dig Development

In a reversal of the situation in which home owners complain about proposed commercial or industrial development, the owner of the Halquist Stone quarry in Lannon, Wis., is objecting to a $30 million development of 220 condominiums and apartment units because he is worried that the new residents will complain about noise and dust from his processing plant. “It’s really a question of who was there first,” says David Crump, the director of legal research for NAHB. “If the use that’s going in right next door is not compatible with what you’re doing, obviously the people who were there first want to keep them out.” Jerry Deschane, the deputy executive vice president of the Wisconsin Builders Association, said he’s never heard of any instances in Wisconsin of a quarry or similar industrial site objecting to a nearby residential development.
Milwaukee Journal Sentinel (2/24/05); Reid J. Epstein: www.jsonline.com

Bids Are Busting Budgets

In the San Diego area, officials who oversee city, county and school construction projects are experiencing sticker shock and bids are coming in higher than estimates. Compared to the 2%-4% increases in construction costs that were typical in recent years, the last two years have seen significant increases in nearly everything needed to build a building — steel, drywall, wood and cement. In San Diego County, the price of plywood jumped 67% and steel rebar increased 33% from 2003 to 2004, according to Marshall & Swift/Boeckh, a Los Angeles company that tracks building costs for the appraisal and insurance industries. Factors behind the rising materials prices include a development surge in China that created a worldwide steel shortage, post-hurricane rebuilding efforts in Florida, California’s home building boom and rising petroleum prices that have pushed up manufacturing costs, particularly for asphalt shingles. Construction bids received by the city of San Diego since 2003 for some of its library and fire station projects exceeded estimates by 20%-30%, sending officials scrambling to find additional money to cover the increase. “We’ve had construction escalations before,” said Bruce Herring, San Diego’s deputy manager who has worked for the city for 30 years. “But I think this is the most severe we’ve seen in a short period of time that I can remember.”
San Diego Union-Tribune (2/21/05); Karen Kucher: www.signonsandiego.com

Massachusetts Sees $50 Million to Help Nonprofits Buy Church Sites

The Massachusetts Housing Investment Corp. and six other institutions will be making $50 million in financing available to help nonprofit community groups purchase and redevelop properties closed by the Boston Archdiocese. Bidding has already ended on 16 properties shuttered by the archdiocese, including those in Waltham, Salem and Lowell. The money will help member organizations of the Massachusetts Association of Community Development Corporations compete with private developers to buy closed church properties, according to Maureen Flynn, the association’s deputy director. In the next round of properties to become available in April, Richard Thai, executive director of the Jamaica Plain Neighborhood Development Corporation, said that he hopes to use some of the money to bid on the local Blessed Sacrament church, which has been a mainstay of the community for 100 years and many want to see turned into affordable housing.
Boston Globe (2/22/05); Thomas C. Palmer Jr.: www.boston.com

Bats Infest Apartments

Bats have been scaring residents of Yamacraw Village in the Savannah, Ga., area and swarming into a handful of their apartments after being ousted from attics by the city’s housing authority. “They’ve designed a system that allows the bats to come out of the attic, where they’ve lived for some 40 years, and not allow them back in,” explained Sandy Glicken of the housing authority. “So what’s happening is you have bats that don’t know where they should go.” The health department says that bats usually aren’t a danger to people. Most bats don’t carry rabies, and they generally stay away from people. But in close quarters, it can be different. “Out in the open, it’s usually not a risk,” said Dr. Diane Weems. “It becomes a risk when they are in residential places in rooms where people are staying.” She says that bats’ teeth are so small that you may not even know it when one bites you, and advises locals to call poison control if they wake up with a bat in the room. The housing authority has responded by putting new screens on doors that had holes in them.
WTOC, Savannah, Ga. (2/23-24/05): www.wtoctv

Supreme Court Looks at Economic Development as Justification for Taking Private Property

In the first of two cases that could hold major repercussions for property rights of Americans under the Fifth Amendment to the U.S. Constitution, the U.S. Supreme Court on Feb. 22 heard oral arguments from home owners in Connecticut who have been fighting the efforts of the City of New London to take their property so that private developers can turn it into a business and technology park.

The approximately 90 acres of land that are in dispute are adjacent to a Pfizer global research facility. In justifying its redevelopment plans, the city says that the new use of the property would generate higher property tax revenue, provide new employment opportunities to make up for the closing of a local Navy facility, encourage access to the city’s waterfront and build momentum for revitalization of the downtown area.

The property owners claim that the city’s plans represent an unconstitutional transfer of land from one private property owner to another in violation of the Fifth Amendment. That view did not persuade the Connecticut Supreme Court, which ruled in favor of the city last March, taking a broad approach to the issue of public use and finding that courts do not need to carefully examine this type of taking when a legislature has spoken.

NAHB has filed an amicus brief in support of the property owner in the case — Kelo v. City of New London. While not taking the position that economic development can never be a public use under the Constitution, NAHB is advocating heightened judicial review of such municipal plans and views the case as an opportunity for the Court to set out some parameters to curb abuses by local governments.

It is fairly well established that parks, utilities and the redevelopment of slums are appropriate applications of public use in most states. The courts, however, have been splintered over the recent trend by localities to attempt to take private property using economic development — higher tax revenue and more job opportunity — as a “public use" appropriate for a taking.

A favorable response from the Supreme Court would also help provide some certainty to NAHB members who are working with local governments about which types of eminent domain projects can go forward.

The Supreme Court last Tuesday also heard arguments in the case of Lingle v. Chevron U.S.A., which concerns a well-established legal test for a Fifth Amendment taking. For a story on that case in this issue of Nation’s Building News, click here.

For more information, e-mail Mary Lynn Pickel, or call her at 800-368-5242 x8485.

Housing Snapshot

Mortgage rates ticked up for the second consecutive week, according to Freddie Mac, while still remaining at affordable levels. Frank Nothaft, Freddie Mac's chief economist, predicted that a lower-than-expected rise in the Consumer Price Index (CPI) and a subsequent decline in bond yields could push mortgage rates back to where they were a week or two earlier. Despite indications of declines in housing sales in January, he said that "continuing low interest rates will keep the housing sector active for some time to come." The Labor Department reported that the CPI was up a scant 0.1% in January. The Commerce Department repored good news for the economy last week with growth in the Gross Domestic Product running at 3.8% in last year's fourth quarter, up from an earlier estimate of 3.1%. Lumber prices, which had been rising in recent weeks, came almost to a standstill last week, according to Random Lengths. The cost of framing lumber rose from $426 to $427 per 1,000 board feet; it was $384 one year earlier. The panel composite price, which includes plywood and oriented strand board, dropped from $459 to $457 per 1,000 square feet, compared to $571 a year earlier.

Mortgage Interest Rates

30 Year Fixed Rate: 5.69\%
15 Year Fixed Rate: 5.22\%
1 Year ARM: 4.16\%

Housing Starts: Jan. 2005

Total: 2.159 milliom\%
Single Family: 1.76 million\%
Multi Family: 399,000\%

New Home Sales: Jan. 2005 *

1.106 million

Existing Home Sales: Jan. 2005 *

6.81 million

* Seasonally Adjusted Annual Rate

NAHB Is Your Business Partner

If you were one of the record 105,000 housing professionals who attended this year’s International Builders’ Show in Orlando, then you saw for yourself that nobody puts on a show like NAHB. From the largest assembly anywhere of cutting-edge building products and services to presentations by expert speakers on the issues that are shaping our industry, in four super-charged days NAHB’s annual exposition provides the resources and the ideas that can keep your business ahead of the competition.

NAHB is the best business partner you could have, not just at the start of the year but all year long. I am committed to providing our members with the tools they need to score success in an industry that is always fraught with challenges. We are fired up about prospects for housing in 2005 and we are ready to deliver. In the coming year, we’re going to continue to focus on what NAHB does best, and we’re going to do it better than ever.

