Print-All Page: June 6, 2005

With concerns about affordability growing in many of the nation’s major housing markets, NAHB Vice President and Treasurer Brian Catalde and California Building Industry Association (CBIA) President Steve Doyle, attending PCBC last week in San Francisco, called on local governments to reduce the impact fees, zoning constraints, construction code requirements and other regulatory burdens on builders and developers that are driving up the cost of housing.

Catalde and Doyle said local governments should approve more medium- and high-density housing, plan better for growth, streamline the zoning and approval processes and spread the costs of government services more equitably among all their citizens rather than singling out new-home buyers.

“We are seeing millions and millions of middle-income families being priced out of the market for homeownership all across the country,” said Catalde, a builder based in Playa del Rey in Southern California.

Catalde noted that four factors ― the cost of doing business; cost shifting such as impact fees and inclusionary zoning; production constraints such as large-lot zoning, setback requirements, urban growth boundaries and habitat areas and open space requirements; and the cost of regulation have escalated the cost of housing.

“You’ve got hundreds of regulatory costs and impact fees. There are so many layers of regulations that it’s all pretty fuzzy until you’ve found your way through the maze,” Catalde said. “Ultimately, it’s the home buyer who gets stuck paying the check.”

Catalde mapped out four meaningful steps that local governments can tackle immediately in order to make housing more affordable. These include:

In California, where demand is so strong that the housing supply is barely keeping up and affordability has plummeted, Doyle, a San Diego County builder, said CBIA is working with the governor’s office and the League of California Cities to create legislation that would require local governments to zone enough land for housing to accommodate population growth for the next 20 years.

“Most local officials realize what the high cost of housing is doing to their communities today and the impact it will inevitably have down the line in terms of the economy and their ability to find and retain employees,” Doyle said. “We’re hopeful a bill will result by next year."

Another bill making its way through the California legislative process would streamline the environmental review process for infill developments, Doyle said, while adding that the bill would be a “good first step in reforming the state’s environmental laws.”

Doyle said the homeownership rate in California was the second-lowest in the county. He noted that much of the high cost of housing could be attributed to NIMBYs; environmental activists; local officials who want to appease their NIMBYs and want new housing to pay for an ever-growing range of government services; and state lawmakers “who keep coming up with ever-more creative ways of making it harder to build houses.”

About 5% of California is developed, and the amount of land zoned for housing construction that has been permitted and is ready to be developed is a lot less than that, Doyle said. In addition, “it takes seven to 10 years to get a subdivision approved, so it’s not like the spigot is going to open up anytime soon,” he said.

Doyle also noted that jurisdictions are adding exorbitant impact fees for local services. For instance, the city of Livermore is charging $130,000 per home in its subdivisions, the highest in the state.

“The school district, the park district, the city, the county, the arts council ― everybody wants their cut. There’s hardly a community left where the fee burden is under $20,000 per home, and in most communities, fees total $30,000 to $50,000 per home,” Doyle said.

“Too many of our legislators seem to think that whenever there is a problem, the solution is to make the new-home buyer take care of it,” Doyle pointed out.

For example, rather than building new power plants or making older homes more energy-efficient in order to help solve the state’s energy problems, he said that the state is tightening its energy standards for new homes — already 30% higher than the rest of the county ― even more.

“Instead of focusing on 150,000 new single-family homes a year, if we really want to make a dent in energy consumption, we’d work on the 9 million homes built before the first energy standards were enacted. Just insulating these older homes would make a huge difference,” Doyle said.

To read Brian Catalde’s entire comments at PCBC, visit Housing Forum in this issue.

Floor Plans: Carolina Dreamin'

Building in an Idyllic Location: John Nimphius, of Advanced Custom Homes, Inc., came to Hilton Head, S.C., in the late 1990s to build the home of his dreams in the setting of his dreams ― on Hilton Head Island with its breathtaking vistas of the Intracoastal Waterway and the saltwater marshes that feed into it.

Four Floors of Elegance: To take full advantage of the setting, Nimphius built a four-story, four-bedroom townhouse in Windmill Harbour, a 172-acre private community of 500 residences. The home overlooks the centerpiece of the community, a 15-acre-inland harbor. (He has since built six more and lived in two of them.)

An elegant spiral staircase off the foyer soars between the main living area and the bedroom level, with the master suite one floor above. Owners and guests can also get between floors in a one-person elevator.

The dining room, living room and kitchen with breakfast nook are on the main living area. French doors open from the living room and breakfast area onto a full-width covered porch at the rear of the home that, not coincidentally, overlooks the harbor.

The master suite on the bedroom level includes a 486-square-foot bedroom with two French doors opening onto another rear deck that overlooks the harbor and a breakfast bar. The master bath includes a spa tub, marble shower and his-and-her vanities. A 126-square-foot walk-in closet completes the master suite. The bedroom level also includes a laundry room and a second bedroom with private bath. The hall above the foyer leads to French doors that open to a full-width deck on the front of the home.

The top floor features two more bedrooms, each with private baths, and ample attic storage space.

The garage level features two bays (with room for up to three cars) and an office that opens onto a full width patio that also overlooks the harbor.

Termites and Flooding and Winds, Oh My! Nimphius did not want to rely on the area’s traditional building materials when building his home. He did not think they were substantial enough to withstand the rigors of coastal winds, floods and termites that were endemic to the region

After researching alternative building methods, Nimphius chose Insulated Concrete Forms (ICF) by Reward Wall Systems. Not only did the construction process provide the strength and termite protection he desired, it provided soundproofing and fireproofing for the seven townhouses he has built in Windmill Harbor to date — and he was able to receive a substantial insurance discount as well.

Features & Specs

Nimphius Home

Location: Hilton Head, S.C.
Total Square Footage: 6,200
Four-Story Townhouse
Four Bedrooms, Each With a Private Bathroom
Soaring Spiral Staircase
Private, One-Person Elevator
Multiple Front and Rear Porches, Including Full-Width Porches
Master Suite With Breakfast Bar
Custom Construction in Steel, Wood Frame and ICF Concrete
Stucco Exterior Finish
13-Inch iForm Common Walls
11-Inch iForm Exterior Walls
3-Ton, 2-Ton and 1-1/2-Ton HVAC
Average Utility Costs (Electric and Gas): $155 Per Month
Asphalt Shingle Roof, 5-Inch Sprayed Foam on Underside of Roof Deck

Community: Windmill Harbour

172 Acres
500 Residences
15-Acre Inland Harbor

— Advanced Custom Homes (www.advancedhomes.us)

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Builders Reduce Environmental Regulatory Burdens

Under a new initiative in Wisconsin designed to promote superior environmental performance in housing and other industries, the Wisconsin Builders Association (WBA) is working with the state’s Department of Natural Resources (DNR) on a charter that will substantially reduce regulatory burdens on builders who are pursuing innovative techniques to protect natural resources and improve air and water quality.

The state’s Green Tier program, which was signed into law by Governor Jim Doyle in 2004, will provide builders and developers with the flexibility to pursue new environmentally friendly techniques that push beyond many of the old, prescriptive ideas incorporated into the DNR’s existing regulations.

In exchange for following practices that yield higher results than those achieved under the department’s environmental requirements, participants in the Green Tier program will be able to drastically reduce their permitting time, cut other compliance costs and move forward with assurance in their development plans for a particular piece of land.

“We saw that innovative solutions proposed by some developers improved the environment much more than our prescriptive regulations, but we were unable to implement those ideas because they were outside our scope,” said Mark McDermid, director of the DNR's Bureau of Cooperative Environmental Assistance.