One of our top priorities is improving the business environment in which we all operate. This means eliminating the regulatory barriers that frustrate our efforts to supply the housing that is sorely needed in our growing communities. And it means empowering our members with educational opportunities so that they will have the wide range of abilities needed to prosper in the home building business — to assess your marketplace, provide your prospective customers with what they want, run an effective operation, navigate the approval process, turn neighbors into supporters of your housing plans and much, much more.

We’re going to be more proactive in moving forward our legislative agenda in the 109th Congress. We’re going to tackle issues head-on. One of the top issues emerging in the Senate will be reforms for the housing industry’s government sponsored enterprises (GSEs) — Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Following the recommendations of a specially appointed NAHB task force on this issue, our board of directors has just approved major policy on oversight reform, and we’re ready to lead the debate.

Another goal we will continue to pursue with full determination is increasing the supply of affordable workforce housing for teachers, police officers, fire fighters and other essential employees who have been priced out of living in the communities they serve. We brought this issue to national attention last year and identified resources and approaches that will begin to address the problem. We will pursue those initiatives this year, and we will also continue our support for proposals by the Bush Administration to create a homeownership tax credit and a zero-downpayment FHA mortgage to boost homeownership opportunities in this country.

In our commitment to make NAHB your true business partner, we will also be increasing our efforts this year on retaining current members and acquiring new ones. Membership is the lifeblood of this association. Our grassroots membership is the source of our strength, and in 2005 we plan to make the members of our federation even stronger through the expansion of NAHB’s educational programs and networking opportunities, including the 20 Clubs.

Finally, I want to let you know about the Home Builders Care/National Housing Endowment-Tsunami Shelter Fund. With an initial donation of $250,000 designated by the NAHB Board of Directors in Orlando, the fund will be directed to rebuilding efforts that provide temporary and permanent shelter for survivors. I have asked Bob Mitchell, a past president of NAHB, to lead this effort. We will be working with U.S. charitable organizations to demonstrate our concern, and I urge you to join in this effort through a tax-deductible donation. For more information in this issue of Nation's Building News on how you can do your part to address the shelter needs of nations devastated by the tsunami, click here.

You can ask the President of the United States, leaders in the Congress, the chairman of the Federal Reserve or the top economists in the country, and they will all tell you that housing has been the driving force supporting our economy for the past several years. And you can ask the parents of your childrens’ friends at school, members of your church congregation, people standing in the checkout line at the grocery store, and they will tell you that there are few things more important for their families than housing. That is an awesome responsibility for a single industry, but one in which we can all take great professional pride.

I promise you that NAHB will continue to be your voice — the voice of housing in America. I look forward to serving you and our entire membership.

Housing Demand Solid Despite Snow-Related Sales Decline in January

Unusually snowy conditions in the Midwest and Northeast contributed to a 9.2% decline in sales of newly built single-family homes in January, but demand in the nation’s housing market remains solid, said NAHB in response to a Feb. 28 home sales report from the Commerce Department.

“The fact is that weather was a major factor in the decline, with unusually harsh winter conditions contributing to a 40% drop in the Midwest alone,” said NAHB President David Wilson. “Our latest builder surveys indicate that the fundamentals of the nation’s housing market remain very solid.”

“The January decline is from a December number that Commerce revised upward by 11% since its last report,” noted NAHB Chief Economist David Seiders. “On balance, the housing market is still definitely in good shape. Our latest builder surveys, continuing low mortgage rates and solid growth in employment and household income all bode well for builders in the months ahead.”

Last year’s record-breaking home sales now stand at 1.2 million, an all-time record that’s 10.5% ahead of the previous record set in 2003.

On a national basis, new-home sales fell from December’s seasonally adjusted annual pace of 1.22 million units to a seasonally adjusted annual rate of 1.11 million units in January.

Regionally, snowy weather in the Midwest contributed to a dramatic 40.3% decline in home sales there during January. The Northeast also felt the pinch of wet and snowy conditions, posting a 17.1% decline from December. Sales declined 3.3% in the South and increased 5.6% in the West.

Meanwhile, the number of unsold new units on the market in January climbed 3.5% to 438,000 or a 4.7-month supply at the current sales pace. “A good portion of the units reflected in this inventory have been permitted but not yet started,” noted Seiders.

“The bottom line is that supply and demand in the new-home market are well balanced, and we’re only looking for a modest setback of between 3% and 4% for home sales this year as the interest-rate structure gravitates upward. This housing market still has plenty of strength going forward,” he said.

Register Today for the Spring Construction Forecast Conference

See what's on the horizon for the housing industry at NAHB's Spring Construction Forecast Conference on May 5 in Washington, D.C. Get the latest forecasts on housing starts, project budgets and other economic bellwethers and developments in the housing industry from some of the country's premier economists and finance experts. To register or for more information, click here.

Buffalo-Niagara Falls, N.Y., Most Affordable Housing Market

Buffalo-Niagara Falls, N.Y., is the nation’s most affordable housing market among major metropolitan areas with populations over one million, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) for the fourth quarter of 2004.

Among smaller markets, Lima, Ohio, rated tops for metros with fewer than 250,000 people, while Saginaw-Bay City-Midland, Mich., was the most affordable mid-sized market with 250,000 to just under one million people.

“A dip in mortgage rates during last year’s final quarter made it easier for many families to become home owners,” said NAHB President Dave Wilson. “That’s true in Buffalo and across the country.”

According to the HOI, the average interest rate on home mortgages fell to 5.77% in the fourth quarter, down from 5.83% in the third. As a result, 52% of homes sold nationwide in the final months of 2004 were affordable to families earning the median U.S. household income of $57,500. This was up from 50.4% in the third quarter, but well behind 61.2% at the beginning of 2004.

“Make no mistake — we still have major work to address the housing affordability crunch in America,” Wilson noted. “Out of the 160 metro areas in our survey, housing affordability fell in 73 locations between the third and fourth quarters of 2004. The fact remains that buying a home is becoming increasingly difficult for America’s working families.”

Buffalo-Niagara, N.Y., was the nation’s most affordable major market and the sixth most affordable market overall — behind the less-populated metros of Lima, Ohio; Cumberland, Md.; Mansfield, Ohio; Saginaw-Bay City-Midland, Mich.; and Canton-Massillon, Ohio, respectively. In Buffalo, nearly 90% of the homes sold in last year’s final quarter were affordable to families earning the area median income of $53,600. The median price of homes sold in the market during that period was $79,000.

With nine of its markets appearing on the “25 Most Affordable Metro Areas” list, Ohio wins the title of the most affordable state in which to buy a home. Illinois and Michigan tied as the second-most affordable states, with four metros in each appearing on the top-25 list.

On the flip side of the coin, Los Angeles-Long Beach, Calif., tied with Salinas, Calif., for the top spot on the “25 Least Affordable Metro Areas” list. With 19 entries on that list, California was once again the nation’s least affordable state housing market overall. No other state had more than two locations in the least-affordable column.

“Nowhere are the effects of excessive regulation more apparent than in California’s housing market,” said Wilson. “In Los Angeles-Long Beach, where the median home price was $415,000 in the fourth quarter, a miniscule 5.2% of homes sold were affordable to median-income families earning $53,500 per year. That’s a tough situation that needs to be addressed with reformed land-use policies that allow more affordable housing to be built.”

Increase Profitability by Streamlining Your Operations

Pssst. What’s the secret to making money in the construction industry?

If you said having a steady supply of land, well that certainly helps — but that’s not the secret.

To make money in the industry, you have to have a company vision that employees understand and support. That means having:

• A unified set of goals
• One set of numbers to strive for
• A single mission

The key to achieving this vision is organizational efficiency.

During the 2005 International Builders’ Show, Bob Whitten, vice president of SMA Consulting, discussed strategies for improving profits by focusing and streamlining business operations. He said the first step in the process was to:

Develop Your Company’s Vision

Aligning your company’s work with a common vision is crucial for effective organizational time management. Doing so can result in a 10% time savings and gain in productivity.

If that doesn’t sound like much, multiply that 10% by the number of employees in your company. “The bottom line impact is immense,” Whitten said.

To develop and formalize your company’s vision, Whitten said, first write:

• A company mission statement — this is a concise description of your company’s purpose or role
• A philosophy or values statement — these are the principles that support that mission
• A business plan with strategies ― this is how you will accomplish that mission

Only about 20%-25% of your business plan should contain financials. The rest is your vision. “It’s what causes those numbers to be good, bad or mediocre,” Whitten said.

As a business owner, it’s your responsibility to communicate the company’s organizational vision to everyone in your company. In addition, you will have better buy-in if you ask for your employees’ input while developing each of the vision’s three components.

Set Benchmarks

Benchmarks are the basis for conducting business to meet your goals. “Your decisions are only as good as the information you receive,” Whitten said. “You can track starts, but unless you know how your cycle time is, you never can predict closings.”

Useful benchmarks include:

• Profitability (gross and net)
• Sales, starts and closings
• Cycle time (in days)
• Job cost variance percentage
• Customer satisfaction ratio
• Customer referral ratio (customers who would recommend you to someone else)
• Advertising budget and traffic per unit ratio

Setting company benchmarks requires coordination among departments, so make sure each department in your company has:

• A department description
• A budget
• Benchmarks of success
• A separate section within the company’s business plan
• A reporting system to provide feedback

Here’s how you can use benchmarks and management by objective to work towards your company’s vision:

• Develop quantitative performance measurements.
• Compare your actual results to the benchmarks. (This should be reflected in the business plan.)
• Concentrate on exceptions to the objectives when reviewing those results and developing an improvement action plan.
• Produce reports that indicate whether or not the action plan is working.
• If the action plan isn’t working, revise it. You may also need to revise the business plan’s goals and objectives.

Document Your Processes and Procedures

“Documented procedures are a roadmap for doing more,” Whitten said. In addition to boosting productivity, written production procedures will help you maintain quality control and can help you make more money on each house.

According to Whitten, implementing a written purchase order system with job cost variance control is the key to cost control and profitability.

Record your back- and front-office processes and procedures, too. Because work done in the office is closely tied to work done on your job sites (and vice versa), it’s vital to maintain the same level of quality control throughout your operations. This helps support your organizational vision.

You can take your written procedures and flowcharts and develop them into separate manuals for home owners and the various departments within your company. These manuals then become training tools for your staff.

Home owner manuals do double duty as customer service tools that can save your company lots of time and effort. “Home owners ask the majority of the questions your company receives,” Whitten said. “Tell them you’ll still hold their hand and will respond to their questions, but the home owner manual will answer 75% of their questions.”

Hire Smart

As a business owner, you already know that you can’t swing a hammer, sell homes and handle customer service — and do everything well. That’s why you hire skilled employees who support your company’s vision and will work towards its goals.

Hiring smart helps minimize turnover. It also increases productivity, which enhances organizational efficiencies and increases employee satisfaction.

Whitten is a proponent of using behavioral job models— which measure the personality traits of an ideal candidate — to get a good fit between a candidate and a job.

“You usually don’t want someone with an accountant’s personality to be a salesperson,” he said. “Likewise, someone with an outgoing personality may not function well in your accounting department.”

Checking job candidates’ references and credit histories costs a few hundred dollars maximum but is invaluable for bringing the right people aboard. Unfortunately, many contractors don’t take the time to do this and instead rely on word-of-mouth from the person who referred a job candidate to them.

“If you’re going to offer someone $50,000 to be a superintendent and you don’t check his driving and credit record, you don’t know who you’re hiring,” said Whitten. Don’t take that risk in your business.

Useful Resources

The following resources can help you increase your organization’s efficiency, productivity, and profits:

• The "Pro Builder Business Plan Guide" features an electronic spreadsheet and step-by-step exercises that walk you through the process of developing a business plan. Call 800-223-2665 or go to BuilderBooks.com to order.
• Need a purchase order form? The “Form Builder: Contracts” CD contains more than 70 documents to help you manage your business. Call 800-223-2665 or go to BuilderBooks.com to order.
• “Business Basics for Builders” contains details on developing cost control systems, plus how-to’s on estimating, managing change orders and other business essentials. Call 800-223-2665 or go to BuilderBooks.com to order.
• “Job Descriptions for the Home Building Industry, Third Edition,” contains 40 job descriptions, interview questions and other hiring tools. Call 800-223-2665 or go to  BuilderBooks.com to order.

NAHB Has More Than 170 Resources to Help You Run Your Business More Profitably

Go to NAHB's Business Management Tools Web pages for instant access to more than 170 timesaving, moneymaking and cost-cutting business resources to help you run your business more profitably. Get guidance on accounting and financial management, business strategy, computers and information technology, customer service, human resources and more. 

What Visitors Don’t See on Your Web Site Could Generate More Sales

Some of the key factors necessary to create an effective Web site for your active adult community are ones most visitors won’t even notice.

Perhaps the biggest decision you will make concerning your Web site is choosing the company to design and host it. There are hundreds of host companies out there, but it’s important to find the right firm. Look for companies that offer the following:

•  • Web Statistical Programs — It is critical to know what types of statistical programs the company offers to analyze traffic on your site. Tracking the number of hits on a daily, weekly and monthly basis will help you gauge the effectiveness of your marketing program, including advertising, press releases and direct-mail pieces, to steer prospects to your site. You also should know where your visitors come from and the search engines they use.

Other data includes the Web pages your visitors use to enter or leave the site, the length of time they spend online, the keywords or phrases they use to locate your site and the search engines that refer them. Having some type of visual cues will help them as they do their online research.

Most hosting companies compile a report profiling the visitors to your Web site. This should be presented in an easy-to-understand format because the data can be a valuable tool for the builder, marketing team and sales staff.

• Stability and High-Tech Support — Select a company with a proven track record for technical stability and knowledgeable tech support. You can’t entice prospects to drop by your community if your Web site has crashed or is temporarily unavailable.

Look for established companies that have been in business for several years. Also, make sure that the hosting company offers phone support in case your site has a problem. Always ask for references to verify the company’s service and support track record.

Ensure Maximum Usability

Your Web site must be user-friendly. If your site is “usable,” visitors will spend more quality time learning about the homes they plan to buy and less time bouncing around the site trying to figure out where your homes are featured. The best sites are:

• Easy to Navigate — This is the most significant element of all. If your site's navigation frustrates visitors, you will lose them before they have a chance to check out your models or drop by the sales center.

The main menu should have clearly defined sections that allow visitors to click on the pages that interest them. Including visual cues ― such as designing your menu(s) with titles that change color to indicate that the visitor has already clicked on a particular page or section — that help them navigate your site is a plus.

• Easy to Read — Keep the content on each page succinct and limited to no more than one or two paragraphs. Visitors would rather look at photos, illustrations, maps and floor plans than scroll through bulky copy. Also, be sure that the typeface is large enough (10-point type or bigger) to be read by a 55+ reader.
  
  
• Fast Download Time — If you opt to have an “Introductory Page” before the home page, make sure it doesn’t overwhelm the visitor or take too long to download.

Also, be sure to do your visitors a favor by including a “Skip Intro” button that allows them to go directly to your home page. Although more and more Web users have access to broadband or high-speed Internet, keep in mind that many of them might still be using dial-up (56K modem) access to the Internet.