“Until the Green Tier law passed, our hands were often tied, preventing us from achieving sustainable environmental performance and making it harder for developers to provide needed housing in a timely fashion,” said McDermid.

“Working in collaboration with the DNR means we can protect and improve the environment while continuing to provide market-reasonable housing for residents throughout Wisconsin,” said Leon Church, a developer from Appleton, Wis. and chairman of the WBA’s Development Council, which has been working on the association’s Green Tier Charter.

The Wisconsin builders have established a number of goals for their charter with the DNR:

To ensure compliance with the WBA charter, participants will voluntarily audit their own practices in a number of defined areas and track, document and correct any “violations” without the involvement of the DNR, including fines and enforcement actions.

“This new cooperative approach and our initial charter set the stage for environmental and economic successes for years to come,” said Church.

For more information on the Green Tier program or WBA’s Green Tier Charter, e-mail John Kisiel at the WBA Development Council, or call 608-242-5155 x22.

Market Driving Risky Mortgages

Adjustable-rate and interest-only loans together accounted for 63% of all loan originations in the second half of last year, according to the Mortgage Bankers Association, and the group’s chief economist, Doug Duncan, says that’s probably the highest it has ever been. And about one-fourth of buyers across the country are taking out interest-only loans, most of which are adjustable, reports San Francisco-based LoanPerformance. Lenders say that with home prices rising so quickly, many buyers couldn’t afford homes without using the loans. Also, lenders are pushing the loans to maintain a high sales volume at a time when loan refinancings have plunged. Many economists are alarmed that so many buyers are choosing these loans at a time when the interest rates on fixed-rate mortgages remain at near-record lows. “I don’t know anyone who thinks rates will come down,” said economist Dean Baker, co-director of the Washington, D.C.-based Center for Economic and Policy Research. “Almost everybody expects rates in three or four years to be much higher than they are today. People who are professionals are systematically misadvising people. They want to make the deal.” (www.washingtonpost.com) Washington Post (6/3/05); Kirstin Downey

Mudd Vows to Change Fannie Mae Culture

At a town meeting with more than 1,000 of Fannie Mae’s approximately 5,000 employees and a conference call with investment analysts, Daniel H. Mudd, the new chief executive officer of the housing finance giant, pledged to change the culture of the company in the wake of last year’s accounting scandal and set the hiring of a corporate ethics officer as one of his top priorities. He said he will also be filling several other key positions, including chief financial officer and chief risk officer. Mudd pledged that the company would be more transparent and that it would disclose another accounting violation if one is uncovered. In response to an analyst’s question, he said that the company will continue to decrease its portfolio of mortgages, mortgage-backed securities and other assets until it meets the capital reserve requirements set by its main regulator, the Office of Federal Housing Enterprise Oversight. “What came across in the call to me was, ‘We’ve got to turn the culture around; we are turning the culture more in the direction of service and the client,’” said Bruce W. Harting, a Lehman Brothers analyst. (www.washingtonpost.com)
Washington Post (6/3/05); Annys Shin

Court OKs School Fees on Homes

A state appeals court in Florida has cleared the way for the doubling of school fees on new homes in Lee County as early as this fall. The school fees currently stand at $2,232 for every new single-family home built in the county and $691 for every multifamily unit. Builders are paying almost $10,000 per home in impact fees for schools, parks, roads, fire protection and other services, and those costs are passed on to new home buyers in the county. Michael Reitman, executive vice president of the Lee Building Industry Association, said that the higher impact fees are not likely to curtail local growth, but they will make it tougher for working people to live in the county. “We’re the hottest housing market in the country; it won’t affect us,” Reitman said about home builders. But “new school teachers, firefighters, people working in Lee County and county employees will not be able to buy a new home.” Reitman’s association, along with First Home Builders and home owner Tina Brown, filed the original lawsuit against the school fees in December 2001 challenging their fairness and the method used for computing them. (www.news-press.com)
News-Press, Southwest Florida (6/2/05); David Breitenstein

Impact Fees Will Nearly Double

The Hernando Builders Association may challenge a unanimous decision by the Hernando County Commission in Florida to nearly double the fees for new homes from $4,779 to $9,211 starting next month. Assuming that builders construct 3,000 new houses in the coming year, as expected, the fees will generated $28 million. They generated $15.5 million in 2004. State law requires the fees to be based on the cost of providing new residents with roads, schools and other facilities and services, and builders say that the fees have now climbed higher than those costs. “We sure feel as though we pay our fair share,” said Stuart Glover, owner of Palmwood Builders. The new fees, he said, “would put too much weight on the new folks moving in.” (www.sptimes.com)
St. Petersburg Times (6/3/05); Dan DeWitt

Laguna Beach Landslide Sends Homes Crashing Down Hill

Eighteen hillside homes were destroyed, dozens of others remained in danger and as many as 1,000 people were evacuated in a landslide last Wednesday in Laguna Beach, Calif., about 50 miles southeast of Los Angeles. The slide occurred about a mile from the beach on steep sandstone hills that have been densely covered by two- and three-story homes that generally sell for $2 million or more. The slide was “almost certainly” related to winter storms, said Ed Harp, a geologist with the U.S. Geological Survey based in Golden, Colo. The area has received 27.85 inches of rainfall since July 1, 2004, compared to its annual average of 12.60 inches. Half-an-inch of rain fell in the area on May 5-6. The area historically has experienced flooding, mudslides and wildfires, and several of its homes were red-tagged as uninhabitable in February. In February 1998, a rainstorm triggered slides that damaged 300 homes, 18 of them seriously. An October 1993 fire swept down into the city and destroyed some 400 homes. Most were rebuilt within a half-dozen years. (www.signonsandiego.com)
San Diego Union-Tribune (6/1/05); Ben Fox, Associated Press

Supervisors Greenlight Summerhaven Plans

Replacing the six-unit Alpine Inn that burned in the Aspen Fire in 2003, Pima County, Ariz. Supervisors have approved a combined lodge-restaurant-condominium development that will try to promote ecotourism in harmony with the Mount Lemmon area. The new lodge’s 54 overnight units and condominiums will be designed to meet environmental standards of the U.S. Green Building Council, supported by the Environmental Protection Agency and NAHB. The lodge will be built of salvaged trees from the fire, will use efficient toilets and dishwashers to reduce consumption and will harvest rainwater for landscaping. The six-acre project, including shops, may take seven to 10 years to build.
(www.azstarnet.com)
Arizona Daily Star (5/18/05); Tony Davis

Tucson Home Buyers Priced Out

Soaring home costs that have been rising much faster than local incomes have priced at least 1,000 households out of the housing market in Tucson, Ariz. in the past year, according to NAHB economists. House hunters Chris Johnson, a registered nurse, and Tammy Johnson, a nursing assistant, both 23 and the parents of two children, had a hard time finding the three-bedroom home they needed with a price tag of no more than $150,000. After twice finding homes they liked but being outbid by people willing to pay more than the asking price, they finally were able to find a home for $162,000, with the husband’s parents cosigning for the loan. Median incomes in Pima County fell 1.5% from 2002 to 2003, while the median home price jumped 7.9%, and the situation has gotten worse since then. The median price of new and existing homes in the county in March was $184,609, up 18% in a year. If the price were $5,000 higher, another 4,400 households would not have qualified for a mortgage, according to NAHB’s “priced out” calculators. Competition for homes has become so fierce that attached to some bids are “accelerating clauses” for pre-approved, incremental increases in the bidding price in an effort to outdo other buyers. (www.azstarnet.com)
Arizona Daily Star (5/15/05); Joseph Barrios