Branding and Design — Be Consistent

Any marketing professional knows the value marketing material that has a consistent look. This rule of thumb also applies to your community Web site.

Your community’s overall look or theme should be conveyed simply and clearly on your Web site. Let your Web designer know which primary elements you want on each page of your site. Use your company or community’s colors, logos and any photos on your site to brand your community the same way you do in your advertisements, printed material, marketing brochures and signage.

A coordinated marketing message will help you distinguish yourself from the competition. Combining a professional, creative Web design with optimal usability will make a lasting impression.

Your Web site’s design should have these features:

• Emotional Appeal — Develop a look and feel for your site that will appeal to your visitors’ emotions and get them hooked. If your community is located near a waterfront, add photos of a lake or beach and maybe a few sound effects that will stimulate interest in learning more about living in your community.

Active adults are always big on lifestyle, so make sure your Web site gets that point across.

• Flexibility — Plan your site with future additions in mind. Building a Web site is similar to building your active adult community: one phase at a time.

Virtual home tours, home owner testimonials, lifestyle photos of your on-site recreational amenities and an inventory price list showing the sales status and availability of your current phase are just a few examples of content to add to your site.

It isn’t cost-effective to completely redesign your site every time your community reaches a new phase; instead, make sure your site is flexible. Allot space for new sections and update your site regularly. It will be less expensive to maintain your site than it is to reprint a marketing brochure.

• Floor Plan Options — When illustrating site and floor plans, design your Web site so that visitors can click on a particular location that can be color-coded to match a particular home style. Once they make their selection, give visitors the choice of viewing the floor plan on the screen or allow them to print out the plan. Your site also should permit visitors to see photos of each building plan or take them on a virtual tour or your community.

Use Search Engines to Drive Traffic

Search Engine Optimization (SEO) has become a specialized field and will not be covered in great detail. However, there are several techniques to generate traffic from search engines:

• Catch Keywords or Phrases — When designing your site, think of keywords or phrases (usually two to four words long) to include in your content or to embed in a page's META tags (the hidden portion of a Web page). Using keywords like “active adult communities” or “retirement communities” will make your site more searchable.
  
  
• Awareness — Once your site has been completed, develop a promotional plan to increase awareness of your community's Web site.

You may want to have your site featured on a regional or national directory of active adult or lifestyle communities. Other options are your local chamber of commerce, the real state section of your local newspaper or sites that appeal to seniors. Try to get other Web sites to link directly to your site. This is how search engines determine a site’s importance.

Your keywords, content and the number of other sites that link directly to your site are the main criteria that search engines employ to determine your site’s value. Search engine companies like AOL, Google, MSN and Yahoo are constantly evolving their methods of organizing Web pages and as part of the process, they will pay attention to your Web page’s content and the number of referrals you get.

A Good Web Site Can Lead to More Sales

Remember that the purpose of your community Web site is to attract prospects to your community. You want visitors to learn more about your community online and pre-qualify them as informed buyers before they arrive at your sales center. While they may not purchase a home right away, they will be much more knowledgeable and motivated when they visit your community. That will make your sales staff’s job easier, and that, ultimately, could lead to bigger sales.

Rich Carlson, MIRM, is the president of Carlson Communications, a Northborough, Mass.-based firm that specializes in the active adult real estate market. Carlson currently is working with 13 active adult communities in the Northeast and Mid-Atlantic areas. Carlson is active in the Builders Association of Greater Boston, the 50-Plus New England Housing Council, the National Sales & Marketing Council and NAHB’s Institute of Residential Marketing. For more information, e-mail Carlson or call him at 508-393-9922.

This article appeared in the Fall 2005 issue of Seniors’ Housing News magazine, a quarterly publication of the NAHB Seniors Housing Council.

HUD Recognizes 2003 IBC Code as Safe Harbor for Accessibility Compliance

The U.S. Department of Housing and Urban Development has decided to recognize the 2003 edition of the International Building Code (IBC) as a safe harbor for compliance with the accessibility requirements of the federal Fair Housing Act.

“The best way to assure compliance with accessibility requirements and to increase the amount of accessible multifamily housing available is to incorporate the guidelines into state and local building codes,” said NAHB President David Wilson, who hailed the HUD decision as a major victory for multifamily builders, HUD and the disability community.

At the urging of NAHB, HUD initially endorsed the IBC as a safe harbor for federal accessibility compliance in 2000. Builders and their designers were earlier confused about how to comply with Fair Housing Act guidelines, because building codes did not include accessibility guidelines when the law took effect in 1988.

State and local governments use model building codes, which are developed by private organizations, including the International Code Council, as a basis for their own building and safety codes.

“Building inspectors for local governments issue construction and occupancy permits based on compliance with these codes,” said Wilson, noting that more than 40 states have adopted the IBC code that was endorsed by HUD as a fair housing safe harbor in 2000.

HUD’s latest endorsement of the IBC 2003 edition means that the process of adopting these codes at the local level can continue unabated.

“NAHB is very pleased to have been able to close this critical gap,” said Wilson. “This current endorsement, like its predecessor in 2000, will play an important role in increasing the nation’s inventory of accessible housing and assuring that anyone who wants an accessible unit can find one.”

For more information, e-mail Laura Zaner at NAHB, or call her at 800-368-5242 x8563.

Arbor Day Foundation Seeks Presenters for Upcoming Conference

The National Arbor Day Foundation is seeking presenters for its national conference, Building for Greener Communities, which will be held Sept. 19-21 in Nebraska City, Neb. The deadline for submitting a presentation proposal is March 23.

The conference will address a wide range of issues relating to preserving, protecting, enhancing and managing natural and man-made environments.

The National Arbor Day Foundation is seeking proposals that will focus on the process and techniques of retaining trees and other natural features during construction and land development. Possible topics might include infill development, conservation development, watershed protection, preventing wildfire, zeriscaping, green building, energy conservation and efficient land use.

Presentations will range in duration from 30 to 60 minutes. The foundation is particularly interested in presentations that include an audio-visual element and that engage and interact with the audience.

For more information about submitting a presentation, e-mail Steve Pearson, manager of conference and seminars for the foundation, or call him at 402-474-5655.

Register Onsite for NAHB's 2005 Green Building Conference in Atlanta

Register onsite for the upcoming National Green Building Conference in Atlanta on March 13-15. The high caliber education programs will give you a chance to meet other green-minded builders from all around the country as well as meet with exhibitors with products to help you build a better home.

The National Green Building Conference is the only national conference targeted to "Green Building" for the mainstream residential building industry. For more information, click here.

Storm Water Exemptions for Oil and Gas Exploration Should Also Apply to Construction

NAHB has filed comments urging the U.S. Environmental Protection Agency (EPA) to give construction sites a Phase II permit exemption similar to the one it is likely to offer oil and gas exploration sites.

In September, EPA will propose a rulemaking to determine whether small oil and gas exploration sites of one to five acres should be permanently exempted from Phase II permitting rules and regulated in alternative ways. EPA will weigh the economic impacts of the regulations against the risks that oil and gas exploration activities pose to water quality.

In the meantime, the agency has extended the Phase II rule deadline for oil and gas exploration sites for another six months.

When a similar cost-benefit analysis is applied to residential construction sites, “the burden of compliance is very high, especially on small businesses, while the risk to the environment is very low,” NAHB said in its comments. Home buyers shoulder the burden, too, since costs associated with the regulations can raise the price of housing by thousands of dollars per home. For every $1,000 increase in price, 400,000 people are priced out of the housing market.