Regulation and Fees Add Heat to a Bubbling Housing Market

A growing number of localities are imposing exorbitant impact fees to meet expenses unrelated to the development they are charging, according to NAHB, including one city in California that has routinely charged for the cost of building new parks even though it hasn’t opened a park in 27 years. “Home builders are often an easy target for local tax authorities,” says Clayton Traylor, senior vice president at NAHB. “These taxes are invisible and the people they fall upon — ultimately those who buy new homes — don’t have a voice.” Brian Catalade, NAHB’s vice president/treasurer, complains that he was recently forced to spend $1.1 million on road building almost three miles away from his construction site. The Department of Housing and Urban Development says that in some towns “gold-plated” regulations still require cul-de-sacs to be built to allow a 1950s fire engine to turn around, even though modern fire vehicles require less space. Bryan Applegate, director of America’s Affordable Communities Initiative at HUD, says a duplicative and time-consuming planning process has also been adding to upward pressure on house prices. “Cutting back on fees and regulation could cut development costs by about a third in some places,” he says. (www.ft.com)
London Financial Times (5/27/05); Christopher Swan

Business Leaders See Many Priced Out of Living Locally in South Florida

Business leaders attending a recent economic summit in Palm Beach on the outlook for South Florida heard that soaring home prices are making it difficult for the region’s employers to recruit workers from other parts of the country. James Tarlton, head of the Broward Alliance, said he wondered how police, firefighters, nurses and teachers will be able to afford to live there. Home prices have risen 32% in Palm Beach County and 27% in Broward and Miami-Dade counties over the past year, according to the Florida Association of Realtors®. Andrew Rosen, president of Kaplan University in Fort Lauderdale, said he recently offered an Atlanta man a $150,000 salary to take a top post at his company, but the job candidate refused to accept anything less than $200,000 after he took a look at housing prices. Rosen said this will make it difficult to lure employees from anywhere but a few high-cost areas in California and the Northeast. Kelly Smallridge, head of the Business Development Board of Palm Beach County, said her group is working with an aerospace firm that hopes to add jobs paying $40,000-$50,000, which was once considered a generous salary. “If you’re creating jobs that pay $40,000 or $50,000, where are those people going to find homes in Palm Beach County?” she asked. (www.palmbeachpost.com)
Palm Beach Post (5/27/05); Jeff Ostrowski

Downtown Atlanta Hopes for a Change of Pace

Despite development activity slowing in all property types in the Atlanta area, buyers and renters are lining up for new condominium and apartment units in established urban neighborhoods, driven at least partly by an effort to escape some of the nation’s highest commuting costs. On the 138-acre site of an old steel mill in the city’s Midtown section, Atlanta’s Jacoby Development Inc. and New York-based Global Real Estate Investment Corp. are developing the $2 billion Atlantic Station, which will add 7.5 million square feet of retail, office and entertainment space, with hotels and as many as 5,000 residential units. Developer Sembler Co., based in St. Petersburg, Fla., will wrap up four urban mixed-use developments by 2006 with a total of 1.6 million square feet of storefront space and 1,200 residential units. Real estate markets in the nation’s ninth-largest metro area have been slow to recover, with job growth of only 0.8% for the year ending in March. But a relatively low cost of living is attracting corporations to the city. At 11.5% at the end of last year, Atlanta’s apartment vacancies were the third highest in the U.S. at the end of 2004, behind Houston and Denver, but they were lower in more developed parts of the city. Atlanta’s median housing price is just $155,562. (www.realestatejournal.com)
RealEstateJournal, Wall Street Journal (5/31/05) Nancy D. Holt

Why Housing Costs So Much

Following are remarks by NAHB Vice President/Treasurer Brian Catalde at a PCBC press conference in San Francisco on June 1.

So we’ve just finished lunch at one of those fancy restaurants where they don’t have prices on the menu. And it was good. Now the waiter brings the bill — and we’re shocked. How come this meal is so expensive?

You’re probably wondering what the hell I’m talking about. I’m talking about the high cost of housing. We’ve had a feast, and now the bill has come due.

We’ve all become accustomed to stories about fast-rising home prices in New York, Boston, Seattle, Washington, D.C. What makes this story even more compelling — and the problem more vexing — is that we are seeing millions and millions of middle-income families being priced out of the market for homeownership all across the country.

I’m going to go over the bill with you, and I’m going to explain a few of the reasons housing has become so expensive. I’ll focus on four factors that home builders see as the prime drivers of the cost increase:

These regulations are not put in place in a vacuum. They are layered, one on top of another, and the cumulative cost is tens of thousands of dollars for every new home. In some high-cost areas the regulatory costs are well over $100,000 per home.

When you eat at one of those fancy restaurants with no prices on the menu, you don’t have any idea how much the bill will be until they bring it at the end of the meal. Well, it’s the same thing when you build a home and you’ve got hundreds of regulatory costs and impact fees. There are so many layers of regulations that it’s all pretty fuzzy until you’ve found your way through the maze. Ultimately, it’s the home buyer who gets stuck paying the check.

Solutions

As a society, we say we want to take meaningful steps to make housing more affordable. As a first step, we must resolve the perceived conflict between the need for housing and the desire to preserve quality of life. Folks, housing affordability and quality of life are not mutually exclusive. In fact, they very much go together.

But for now, the reality is we have a serious affordability problem. And it is no longer a California problem or a West Coast problem. It’s a national problem. I want to suggest four things we can do to reduce some of these costs:

Those are four good places to start. But over the long term, this challenge demands innovative thinking and committed leadership. No other state has a greater housing affordability problem than California. In crisis we also find opportunity. California is known around the world as a leader. Whether it’s fashion, entertainment, technology or a hundred other aspects of life, this state has been the first to find new ways of doing things.

Californians are creative, innovative and entrepreneurial. It’s time for us to put that spirit to work and to make California a leader in innovative land use and affordable housing. If we, as a nation, are going to overcome the housing affordability problem, then the solutions must be found right here.

Now we understand how the bill got so big and we have some idea of how we can address the problem. Perhaps next time, we’ll pick a more reasonable restaurant. Maybe we can even have dessert.

California Home Equity Up $1 Trillion Since 2000

Looking at the upside of the rapid escalation in housing prices in booming California markets, a new report from the California Building Industry Association estimates that the state’s home owners have seen their equity grow by $1 trillion since 2000.

Excluding downpayments, median equity grew by $230,386 for single-family home owners and $200,544 for condominium owners, according to the report, which was prepared by Alan Nevin, the association’s chief economist.

“For the person who owned a single-family home in the year 2000 and bought that home with a 15% downpayment, their return on equity would be approaching 1,000%,” Nevin said.

Nevin added that much of this equity has already been plowed back into the economy through refinancing, allowing home owners to buy goods and services they wouldn’t have been able to afford otherwise and helping keep California’s economy growing.

The study — released last week at PCBC The Premier Building Show in San Francisco — found that the 2.5 million homes purchased since 2000 have seen an increase in value of $378.69 billion, while the 4.3 million homes owned but not sold in that time period have increased in value by $641 billion.

Homes sold in the San Francisco Bay Area and Los Angeles County appreciated the most — by $83.24 billion and $82.16 billion, respectively.

Nevin said that despite the steep increases in home values, he doesn’t foresee a housing “bubble,” because the underlying demand for homes remains strong, while the supply has been constrained by government barriers, slow-growth pressures and other factors. However, he said that he did expect the rate of price appreciation to slow to more sustainable, healthier levels.

“Rates of gain will not go up as fast as they have in the last three years,” he said. “We anticipate that over the next three years, the appreciation rate will be in the 5%-8% range per year.”