EPA’s original analysis of the economic impact of Phase II storm water regulation on home builders contained several inaccuracies, resulting in a significant underestimate of compliance costs for the residential construction industry. Incorrect assumptions include:

• Underestimating the number of inspections required by Phase II operators by at least one-half
• Incorrectly assuming that 15% of all small construction sites would be waived from the storm water regulations. In reality, few states have waivers available. Despite estimating that more than 19,000 waivers would be granted, EPA has received less than 200 waiver applications since 2003.
• By incorrectly defining a construction “site,” the Phase II economic analysis omits an entire class of construction site operators, resulting in an additional $544 million in administrative costs.

Reconsidering whether Phase II rules should apply to small construction sites is timely and warranted, and NAHB will continue to push for needed change. When builders converge on Capitol Hill on April 13 for this year’s Legislative Conference, they will tell their members of Congress to direct EPA to reform the federal storm water permit program.

For more information on NAHB’s storm water comments, contact Amy Ericksen at 800-368-5242, x8662.

Philadelphia Builders Peg Revitalization Efforts on Streamlining City’s Zoning and Permit System

In an effort to rebuild Philadelphia’s neighborhoods after losing residents and jobs for half a century, the Building Industry Association of Philadelphia last fall issued a comprehensive, 10-step plan aimed at addressing major shortcomings in the city’s residential development permit review process.

Philadelphia was of little interest to private developers in the 1980s and 1990s, according to the association’s report, “If We Fix It, They Will Come.” The city’s middle-class made up only 19% of its population during those years, a smaller share than in 75% of the nation’s largest cities, but that situation is ready to change, the report says, provided that ways can be found to accommodate the new housing that will be needed.

For the first time in several decades, private residential developers are taking a hard look at opportunities in the city, the report says. Roadblocks to new housing in the suburbs have become formidable. “In addition, the city offers many advantages to developers, including existing sewer and water infrastructure, no fees for reviewing development projects, available land, a pent-up demand for new housing, a welcoming attitude towards growth and extraordinary amenities such as parks and cultural ventures.”

Philadelphia Mayor John Street's $1.6 billion Neighborhood Transformation Initiative calls for 16,000 new privately built houses in the Philadelphia market and the rehabilitation of another 2,500 — an ambitious goal for a city that was able to deliver fewer than 1,000 single-family and multifamily units as recently as 2002.

Standing in the way is a 40-year-old zoning code and a permitting process that involves up to 14 different city agencies and boards, adding significantly to the costs of a development project, according to the report. “Philadelphia must streamline its current maze of bureaucratic requirements so that quality development can proceed swiftly and predictably.”

With about 60,000 abandoned properties to deal with, Philadelphia is following in the footsteps of cities like Baltimore, Chicago, Milwaukee and Detroit, which have made modernization of their zoning and permit systems a top priority, the Philadelphia builders say.

“The cities who have invested in a streamlined process have seen up to a 400% rise in private market investment, a 60% decrease in government costs to regulate construction and an enhanced reputation as modern, business-friendly cities,” the builders report, citing research from the National Conference of States on Building Codes and Standards on more than 150 reform efforts around the country in the past eight years.

Cities that have tracked the results from streamlined permitting efforts in the early 1990s have reported significant savings to local government and home builders:

• San Diego’s Process 2000 permit review program saved government $10 million and customers $3.5 million in its first four years.
• The Express Service program in Raleigh, N.C., cut government and building industry costs by 25%.
• The 1997 adoption of Phoenix’s Customized Plan Review system reduced the staff time needed for plan review of large construction projects of 5,000 square feet or more by 50%.
• Streamlining in Los Angeles enabled to the city to handle an 88% increase in construction activity with only a 1.5% increase in staff time. Reforms there also saved the development sector tens of millions of dollars by reducing wait time for a permit applicant from two to three hours to seven minutes, reducing plan check time from 10 weeks to an average of 10 days and reducing inspection waits from four to five days to 24 hours.
• Chicago has found that better regulation has attracted developers interested in reusing abandoned land and rebuilding neighborhoods. In 2003, the city added $78 million to its tax revenue while creating 3,000 new jobs as a direct result of redevelopment of vacant and blighted property.
• St. Paul, Minn., added $20-$30 million in revenue by bringing abandoned properties back on the tax rolls and added 50,000 new residents and 40,000 new jobs.

To start off the reform process, the building industry association has created a guide to lead developers through each step of the current system. Over the longer-term, the builders hope that the city will create an online information tool modeled after Chicago’s Permit Wizard, which allows users to obtain detailed, site-specific project information about the steps they need to take before beginning a project.

After entering an address and responding to a brief series of questions, the Wizard provides a comprehensive set of requirements for obtaining a permit, including all of the forms that must be completed, in a downloadable form; descriptions of the steps in the process; and an explanation of the documentation that will be needed.

Among the deficiencies of the current system in Philadelphia, there are conflicting requirements among the agencies and boards with which the developer has to negotiate; no time frames are provided for the review; and no clear-cut review standards are provided, the report says.

There is no single point of entry into the development process, the Philadelphia builders complain. The most commonly used gateway — Licenses and Inspections — serves a large variety of customers on a first-come, first-served basis with no distinctions among the types of permit seekers.

“A developer seeking to build a $10 million subdivision in West Philadelphia waits in the same line, goes to the same counter and sees the same personnel as a business seeking approval to place a dumpster,” the report says. “As a result, it is common for a development professional to arrive at L&I early in the morning with a book and lunch in hand to wait the day away just to submit an application or pick up an approved permit.”

New HUD Awards Recognize Efforts to Remove Affordable Housing Barriers

Sponsored by the U.S. Department of Housing and Urban Development, a new national awards program — the Affordable Community Awards — will recognize the efforts of local governments that reduce regulatory barriers to affordable housing.

The deadline for nominations is March 15.

Interested individuals or groups may nominate either a state or local government that has demonstrated extraordinary achievement in eliminating regulatory barriers to housing affordability. State and local governments may also nominate themselves or other local units of government for awards. Submissions will be evaluated and selected by a diverse group of senior-level HUD staff in the department’s Affordable Communities Initiative Team.

"It's important to recognize and reward communities that assume a leadership role to encourage the production of affordable housing," said HUD Secretary Alphonso Jackson. "Across this great nation, local communities are removing barriers to affordable housing and opening more doors to homeownership for hard working families."

Regulatory barriers include public statutes, ordinances, regulations, fees, processes and procedures that significantly restrict the development of affordable housing without providing a commensurate health or safety benefit. These barriers can effectively exclude working individuals such as teachers, police officers, firefighters, nurses and returning veterans from living in the communities where they work.

In addition, senior citizens often find it extremely difficult to find suitable housing near their adult children while young families likewise face difficulties in finding a home in the communities where they were raised.

Local communities interested in sharing innovative strategies to overcome regulatory barriers to affordable housing can click here to visit HUD’s Regulatory Barriers Clearinghouse.

“The National Association of Home Builders strongly supports HUD’s efforts to remove excessive and redundant regulatory barriers that push up the cost of housing,” said NAHB President David Wilson. “I think the Affordable Communities Awards are an excellent way to recognize the efforts of local governments to develop regulatory policies that make it possible to produce housing that is affordable to working families.”

To download an application for the 2005 awards, click here. Applications must be postmarked no later than March 15.

For a detailed description of the nomination and selection process, click here.

Register Now for the 2005 NAHB Multifamily Pillars of the Industry Conference

The NAHB Multifamily Pillars of the Industry Conference & Awards Gala is the premier industry event for the multifamily industry. Join NAHB Multifamily and Pillars Conference Chairman Ron Terwilliger for the best networking and educational opportunity the industry has to offer. Click here for more information on this event. To register now for this event, click here.

Legal Test for Takings Liability an Issue in Supreme Court Case

In the second of two major property rights cases presented to the Supreme Court on Feb. 22, an important legal precedent for determining when a taking occurs is being considered.