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Available at two levels — Pro and Executive — subscribers can choose the level that best meets their needs. To learn more or subscribe to “HousingEconomics Online,” visit www.housingeconomics.com.

Eye on the Economy

By David F. Seiders, NAHB Chief Economist
The economy still is moving ahead at a solid pace …

Earlier fears of a stall out in growth of the U.S. economy have been erased by revisions to key data for the first quarter, as well as by reassuring data for April and May.

As expected, growth of real Gross Domestic Product (GDP) was revised up for the first quarter, from 3.1% to 3.5%. The revision reflected stronger patterns for personal consumption expenditures, residential fixed investment and foreign trade, while business inventory investment was revised downward (that’s a good thing). The performance of GDP growth squares with the solid performance of the labor market in the first quarter.

Forward economic momentum extended into the second quarter of the year. Growth of personal consumption expenditures remained quite healthy in April, supported by strong growth in disposable personal income (particularly labor income). Expenditures on housing also continued to climb in April as home sales surged and residential construction put-in-place recorded another solid advance, and surveys of builders and mortgage lenders were quite positive in May. New orders for durable goods were revised up for March and perked up in April, and the Institute for Supply Management’s factory index remained above 50 in May — suggesting that the manufacturing sector still is in a forward gear. Everything considered, GDP growth appears to be headed to about 3.5% in the second quarter, and we expect growth to hang around that pace in the second half of the year.

Global oil prices and the cost of gasoline at the pump have come off their April highs, reducing threats to the ongoing economic expansion as well as threats to “core” inflation (excluding prices of food and energy) in the U.S. Inevitable “leakage” of oil and gas prices into core consumer prices has been on the minds of officials at our central bank, and the recent sag of energy prices certainly is welcome news.

The news on core consumer price inflation in April was reassuring in its own right. The year-over-year change in the core component of the Consumer Price Index (CPI) receded to 2.2% while the technically superior chain-core version held at a 1.9% pace. Of even more importance, the Fed’s favorite inflation gauge — the core price index for Personal Consumption Expenditures (PCE) — receded to 1.6% in April (year-over-year basis) and the market-based version (excluding various implicit prices) was exactly the same. While the core PCE price measures remain near the upper end of the Fed’s apparent “comfort zone,” the recent lack of upward momentum is a major change in the economic environment.

Minutes from the May 3 meeting of the Federal Open Market Committee (FOMC) reveal ongoing preoccupation with upside risks to the inflation outlook as the economic expansion moves forward and slack in resource markets is reduced in the process. The minutes also make it perfectly clear that the Fed still views its monetary policy stance as too easy, despite the substantial increase in the federal funds rate implemented since mid-2004 (two percentage points). Indeed, the minutes say that all FOMC members “regarded the stance of monetary policy as accommodative and judged that the current level of short-term rates remained too low to be consistent with sustainable growth and stable prices in the long run.” Indeed, the real (inflation-adjusted) funds rate is only about 1%, and history shows that such a policy stance is not sustainable over time.

The evaporation of the early-year “soft spot” in the economic expansion gives the Fed leeway to accelerate its march back to monetary “neutrality,” while the recent positive news on core inflation lessens the urgency of such a march. NAHB’s forecast assumes the Fed will continue to move ahead at a determined but “measured” pace, hiking the funds rate by another quarter point (to 3.25%) at the June 30 FOMC meeting and taking this short-term rate to 4% by year end. Some further increase may be in the cards for 2006.

Long-term interest rates have moved downward in recent weeks, pushing the 10-year Treasury yield below 4% and the fixed-rate home mortgage yield to about 5.5%. These rates are lower than in early February when Fed Chairman Alan Greenspan told Congress that persistently low long-term rates posed a “conundrum” in U.S. and global financial markets.

The evolving patterns of GDP growth and core inflation clearly are viewed as positive by bond market participants, and the Fed’s revealed preferences about monetary policy management certainly are helping to contain long-term inflation expectations — perhaps the biggest influence on current long-term interest rates. The U.S. also is enjoying a large inflow of foreign capital into U.S. financial markets, and a lot of it is coming from foreign central banks.

It’s entirely possible that current downward pressures on long-term interest rates will persist as the economic expansion moves forward. But it’s more likely that the expansion will generate stronger upward pressures on core inflation (primarily from rising unit labor costs) and that ongoing Fed tightening ultimately will push short- and long-term rates in the same direction. NAHB’s forecast currently shows roughly half-point increases in long-term rates by late in the year — half the projected increase in the federal funds rate.

The recent economic and financial market environment has been quite hospitable for the housing sector, and a spate of highly aggressive mortgage finance products has supported housing demand in markets where affordability has been strained by rapid increases in house prices. Indeed, the interest-sensitive housing sector has remained the hottest part of the U.S. economy despite the pattern of Fed tightening since mid-2004.

Upbeat news on housing for April includes record levels of both new and existing home sales, yet another housing starts number on the north side of 2 million units, and another solid increase in construction put-in-place. Indeed, year-to-date readings are up substantially for sales, starts and construction activity, and the 2004 single-family records clearly are in jeopardy. NAHB’s first-quarter Multifamily and Remodeling Market Indexes (based on surveys of apartment producers and managers as well as professional remodelers) show that these housing components are moving ahead nicely as well, and patterns of construction spending through April show great strength in these areas.

Surveys of builders and mortgage lenders show that robust housing market activity extended into May. NAHB’s Housing Market Index (based on surveys of single-family builders) edged up to 70 in May, near the top of the range that’s prevailed for more than a year. Furthermore, the index of applications for mortgages to buy homes (Mortgage Bankers Association series) moved up to a record level by late May (four-week moving average).

The most reliable indicator of house price movements in the U.S., the House Price Index produced by the Office of Federal Housing Enterprise Oversight (OFHEO), has been released with price readings for the first quarter of the year. Excluding refinancing activity, OFHEO’s repeat-sales House Price Index was up by 10.26% on a year-over-year basis, off only marginally from the pace of late 2004. Including refinancing “transactions” (and appraisals behind the refinancings), the House Price Index was up a whopping 12.5% on a year-over-year basis.

The minutes from the May 3 FOMC meeting noted that “house prices continued to rise rapidly over the first quarter,” while contending that “recent data suggested some slowing.” But it turns out that the second-best measure of house price change, the median sales price of existing homes sold (from the National Association of Realtors®), actually accelerated in April (data released on May 24). Indeed, the median price of single-family homes was up by 15.1% on a year-over-year basis, and the median price for condos/co-ops was up by 18.4%.

The sustained rapid acceleration of house prices inevitably has generated a flood of charges regarding dangerous “bubbles” in U.S. housing markets. Indeed, even Greenspan has changed his tune, recently acknowledging that house prices show signs of “froth” and saying that price behavior exhibits an “unsustainable underlying pattern.” While remaining skeptical about a national house price bubble, Greenspan said there were signs of “lots of little bubbles” (i.e., froth) in particular markets.

Housing markets are not nearly as susceptible as securities markets to boom-bust patterns, but history clearly shows that house prices can fall substantially in local markets if something really goes wrong. On this point, a recent study by the Federal Deposit Insurance Corporation (FDIC) entitled “U.S. Home Prices: Does Bust Always Follow Boom?,” offers some useful perspectives.

The FDIC study noted that metro-area house price booms don’t last forever, that price booms do not necessarily lead to price busts and that most past booms have ended in periods of house price stagnation that allowed various economic fundamentals (including household income and housing supply) to catch up. In this regard, most recorded house price busts were preceded by significant stress in local economies (not vice versa).