The Court last Tuesday heard oral arguments in the case of Lingle v. Chevron U.S.A., which concerns one of the well-established tests for a taking under the Fifth Amendment to the U.S. Constitution — namely, whether a taking arises when a regulation “fails to substantially advance a legitimate government interest.”

Lingle is Linda Lingle, Hawaii’s governor, representing the state.

The precedent that the Supreme Court must consider was established in 1980 in Agins v. City of Tiburon. In that case, the Court said that a taking occurs when a regulation either fails to substantially advance a legitimate government interest, or deprives a property owner of economically viable use of his land.

The current case before the Supreme Court arises from a Hawaiian rent-control law that places a cap on the maximum amount of rent that gasoline companies can charge for their service station leases. The intent of the legislation was to lower gasoline prices, but experts agree that any savings from fixed rents haven’t been passed through to consumers at the pump.

Chevron, which does business in Hawaii, challenged the statute under the Fifth Amendment Takings Clause, arguing that the rent control “failed to substantially advance a legitimate government interest."

The Ninth Circuit Court, which is usually hostile to takings claims, upheld a trial court decision agreeing with Chevron and specifically endorsed the “substantial advancement” test.

Should the state of Hawaii prevail, it would be a significant reversal of the “legitimate government interest” test for takings liability that was established in 1980.

For more information, e-mail Duane Desiderio, or call him at 800-368-5242 x8146.

Information About Current Use of Arbitration Requested

The home building industry has seen a dramatic increase in construction defect litigation since the early 1990s. To date, approximately 24 states have adopted notice of opportunity to repair legislation, which requires home owners to notify builders of alleged construction defects prior to filing lawsuits and gives builders an opportunity to address defect concerns.

Anecdotal evidence exists that arbitration involving home construction defects provides a quicker, less expensive and fair alternative to court trial for consumers as well as builders.

NAHB is in the process of determining the extent of current arbitration use in the industry during 2002-2003 and is seeking information from arbitration service providers.

NAHB is asking arbitration service providers to fill out the following six-question survey about arbitration and forward the answers to NAHB.

(Builders and remodelers who have used arbitration service providers are asked to forward the questionnaire to your provider.)

Construction Defect Arbitration Questionnaire

• How many arbitrations in each of past two years have you conducted involving construction defect issues in connection with a new home? A remodeling project?

2002: (New Home) __________________ (Remodeling) ___________________
2003: (New Home) __________________ (Remodeling) ___________________

• For 2002 what percentage of the arbitrations were initiated by:

Home owner _________________%
Builder ______________________%

• For 2003 what percentage of the arbitrations were initiated by:

Home owner _________________%
Builder ______________________%

• In what percentage did plaintiff (aka “claimant”) get an award?

2002 ____________ % of Plaintiff Awards
2003 ____________ % of Plaintiff Awards

• In what percentage did defendant (aka “respondent”) get an award?

2002 ____________ % of Defendant Award
2003 ____________ % of Defendant Award

• In what percentage did the arbitrations not proceed to award and settle?

2002 __________% Settled After Arbitration Initiated
2003 __________% Settled After Arbitration Initiated

If you do not have exact figures, an approximation will do. If you provide services in multiple states, please provide a breakdown by state.

Organization Name: __________________________________________________

Any information provided is for NAHB use and will not be shared with the public.

E-mail your responses to David Jaffe.

Index Finds Slight Remodeling Slowdown in Fourth Quarter

Sopping wet weather slightly dampened remodeling activity in the fourth quarter of 2004, according to the NAHB Remodeling Market Index (RMI), reducing activity one point on the index from the third quarter.

“Although the RMI is seasonally adjusted, we still can’t always predict the weather,” said Remodelors Council Chairman Don Novak, CGR, CAPS, CGB, a remodeler from Cedar Rapids, Iowa. “Interest rates are still good, and remodelers are looking forward to a rebound in the spring.”

The RMI is derived from a quarterly national survey of 500 remodelers, who are asked for their assessments of both current and future market conditions.

Although current market conditions for the closing three months of 2004 dropped from 51.8 to 50.7 on the index, future expectations climbed from 52.4 to 54.

Regionally, only the West saw a fourth-quarter improvement in current conditions, which moved up from 56.9 to 58.7; but the region saw the biggest drop-off in future expectations, from 62.3 to 57.3.

Current conditions declined from 46.6 to 46.0 in the Midwest; 54.7 to 52.9 in the South; and 52.8 to 46.7 in the Northeast, the sharpest regional decline for the second consecutive month.

Future expectations moved up from 44.4 to 48.8 in the Midwest; stayed the same at 57.9 in the South; and declined from 56.3 to 53.8 in the Northeast.

“Despite the slowdown in the fourth quarter of 2004, the market remains positive and we continue to see gains in future expectations,” said NAHB Chief Economist David Seiders. “Calls for bids and appointments for proposals are still coming in, leading us to expect a healthy 2005.”

Broken down into components of the remodeling industry, the RMI saw a small gain in major additions and alterations from 49.22 to 49.88 from the third to the fourth quarter; a decline in minor additions and alterations from 51.65 to 50.15; and a decline in maintenance and repairs from 54.61 to 52.41.

Those surveyed for the fourth-quarter RMI were also asked a special question about their involvement in aging-in-place home modifications.

Sixty-one percent of survey respondents said that their company was involved in home modification work related to aging in place. Of those, about 71% reported undertaking jobs in homes whose owners were in the 55-64 age group; 62% worked on homes whose owners were 65 or older.

About 14% of those polled said that requests for aging-in-place jobs had increased significantly over the past five years, and more than 60% reported seeing some increase.

When asked to assess the familiarity of consumers with the concept of aging in place, 69% of the respondents said that some of their clients were aware of it, while 25% said their customers were not.

The most typical “aging-in-place” projects were installing grab bars, installing higher toilets and widening doorways. Other popular jobs were building ramps and installing curbless showers.

Of the remodelers who reported making aging-in-place modifications, 23% said they had earned a Certified Aging-In-Place Specialist (CAPS) designation and another 28% said they plan on obtaining the designation in the near future.

How to Deal With an Emotional Home Owner

By Tracy Moore, CGR, CGB, GMB, Anderson-Moore Builders, Inc.
We all have war stories about customers — about customers throwing temper tantrums; customers crying, screaming, cursing or leaving threatening telephone messages; customers sending bullying e-mails.

Let’s face it, customers get upset. And sometimes they want to let you ― and everyone around you — know it.

Each customer has a particular “hot button” that opens the floodgates. Some customers crave the attention. Sometimes the anger has nothing to do with the work being done — the customer just is redirecting a personal problem our way because we happen to be there at the time, doing a job that happens to disrupt their regular routine and creates some tension. And sometimes ― occasionally — it’s our own fault.

Communications Plays a Critical Role

In our company’s experience, we have found that some of our customers have gotten emotional because they just didn’t “click” or feel comfortable with a particular trade contractor ― but couldn’t explain why.

Through the years, we have learned that one of the top reasons customers pick a company to do a project in the first place is because the customer has developed a personal bond with the company personnel during pre-construction. But when the job actually begins, trade contractors are onsite doing the work, and that doesn’t quite fit the expectation the customer formed in his or her mind about the company.

When this happens, clear communication between the customer and the trade contractors plays a crucial role. Before the job is started, the customer must have a clear understanding of the communication chain of the contracting company and contact person responsible for their project. The trade contractor, too, must have a clear understanding of the scope of work and the job site policies of the contractor in charge.

Above all, we must always remember that we are guests in our customers’ homes and we should act as polite and courteous as possible. To have a successful relationship, everyone must have a clear understanding of the rules.

Dust and Dirt Can Kick Up a Storm

Another “hot button” for most clients is dust and dirt.

Before every job, we emphasize to the customer that we have several dust and dirt containment procedures and daily clean-up procedures that will be followed. We also emphasize that no matter what procedures we follow, remodeling is messy and some dust will escape our containment procedures.

To help prevent some of the more common issues that upset customers during a project, we feel it necessary to discuss — in detail — all expectations for both parties.

We usually spend a couple of hours or more, before each project begins, going over these common points in our pre-construction meeting. We explain in detail what our customers can expect during the weeks or months ahead.

But we all know that even the best laid plans, schedules and intentions change daily in the construction industry. We forget to write down an appointment; we don’t get back to the customer with an answer at the exact time we said we would; or that change order that the customer asked us to price last week just added two weeks to the already delayed — because of weather — schedule and the customer is irate that we are charging full markup on a “while you are here, can you do this” item. You get my point.

Every Crisis Is an Opportunity

We are all human. Stuff happens, tempers flare and people get upset.

Instead of getting angry when things fall apart, we need to view these situations as opportunities to show our customers our commitment to professionalism and customer service.

Every situation, when it arises, is unique. But the final outcome of each crisis, at least in our company, is hopefully the same ― a satisfied customer who will refer our company to others.

We pride ourselves on doing exactly what we said we would do each and every time. When a complaint or problem arises that irritates the customer, we call this an “opportunity.” It is a chance for us to react to the situation and show the customer our exceptional customer service skills.

The first order of business is to react quickly. We call this “damage control.”

When customers are irritated, they want action immediately — even if that action is as simple as just listening to them vent frustrations. When these “opportunities” arise, you can take a few steps to diffuse the situation:

• React quickly.
• Look at the problem from the customers’ point of view, try to see the situation through their eyes and understand what upset them.
• Listen.
• Ask how you can help solve the problem.
• Listen.
• Sympathize and apologize for the mess up.
• Listen.
• Don’t take it personally ― the customer is usually upset at the situation, not at you.
• Did I mention listen? Most people just want to vent when they are upset.

A Little Kindness…

When issues arise, this is a good chance to do some inexpensive marketing. If the problem can be corrected for a couple of hundred dollars or less — it’s a no-brainer — do it and don’t charge them. It is the cheapest PR you can buy, so just consider it a part of your marketing budget.

We also keep a few local restaurant gift certificates in our office. It’s amazing how much a relatively inexpensive gift and an apology will enhance your company’s goodwill, especially if you strike while the iron is hot.

Tracy Moore, CGR, CGB, GMB, is president of Anderson-Moore Builders, Inc. He is also the vice president of the Winston-Salem Remodelors™ Council and previously was the council’s secretary, vice president and president. For more information, e-mail Moore.

The NAHB University of Housing Offers Designation Programs and Other Courses

The NAHB University of Housing offers CAPS, CGR, CGB and a variety of other professional designation programs and business management courses that set builders and remodelers apart from the competition. To learn more about NAHB’s designation programs, visit www.nahb.org/designations. For a complete list of all current education offerings, click here.

Watch for a New Look for Nation's Building News

Coming next week, Nation's Building News Online will have a new look and even more of the information you need and want — like the latest lumber prices, interest rates, floor plans, builder tips and industry news and information. Building news that will make your business click.

The new NBN will arrive in an even easier-to-read and more “user-friendly” format — with color-coded category tabs to help you locate information of interest to you quickly and weekly charts to give you an instant read on important economic information like starts, sales and prices on framing lumber, OSB and plywood.

Subscribe Your Employees to Nation’s Building News — Chance to Win Digital Camera

Subscribe your employees to Nation’s Building News Online. It’s free, easy and NAHB members who sign up three or more employees will be entered into the "Make Your Business Click" contest to win a digital camera. To learn more or sign up your employees, click here.

Salinas Development Provides Affordable Housing for Farm Workers

One of six winners of NAHB’s Innovations in Workforce Housing Awards announced last month during the International Builders’ Show, a new development in Salinas, Calif., is providing homes for farm workers and other working families in an area where housing prices are fast outpacing incomes of low- and moderate-income households.

Developed by Community Housing Improvement Systems & Planning Association (CHISPA), Mesquite Manor is a 52-home subdivision located on a seven-acre parcel in northeast Salinas. Because of skyrocketing house prices, CHISPA worked with the city and local residents to rezone the land from commercial to residential. Salinas is in Monterey County, about 15 miles northeast of Monterey.

“With the collaborative efforts of the City of Salinas Farmworker Housing Initiative program, County of Monterey, U.S. Department of Agriculture, California Housing Finance Agency, Bank of America, California Department of Housing and Community Development, Community Bank of Central California and, most importantly, the surrounding neighbors, CHISPA was able to provide much needed housing to the hard working resident of Salinas,” said David Cooke, director of real estate development for CHISPA, who accepted the award.

Of the 52 homes, 25 were homes constructed and owned by eligible farm worker families participating in CHISPA’s mutual self-help housing program. Families in the program have household earnings that are 80% or less of median family income for Monterey County. Many of the participants are employed by several of the largest agricultural growers in the county.

The remaining 27 homes provided first-time homeownership opportunities for households earning 120% or less of the county’s median household income. These included teachers, nurses, city and county employees, entry-level professionals and special-needs households, such as those caring for foster children or developmentally disabled adults.

The one- and two-story homes in the award-winning project were built by CHISPA’s subsidiary construction company Central Coast Residential Builders. The homes were sold through a lottery to qualified applicants at prices affordable to the individual households at their income level.

The Mesquite Manor homes, which range from 1,100 to 1,500 square feet, all have two baths and three or four bedrooms. There are five different floor plans and multiple elevations on 4,000 to 5,000 square-foot lots.

The homes are built with wood-frame construction, slab foundations, stucco exteriors, tile roofs and two-car garages. A park, elementary school, shopping center and public transportation are all within walking distance of the neighborhood.

“The Innovation in Workforce Housing Awards emphasize creativity in community design, financing and in partnering with other community groups,” said Bobby Rayburn, immediate past president of NAHB and a home and apartment builder from Jackson, Miss. “Mesquite Manor is an excellent example of a development that is meeting the needs of working families in a very expensive housing market.”

For more information about workforce housing and these awards, including eligibility requirements, click here; or e-mail Kym Kilbourne at NAHB, or call her at 800-368-5242 x8447.

Award photograph by Oscar Einzig Photographers

Leaders in Mississippi Meet to Plan Future of State’s Project CRAFT Program

Mississippi Department of Human Services (MDHS) Director Donald Taylor and Immediate NAHB Past President Bobby Rayburn were among those who gathered in Jackson, Miss., on Feb. 16 to discuss the future of the state’s Project CRAFT (Community Restitution Apprenticeship-Focused Training) program.

An initiative of the Home Builders Institute (HBI), the workforce development arm of NAHB, Project CRAFT was introduced in Mississippi last year by Rayburn and is offering training and job placement services to adjudicated juveniles from Hinds, Rankin, Madison and Warren Counties.

Rayburn spoke of the desperate shortage of skilled workers for builders and contractors in his state and he called Project CRAFT students a source of hope and strength for the future health of the home building industry in Mississippi.

The meeting was attended by 30 representatives from several organizations, including MDHS, the Home Builder Associations of Jackson, the HBA of Mississippi, CARES of Mississippi, Hinds Community College and the Hinds, Warrant, Madison and Rankin County Youth Courts.

Addressing the agency’s mission and its goal to assist in the development of adjudicated adolescents, Taylor said that his department is planning to create a Hall of Fame, which will include recognition of Project CRAFT graduates who have turned their lives around and achieved success in their career pursuits.

Judge Thomas Broome of the Rankin County Youth Court complimented HBI and MDHS for implementing the program, and he said it was a valuable resource in helping local youths access jobs following their release from the juvenile justice system.

Currently, nine students are participating in Jackson’s CRAFT program, while simultaneously enrolled in GED classes.