This time could be different, of course, and current “bubble” charges focus heavily on an unusually heavy presence of investors/speculators in boom markets as well as on a glaring prevalence of “innovative” mortgage products that stretch affordability but may sacrifice credit quality down the line. But as long as the national economy continues to move ahead nicely, pulling most local economies with it, the most likely outcome will be a slowdown (or flattening) of house prices in overheated areas, with few cases of outright decline.

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 June 1 edition. To subcribe to “Eye on the Economy,” click here.

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

"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. To order, visit the www.housingeconomicsonline.com detail page.

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

A Story-Pole Approach to Shingling a Roof

[Click for larger image]

Although roofing isn’t one of my favorite tasks, I do appreciate a straight, well-installed job.

But my eyes aren’t what they used to be. These days, I find it harder and harder to see pencil marks made on the dark tarpaper needed to set my alignment chalk lines.

So, to make it easier for me to see the marks for the chalk lines, I put them on drywall tape.

As shown in the illustration, I make marks on the drywall tape indicating the top edges of shingle courses.

Then I snap chalk lines without having to hunt around for a hard-to-see pencil mark or snaking my tape down to the drip edge, hoping it won’t pull off as I get to the top of the roof.

BuilderBooks.com is your source for training and education products for the building industry. The official bookstore for NAHB, BuilderBooks.com offers award-winning publications, software, brochures and more available in both English and Spanish. To view these publications online, click here, or call 800-223-2665.

Subscribe Your Employees to Nation’s Building News — and a 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.

A Tune-Up Checklist to Help Reduce Cycle Time

By Glen West and Mark Reich
Reducing cycle time is one of the more effective ways to maintain or even boost your gross profit margin on the sale of a house. However, finding new ways to shorten the amount of time between groundbreaking and final inspection can be challenging — especially if you think you've already shaved every possible day from the schedule.

Implementing a best practices approach to your production process will uncover wasted time on the job site, and it can enable you to continually improve the efficiency of your entire building operation.

Improved workflow management can help you complete phases of work more quickly and with greater reliability from project to project. From this effort, you can set and attain new standards to help your business achieve new goals for sales, quality and profitability.

The following checklist can help you adopt a best practices approach to reducing cycle time. Use it initially to take a quick snapshot of how your business stacks up on some common practices that home builders use to shorten the production process. Then, with your snapshot in hand, you can drill into those areas that need improvement.

Now, with answers in hand, drill into some strategies to better manage your production workflow.

Assess the value. Determine how every phase of your building process provides direct value to the customer. Eliminate or reduce stages that don’t contribute value. Alternately, combine these stages with other activities to achieve a shared reduction in time. For example, combining a home owner’s mid-cycle walkthrough (on a pre-sold house) with a post-framing inspection can prove invaluable. Even a one-hour walkthrough can help identify potential problems or concerns early in construction, when they are easier to correct. Plus, such attention helps ease a new home owner’s typical anxieties.

Make it easy. Stage and zone materials, tools, equipment and crews near the locations where they’ll be used. You can do this daily and for individual phases of work. This practice can help reduce materials handling and can improve job-site safety. Some home builders now rent cargo-sized storage containers to secure tools and materials on site. This keeps materials and tools close at hand and secures them from breakage, theft or inclement weather.

Panelize. At every stage of the process, look for ways to use factory-built or other industrialized (precut, panelized, stock) components and products — from plated trusses to pre-hung doors. The use of components speeds up on-site assembly and installation and delivers reliable quality.

Standardize your processes. Standardize change orders, materials delivery and progress reporting to provide reliable, accurate and timely information to appropriate members of the organization. You can also provide this information to trade contractors (see below), vendors and customers.

A well-honed, integrated front- and back-office system can help you stay on top of changes and daily challenges. Perform a systems check to measure the effectiveness of your current workflow. Start at the very beginning with your lead process, customer relationship management (CRM) system, and model and options selection systems. Then review your process for creating estimates and handling scheduling, accounting, job costing and change orders.

Ensure that your trade contractors and vendors get off to the right start by giving each one a copy of your company’s standard, written procedures for contracts, invoicing, payment schedules, change orders and the like. Having a clear, up-front understanding of procedures can help reduce misunderstandings — as well as cycle time delays — once a house or construction phase has been started.

Automate the paperwork. Once you have standard procedures in place, work toward an electronic reporting system that eliminates handwritten information or duplicate data entry. An electronic reporting system can reduce errors and can push information through the process faster. Consider using electronic plans to automate take-offs. In addition, explore options to automate your accounting and job costing functions and share data between them. Consider supporting functions, too, such as creating standard reports, managing electronic documents and creating a companywide electronic address book.

Also, explore ways to save time and money by transferring field data to the office (and vice versa) with wireless technology. Recent software introductions and improved hardware, such as drop-tested hardened laptops, make wireless data transfer easier and more efficient.

Start right. Before you start a project (and before each phase of work begins), review and adjust the production schedule with all trade contractors, vendors and other labor and supply sources. Communicating progress or delays (if the current work phase is hindered for any reason) can help redirect resources to other projects.

Foster a team approach with your employees as well as your trade contractors and vendors. Set your expectations with the entire team for giving and receiving feedback about potential problems and successful processes that allow each work phase to progress faster, smarter and more cost-effectively.

Train thoroughly. Provide trade contractors and crews with solid training. Mitigate on-the-job training and instruction before each project and work phase begins by discussing installation and assembly instructions for each product or system, proper and safe equipment and tool usage, and job-site safety measures.

To eliminate schedule delays, make sure the tools and equipment you provide are in peak working order, and that materials and products are defect-free. Work with your vendors to develop procedures for proper material delivery, storage and handling. No detail is too small to help reduce breakage, damage, incorrect installation or job-site injury.

Troubleshoot as you go. Use the team approach mentioned above to develop a system for finding, reporting and eliminating defects during the building process — instead of during the final walk-through. Encouraging team members to communicate challenges early in the phase allows you to adjust your processes as needed. This mitigates similar problems in future starts. For example, if a particular skylight turns out to be difficult to install, adjust your materials, labor and schedule accordingly for that particular house model in subsequent starts or project phases.

Ease transitions. Review transitions and hand-offs between phases and trade contractors (e.g., framing to rough electrical). Identify where activities might be shared, reduced, eliminated or approached differently to save time and improve overall quality. To develop a smooth working relationship with the city building inspection department, treat your city inspectors as part of the team.

Get feedback. Identify inefficiencies and refine your processes by debriefing superintendents, key trade contractors, crew members, vendors, suppliers and clients (if applicable). Hold debriefing sessions after each phase of work is completed and once more after the house is finished. Spending just an hour per phase on review can help shave a day or more off the overall production schedule, and allow you to continually develop your production practices toward optimal efficiency.

Glen West is product development director for Best Software’s Timberline Office product suite. He has 14 years of field experience working with home builders to serve their business management needs. Mark Reich is a regional area manager for Timberline Office. He specializes in residential business management solutions.

Best Software’s Timberline Office, which features integrated accounting, estimating and information management software, is designed to improve operations for all types of residential builders. BuilderMT (Management Technology) provides implementation, business and custom end-user training and consulting services to help builders recognize the benefits of organizing internal work processes and workflow as a means of increased productivity and profitability. For more information, click here and click here.

Public-Purpose Marketing Should Aim for the Heart

Builders seeking an edge in selling to aging baby boomers have a thing or two to learn from companies such as Vodafone, Virgin Airlines, Mini Cooper and Target, which have been using social or public-purpose marketing to cultivate high levels of customer loyalty, Richard Steckel, president of AddVenture Network, said at last month’s Building for Boomers and Beyond Seniors Housing Symposium in Chantilly, Va.