Project CRAFT provides students with pre-apprenticeship and vocational skills training and, most importantly, with hands-on work experience. Through the North Midtown Community Development Corporation (NMCDP), CRAFT students participate in a variety of community-based construction projects in which they can develop their skills.

HBI organized the advisory group to garner the support of the Jackson community, which is indispensable to the program’s continued success. Advisory group members offered many suggestions for the ongoing implementation of the program and its services, including working with community-based organizations to develop mentoring opportunities for the students. Members of the local home builders association offered to provide job sites for construction training and help out with educational field trips.

For more information on Project CRAFT/Jackson, e-mail Dennis Torbett at HBI, or call him at 800-795-7955 x8908.

New Large Angle Grinders Reduce Vibration By 60%

The new heavy duty and versatile 1800 series 7- and 9 -inch large angle grinders and sanders from Bosch Power Tools and Accessories cut vibration by 60% to help prevent Reynards Syndrome, also known as White Finger Disease, which includes hand and finger tingling or numbness; blood flow constriction resulting in blanching or whiteness of the hands and fingers; and loss of grip strength.

For contractors, metal workers and others, these tools are designed to last in weld prep, clean-up and various cut-off and surface preparation applications, says Bosch.

Robert Bosch Tool Corporation is a member of the National Council of the Housing Industry — the Supplier 100 of NAHB.

Bosch’s innovative vibration-reduction system incorporates special vibration rings into its three position side-assist handle and between the main trigger handle and grinder motor housing.

Six models complete the Bosch grinder line, which has been designed to meet and exceed the needs of professionals in the metal and concrete construction industries, according to the manufacturer.

The model 1873-8 is Bosch’s first 7-inch 8,500 RPM and 3-HP large angle grinder to be offered in North America. The grinder’s speed optimizes the removal rate of any 7-inch wheel accessory, the manufacturer says.

The 1873-6 is a 3-HP 7-inch 6,000 RPM grinder, an industry standard. For those looking for larger diameter wheels, both the 1893-6 and 1894-6 tools offer 9-inch wheels. The former, at 6,000 RPM and 3-HP offers the best power-to-weight ratio available, while the latter is the champ at 4.5-HP and barely over 13-pounds. The 1894-6’s rotating D-handle gives users the ability to position the handle for optimal comfort and control in any job.

Rounding out the line are 7- and 9-inch large angle sanders — 1853-5 and 1853-6, at 5,000 and 6,000 RPM, respectively.

Across the line, enhancements in usability and durability include the addition of a tool-free adjustable guard and a metal gear cover for working in the most demanding applications, Broan says. Epoxy coated field windings provide the ultimate protection against abrasive dust and debris while precision spiral bevel gears offer quality engineering and construction for smooth power transmission. Each unit is also AC/DC compatible for use with welders or generators.

Honey, I Shrunk the Lots

How many lots can you cram onto an acre of land? Five? Ten? Fifteen? Would you believe 25, or more? And I’m not talking “units” as in multi-story.

Any developer knows, the more lots, the merrier in terms of a subdivision’s profit potential. Since you can’t make an acre bigger, to squeeze more lots onto one, you must make the lots smaller. But who wants a tin can for a lot?

It turns out lots of folks do, if the can is designed right.

I didn’t make up the title to this column, it is the title of a seminar I recently attended, put on by a business associate, and principal of Mithun Architects in Seattle, Bill Kreager. Actually, this particular seminar is the sequel to another one Bill taught a year ago. For me to attend a sequel that isn’t showing at a local matinee tells you it’s got to be good.

In the good old days, let’s call them the “Leave it to Beaver” days, the majority of home buyers were nuclear families; with 2.3 kids, a dog, two cars (a “sedan” and a “station-wagon”) and a chicken in every pot. Today, that demographic represents, according to Bill, less than 20% of the home-buying public. The other 80% are mostly empty-nesters and singles. Let’s call this new demographic the “nestles."

So where do nestles want to live? Well, the traditional three-bedroom, two-bath split-level house on 15,000 square feet of maintenance isn’t the correct answer. They want attractive, traditional-looking smaller homes on small lots, with little or no upkeep responsibilities. They want to be near shopping and services. Walking trails and lots of maintained open space are important. Oh, and by the way, price matters too.

There is a good reason Bill’s seminars are always packed. Yes, he is an excellent speaker, not to mention entertaining (my favorite slide shows a dozen smiling people crammed into a smallish hot tub. Bill explained that high-density can be fun.) More important, anyone in the building industry needs to be aware that this is a vital, upcoming trend in housing — an opportunity not to be missed.

And I’m not just talking about those of us in the private sector. We can’t develop and build things bureaucracies don’t allow (heck, we have enough trouble building things they do allow). A huge problem is that many jurisdictions still operate under codes and ordinances created in the Beaver Cleaver days. Some have been updated — layered with gobs of spaghetti and other labyrinthine measures — but the end product is still mostly unmanageable. New, simple, progressive-thinking codes are needed.

Bill showed several examples of urban infill projects that look great, fit with the character of the neighborhood, provide homes for many and increase the tax base of some lucky jurisdiction. Okay, so the projects made the developers wads of money too, but isn’t that what win-win is all about?

Specifically, how is desirable high-density, low-rise housing accomplished? Here are a few tips:

• Use narrow lots, minimizing side yards and maximizing the number of lots per linear feet of road.
• Front houses on parks and other open space to give each residence the feel of a spacious yard/recreation area.
• Use landscaping to contain and disguise stormwater treatment and detention facilities.
• Use narrow streets. Not only does this allow more useable lot area, it decreases non-stormwater-friendly pavement. Fire marshals will be concerned, but there is ample precedence to demonstrate it can work well.
• Use alleys in lieu of avenues.
• Use carriage style homes (living space above parking areas).
• Use cottage style homes (homes fronting on common landscaped walkway areas with group parking in back).
• Mix in smartly designed multifamily dwellings. Bill showed several examples of multiplexes that looked just like another large house in the neighborhood.
• High-density can be a terrific product, but it won’t work everywhere. Case in point: there is a charming, brightly colored, well-built and planned cottage home community on the outskirts of a town near me. It’s not selling worth a hoot because it is too far removed from the downtown core. Nestles (apparently) like walking or taking the bus.
• Lastly, employ a good architect to help with layout and site design. Engineers have been cookie-cuttering Leave-It-To-Beaver neighborhoods for decades. I’ll be the first to admit I have no business trying to design the attractive neighborhoods Bill showed. Storm drainage and sewer — fine, I can still handle those. Goes downhill; always has, always will. But when it comes to “form,” well, that’s just not my bag.

Tim Garrison of ConstructionCalc.com, is a professional engineer, author and software producer for the building industry. Send e-mail to buildersengineer@constructioncalc.com. Tim reads every one.

This column cannot be reprinted without permission from the author.

Get GM Discount Pricing on More Than 80 GM Vehicles

GM has begun offering preferred GM Supplier discount pricing to NAHB members on more than 80 General Motors vehicles — including Chevrolet, Pontiac, Buick, GMC, Oldsmobile, Cadillac, Saturn, HUMMER (except H1) and Saab passenger cars, light duty trucks, vans and SUVs — as part of NAHB’s Member Advantage discount program.

The GM Supplier pricing program is available to members who purchase or lease 2004, 2005 or 2006 model-year vehicles.  

Through the program:

• NAHB members can get preferred supplier pricing on all eight GM nameplates.
• GM Supplier pricing is compatible with most current consumer GM incentive programs, including the GM Business Choice program for commercial vehicles.  
• NAHB members will receive their authorization codes and program details via direct mail from GM.

For details, go to www.gmfleet.com/nahb.

The GM Supplier pricing program runs through Jan. 3, 2006.