“Soft-sell activism is not going away for some years,” Steckel said. “If your competition is using it, and you’re not, you’ll be at a competitive disadvantage.”

Builders need to be giving their customers a rationale to choose their company over the competition, he said, and “the tie-breaker is that there’s something about that company that makes me want to go there.”

Vodafone, a cell phone company in New Zealand, decided that it would help people find meaning in their lives by holding an essay-writing contest asking what they would do if they could take a year off to help others, and making that wish possible for the winners by paying their salary.

“Vodafone is a company of values,” Steckel said. Its campaign was so successful that it even started receiving an increase in applications for employment. “It touched a responsive chord in individuals. People started shifting their loyalty because that’s a brand that’s almost like a human being.”

Steckel said he and his wife feel guilty if they leave Target without spending at least $50 because 1% of its weekly sales go to local schools.

“Life is about engagement and vibrancy,” he said. “As a community builder, as a way to differentiate yourself, speak to people’s yearnings to have a meaningful life.” He added that, “This type of marketing has to be genuine. You have to say there is a sound business reason for doing this and you have to deliver on your words.”

To tap into social and cultural trends and cultivate emotional loyalty to their company and brand, builders should emphasize simplification at a time when their baby-boom customers believe that life has gotten too crazy and too fast-paced and they are ready to push back to a simpler life, he said. Builders can help their prospective buyers clarify what’s important in life. They can also address a yearning to return to a simpler time “when relationships were important, when we knew the neighbors on all four sides, when there were bowling teams.”

Soft social activism, soy and organic toilet paper are helping to redefine what’s important, he said. Consumers are saying that they want their economic power to make a difference.

Customers are looking for corporate social responsibility and Steckel cited research finding that 94% of those interviewed said they were actually switching brands to move away from brands that were “socially questionable.”

Jean Carroccio, president of Jean Carroccio and Associates, reported findings from research at the University of Maryland’s Center on Aging showing that baby boomers are looking to play new meaningful roles. “They are looking to move from success to significance, for what they can contribute,” she said.

Carroccio said that they are also interested in opportunities for life-long learning and are looking for “purposeful” social networks that will help them connect.

“Take your customers to new places,” she said. “Customers can only describe the world that is and they have difficulty discussing what could exist. They can seldom tell you what new products or services they want.”

Steckel recommended three books for builders who want to learn more about the importance of emotional branding:

He offered several examples of how to cultivate emotional loyalty among consumers:

Multifamily Market Continues to Gain Ground

The multifamily sector of the housing market performed well in the first quarter of 2005 and is expected to continue to improve, according to the latest Multifamily Market Index (MMI), which was released last week by NAHB.

Compared to last year’s first quarter, multifamily starts were up in all sectors, including for-sale, affordable rentals and market-rate rentals. Occupancy levels also increased in every class of rental apartment as did calls from prospective renters, asking rents and effective rents.

In additional positive news for the multifamily market, rental vacancies nationwide dropped from 8.5% in the fourth quarter of 2004 to 7.8% in this year’s first quarter.

“The appeal of urban areas where people can live, work and play — while escaping the drudgery of a long commute — is really benefiting the multifamily housing market,” said Ron Terwilliger, chairman and chief executive officer of Trammell Crow Residential and chair of NAHB’s Multifamily Leadership Board. “Whether they choose to rent or to buy, these consumers are looking for a specific lifestyle, and that bodes very well for the future of multifamily housing.”

The MMI is based on a quarterly, nationwide survey of multifamily builders and property owners who are asked questions about current market conditions as well as their expectations for the next six months. Any rating over 50 indicates more positive than negative responses for most components of the index.

The index gauging multifamily demand showed impressive gains in this year’s first quarter. Demand for Class B apartments — the mid-range rent category — rose to 60.6, a gain of more than 15 points over the same three-month period a year earlier. Demand for luxury units rose 13.5 points over the previous year’s first quarter, while demand for modestly-priced apartments rose 6.2 points. MMI survey respondents also indicated that they expect this positive trend to continue over the next six months.

The index tracking the number of apartments available for rent indicated continued improvements in vacancy rates and calls from prospective renters.

Among components of the index assessing the health of multifamily production, builders’ and owners’ assessment of market-rate apartment starts rose more than eight points to 57.2 in this year’s first quarter. Builders participating in the MMI survey said they expect even greater gains over the next six months.

Condos continued to be the strongest category in terms of current supply, at 66.9, but respondents expected starts to fall slightly over the next six months.

“The demographic factors — baby boomers who want second homes or smaller-scale, maintenance-free living, and the echo boomers just entering the work force — both serve to support a rising demand for condos and apartments,” said NAHB Chief Economist David Seiders. “With job growth back and the conversion of many rental apartment units into condos, we’re seeing both the rental and for-sale sides of the market come back toward a healthy balance of supply and demand,” he said.

"Marketing Multifamily Housing,” available through BuilderBooks.com, teaches you how to successfully market multifamily developments, get referrals and boost profits from satisfied renters. Learn unique techniques to market to renters. To view or purchase this publication online, click here, or call 800-223-2665.

Education Calendar

Whether you’re new to the industry, hope to make your next career move or want to improve your company’s bottom line, The NAHB University of Housing can assist you in your education pursuits.

Visit www.nahb.org/education for a comprehensive listing of courses throughout the country. Be sure to visit often in order to view the most up-to-date information in your area.

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

Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB.

Modular Builders File Petition on Load Regulations

Working with a coalition of associations representing the modular home industry, NAHB’s Building Systems Councils (BSC) has petitioned the U.S. Department of Transportation to exempt the industry from divisible load regulations that are adding an average $2,032 to the cost of a home. This added cost is an unnecessary burden to home manufacturers and home buyers.

The exemption “would be a tremendous relief to home buyers,” said John Colucci of manufacturer Westchester Modular Homes. “One of the significant benefits of modular construction is cost control, and modular manufacturers have to take advantage of any way to control costs and keep the construction process efficient.”

Most shipments of modules — the factory-crafted sections of modular homes — are transported over the national highway system as oversized loads. Under current regulations, manufacturers are required to break down those loads into individual modules, even though in many cases two modules conveyed by the same transporter would not come close to exceeding weight limits or dimensions specified by individual states.

Under this rule, it takes four vehicles or trips to transport the average modular home, when in many cases two or three would suffice.

One of the fastest-growing segments of the home building industry, modular housing accounted for 42,700 new homes in 2004.

For more information about the modular housing industry or the Building Systems Councils, call 800-368-5242 x8576.

Pulte Ramps Up Factory Component Building System

Looking to improve the quality of its housing and increase the satisfaction of its customers, Pulte Homes has moved beyond testing the waters for factory-built components and expects to deliver 500 of its system-built homes to the Virginia marketplace this year, Jim Petersen, director of research and development for Pulte Home Sciences, said in a May 25 presentation at the National Building Museum in Washington, D.C.

Pulte has been gradually gearing up for its new, more efficient alternative to stick-built construction since the late 1990s, Petersen said, and is ramping up production from a state-of-the-art, 109,000-square-foot facility in Manassas, Va. that is using 150 employees for its plant and field operations.

Able to push out 2,000 homes annually at an average size of 2,500 square feet, the plant is not yet operating at full capacity, Petersen said, and the 4,200-square-foot homes it is now producing are larger than had been anticipated.

As the factory’s production expands, the innovative process will account for an increasing share of the output of Pulte’s division in Virginia, which is now running at about 1,200-1,300 homes annually.

“We needed a market with at least 1,000 homes to justify the expense of the plant,” he said, and he calculated that the facility has a shipping radius of 100 miles.

The component homes and stick-built product are being built in separate communities.

Pulte buys and develops its own land and provides the house plans. As to the factory homes, “we haven’t built the same house twice yet,” Petersen said. Pulte uses its own software, which enables the company to “design every home as a job-specific solution.” This 3-D software has the capability of passing the loads through any design, providing the ability to customize all plans before any 2x4s are even cut. It is this kind of technology that makes each home both quick to produce and unique.

Pulte’s factory components enable the structure to be completed in the field in three to five days, cutting 20-25 days off the typical schedule for construction of a stick-built home. “The home is less exposed to the weather and it doesn’t become saturated,” he said, so that “the material doesn’t expand and contract as much as in a conventionally built home.”

In response to an ongoing decline in the availability of good trade workers, the components have been designed so that they can be assembled in the field by workers with a lower set of skills than those needed to build homes the old-fashioned way, he said.

Petersen boasted that Pulte’s system results in very clean building sites, consistently high quality that reduces service and warranty costs, basements that don’t leak, greater comfort, higher indoor air quality and less potential for mold.

For information on resources on systems-built housing available from NAHB, e-mail Eric Fulton, or call him at 800-368-5242 x8577.

San Diego Builders Cry Foul Over Road Fee

In some places, the retail fee that was adopted on April 13 by a four-to-one vote will be as high as $62 per square foot, which represents a tax of $2.48 million on a typical 40,000 square-foot grocery store, making its construction infeasible.

By comparison, the two building trade associations in the suit complain, fast-growing Riverside County charges $2.83 per square foot for its transportation fee and Phoenix assesses just 35-cents to $4.50 a foot for the same purpose.

“This is a serious offense by government,” said Paul Tryon, chief executive officer of the San Diego BIA. “We’re talking about nearly $1 billion in new taxes, over and above what residents and businesses are already paying for roads.”

McNerney’s association reported that one of its members who paid $5 million for unimproved retail land abandoned the project it had been planning after it calculated that the new fee would have added $5.6 million in costs.

Even though the county has just finished designating lands for commercial and industrial development in its general plan for 2020, the transportation fee, according to San Diego’s builders, will put a moratorium on development that will kill off job creation and new economic activity in the area.

The litigants have charged that the fee is not reasonably related to the actual impacts of commercial and residential development, as required by state law. Further, builders said, senior county staff ignored information and analysis that were presented by engineering experts and made assumptions based on flawed data and overly exaggerated estimates of the impacts of growth.

“Our engineering experts have found that the county is trying to burden future development with 70% of the cost of future roads, but that development will only use up to 35% of the new capacity created,” said Tryon. “This fee wrongly doubles development’s appropriate share of the cost.”

“This lawsuit is not an effort to avoid a fee,” he added, “but a necessary action to secure a fee that is equitable and workable. The building industry is a good corporate citizen with a solid track record of paying for and building the region’s roads, and will continue to do so to offset it impact on roads.”

Trends in Land Use, Environmental Law Examined

Members heard presentations by preeminent land use attorneys on Fifth Amendment takings law; due process and public use issues; water law issues with an impact on East Coast development, including a case study from New Jersey; barriers to affordable and workforce housing; and the latest on the Endangered Species Act.

The LANDS program provides educational and networking opportunities for land use and environmental attorneys so that the building industry can secure better decisions across the country from courts and government agencies that control the use of private land.

During the lunch portion of this year’s program, NAHB First Vice President David Pressly made a special presentation to Eric Santini, of Santini Homes, Inc., in recognition of his valuable contributions to protect the civil rights of the nation’s home builders.

The afternoon session involved a spirited moot court where distinguished LANDS members stood in the shoes of the Supreme Court to hear arguments for and against land development issues raised in the San Remo Hotel, L.P. v. City & County of San Francisco case that is currently pending before the High Court. Nine LANDS members agreed to be part of the “judicial” panel and two members took on the roles of attorneys to present both sides of the case. (For an NBN story on this case, click here.)

As with past conferences, presentations and programs provided up-to-date information on legal trends in land use and environmental law for attorneys who represent NAHB members in jurisdictions across the United States.

For more information on the LANDS program, e-mail Felicia Watson at NAHB, or call her at 800-368-5242 x8229.

Lowe’s Renews Commitment to Job Corps Grads

Lowe’s Companies, Inc. contributed another $50,000 to the Home Builders Institute (HBI), the workforce development arm of NAHB, to renew its commitment to the Building Careers Scholarship program that it established last year.

The funds donated by Lowe’s enable HBI’s Job Corps graduates to make the transition to the workplace by helping defray the costs of such necessities as tools, clothing, living accommodations and transportation.

“We are elated by your continued support of our efforts to help at-risk youths start careers in the home building industry and look forward to another brilliant year in our partnership,” said HBI Chairwoman Patsy Smith.

Mike Horn, Lowe’s vice president of commercial sales, called the scholarship program “a great opportunity for Lowe’s to strengthen the entire building industry while making a difference in the lives of deserving youths.”

Ashley Davis, who finished her training under HBI electrical instructor Ray Coston at the Potomac Job Corps Center in Washington, D.C., used her scholarship to buy clothes, work boots and new tools for her job with Mastec/Advanced Technologies in Charlotte, N.C.

“My life has dramatically changed,” Fox wrote to Lowe’s. “Without your help, I can’t imagine what I’d be doing now. I want to thank each and every one who has helped get me here. …If you keep your mind set, stay focused and work hard, you can go beyond your dream.”

With fiscal year 2004 sales of $36.5 billion, Lowe's Companies, Inc. serves approximately 11 million customers a week at more than 1,000 home improvement stores in 48 states. Based in Mooresville, N.C., the 59-year-old company is the second largest home improvement retailer in the world. For more information, click here.

HBI annually trains and places more than 2,000 at-risk youths enrolled in the Department of Labor’s Job Corps program in seven trades — carpentry, facilities maintenance, electrical wiring, painting, plumbing, brick masonry and landscaping.

For more information on the HBI/Lowe’s Building Careers Scholarship, e-mail Keith Albright or Maria McIntyre at HBI, or call them at 800-795-7955 x8911 or x8912, respectively.

Program Supports Builder-Owned Mortgage Companies

Wiith products and services to provide customized programs for builder-owned mortgage companies, Genworth Financial has developed The Builder Difference to bring together a broad variety of tested mortgage origination solutions for this specialized audience.

This feature is solely for educational and informational purposes. Nothing on this page should be construed as policy, an endorsement, warranty or guaranty by the National Association of Home Builders of the featured product or the product manufacturer. The National Association of Home Builders expressly disclaims any responsibility for any damages arising from the use, application or reliance on any information contained on this page.

How Scott Wammack Made It Big (Part 1)

I've known Scott Wammack for about 10 years. He hired my company to do the civil engineering for a 75-lot subdivision in the mid-1990s. At the time I wondered who he worked for. I mean, for Pete's sake, here's this guy, couldn't have been a day over 25, apparently in complete charge of a several-million-dollar housing development. He unflinchingly did the hiring and firing of all consultants, contractors and builders, and was the guy pushing permits. Surely he must be a crackerjack employee of some bigshot developer down Seattle way?

Nope. He was the bigshot, only I couldn't confirm that until last week when he and I got together over lunch. As fate would have it, we're working together again on another development project, though our roles are a little different this time. I should say my role is a little different; I'm managing the project for the seller, not doing the actual engineering. Scott, on the other hand, is still the man in charge on his side, still doing the hiring, firing and permitting. It’s hard to believe Scott Wammack, now a grizzled veteran of the construction industry at the ripe old age of 33, has assets worth more than $60 million. Here is his incredible story.

Tim: I really appreciate your time today, Scott — thanks. So where did it all begin, where and how did you get your start in the building industry?

Scott: It’s funny, I pretty much knew what I wanted to do as an eighth grader — be a builder. But I had no idea I’d wind up where I am today, nor how I’d get here.

Scott: Not hardly. We didn’t have money, so when I turned 11, my dad started making me pay for as much room and board as I could swing. I worked odd jobs, anything that would pay. As I made more money, I paid more of my way. At age 16, I was basically self-sufficient.

My first construction-industry job was as a laborer at age 14. A builder-developer by the name of “Benna Factor” (not his real name) hired me to sweep and pick up trash on his sites. I worked my butt off that summer, wore out three brooms. After three months of grunt labor, Benna allowed me to expand into other areas. So I bought a hammer and tool belt and started learning carpentry.

Times were tough in the '80s. I did construction during the day and odd jobs at night to cover the bills.

Scott: Twelves Saturdays and Sundays, 16s during the week. It was a regimen that wouldn’t change for about 15 years. I think it was this work ethic that my employer, Benna, noticed about me. He’s had a big part in my success. More on that later.

Right out of high school I enrolled in college at the University of Washington. It took five-and-a-half years, paying my own way, but I finally graduated with a degree in economics, and minors in marketing and accounting. But I’m getting ahead of myself.

During my freshman year, I got my first chance to make some real money. I found a building lot and with Benna’s help, purchased it.

Scott: He cosigned the loan and put up the downpayment. Basically, it was an investment in me — to see if I would sink or swim given the opportunity.

Scott: Not really. But Benna guided me, in a sort of cryptic way. I’d ask him a question and he’d give me an answer, but not a complete answer. It was up to me to sleuth out the details. It forced me to dig in and make things happen — to learn the ropes. There was no spoon-feeding, though there was a certain amount of oversight and guidance.

Tim: By this time you’d been on construction sites for a few years, but you still had to be green. Did you know how to build a house from start to finish? Did you sub a lot of it out?

Scott: I subbed out foundations, drywall, electrical and plumbing. Did the rest myself. I even paid a roofer $200 to teach me how to roof, then roofed it myself. Did I really know how to build a house from stem to stern? Not yet. I was 20 and winging it. Fortunately, the final product was good enough to sell quickly. Paid for my next year of college.

Scott: I hired a friend as a laborer. He didn’t know much and he didn’t work as many hours as me, so I wound up doing a lot on my own. It’s a bugger, you know, tacking one end of board or sheet of plywood in place, then running around to the other side to level it and then nail it off. But I was determined.

The views expressed in this article represent the personal views, statements and opinions of the author and do not necessarily represent the views, statements, opinions or policies of the National Association of Home Builders. NAHB does not necessarily endorse any of the views expressed by the author and NAHB is not responsible for any direct or indirect consequences arising out of the views expressed in this article.

NAHB-Produced Shows on HGTV & DIY — This Week

The NAHB Production Group is a full-service, self-contained, media production unit creating programming for cable television, broadcast television, non-profit, museum and corporate clients. Productions range from magazine format shows for general audiences to museum-installation videos for specialized use.

The production group includes award winning journalists, writers and photographers with experience in broadcast, documentary and corporate television.

Subscribe Your Employees to Nation’s Building News — and Earn a 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.

Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB.

Grant to HBI Addresses Construction Labor Shortage

The Home Builders Institute (HBI), the workforce development arm of NAHB, has received a two-year $75,000 grant from the National Housing Endowment to support the creation of a Career Services Communications Package, which will encourage students to pursue careers in construction at a time when the industry is experiencing an annual shortfall of 60,000-80,000 workers.

The educational initiative will be used to help improve the industry’s image and provide young people, parents and school counselors with a better understanding of viable career options in home building.

The package will showcase housing-related careers ranging from accounting to zoning and will illustrate how various talents, skills and interests can be matched to specific job opportunities. Information on possible career paths and earnings will also be included.

Materials will be distributed to junior high and high schools, community colleges, state career and technical education directors, Job Corps Centers and minority-focused organizations such as historically black colleges and universities and members of the Hispanic Association of Colleges and Universities.

The educational campaign will also be accompanied by public service announcements in major markets across the country to broaden the reach of this important message.

The materials are also geared to enabling home builders associations and their members to engage students during career-day activities, to connect with prospective employees, to reach diverse populations and to broaden the base of individuals who are well-informed about the industry.

For more information on the Career Services Communications Package, e-mail Maria McIntyre at HBI, or call her at 800-795-7955 x8912.

June Is National Homeownership Month

The nation’s home builders are helping Americans on the road to homeownership and self-sufficiency by supporting five community fairs — the first of which was held in Baltimore on June 1 — to celebrate National Homeownership Month.

“With today’s low interest rates and the healthy pace of new home construction, we continue to experience a strong housing market, and that’s good for Americans looking to make the jump into homeownership,” said NAHB President David Wilson. “We believe it’s important to make information about homeownership and other federal programs accessible to consumers who might not otherwise realize that help is available and that it is possible to achieve the dream of homeownership.”

Experts are on hand at the fairs to answer questions, provide critical information and facilitate educational classes. Exhibitors are showcasing information on homeownership incentive programs, current homes for sale in the area and other resources. Admission is free, and prizes, refreshments and children’s activities are provided.

Thanks to innovative builders, improvements in the access to capital and myriad government and industry programs developed to make homeownership a reality, American homeownership is at a record 69%.

During National Homeownership Month and throughout 2005, home builders across the nation will continue to work with housing finance innovators, consumer education organizations and government officials to advance affordable homeownership in America.

For consumer information and more about the homeownership’s unique contribution to national and individual prosperity, click here.

For more information, e-mail Kym Kilbourne at NAHB, or call her at 800-368-5242 x8447.

Tsunami Fund Receives Donation From Glenn Lukos Associates

Right after the Dec. 26 tsunami wreaked havoc in South Asia, Glenn Lukos knew that his company needed to do something. Taking a cue from how he responded to the 9/11 tragedy a few years earlier, Lukos quickly established a way to support the victims of the tsunami disaster.

“We decided to donate 7.5% of our receipts for 30 days,” said Lukos, owner of Glenn Lukos Associates, Inc., an Orange County, Calif.-based environmental consulting firm. The company estimated that this would raise about $35,000. After investigating several charities, it was decided to advance the funds to Direct Relief International, a charity that provides donated material goods to locally run health programs in poor areas around the world and during times of disaster.

The plan was so successful that the company ended up raising $15,000 more than had been projected. Having learned about the Home Builders Care/National Housing-Endowment Tsunami Shelter Fund, Glenn Lukos Associates donated those additional monies to the NAHB effort on behalf of rebuilding homes in Southeast Asia, which has now collected a total of $354,000.

Leading the fundraising effort for the Home Builders Care/National Housing-Tsunami Shelter Fund, former NAHB President Bob Mitchell has set a goal of raising $500,000 by the end of the year to be donated to two partner organizations, Habitat for Humanity International and Shelter For Life International, both U.S.-based charities already working in the region.

National Housing Endowment
Attn: Troy Patterson
1201 15th Street, NW
Washington, D.C. 200

Nation's Building News Online: June 6, 2005

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Tsunami Fund Receives Donation From Glenn Lukos Associates