Hunkering Down Until Housing Markets Turn Up Seen as a Poor Business Strategy

As the housing market continues to bounce along the bottom, home builders and remodelers may think the best thing to do is to hunker down and lay low until the economy rights itself. But that’s not a good idea at all, according to panelists participating in an NAHB webinar last month.

“It’s not a viable strategy,” said moderator Ron Robichaud of Robichaud Financial Services, adding that home building professionals need to look for ways to change their business now — or they won’t survive.

When the downturn first became evident, “we listened to those predictions for a soft landing, but instead we sailed into a perfect storm” of changing consumer expectations amid a looming federal deficit. “A return to the 2004-2006 market,” when healthy profit margins were the norm for most home builders, “is not going to happen,” he said.

From 2002 to 2005, Robichaud said, an estimated 78% of the growth in builders’ profits came from land.

Robichaud spoke along with Steve Black, the owner of Stephen Black Builders Inc., and Joe Pfeiffer, president ofBusiness RIO Inc. in the Aug. 17 webinar, "Business Operations: Successful Strategies That Work in Any Economy." A recording of the webinar is available for purchase.

“You know your market,” Robichaud said. “You know the geography and the economy, and you have relationships with the community, and you have skills and expertise, so you need to identify and maximize opportunities. No town or community is static — and in the course of change, new opportunities emerge.”

For example, depending on where they live, many baby boomers who helped fuel the hot home buying market may want to downsize because their children have left home but find moving more difficult because the value of their home has declined. Creating product for that specialized niche might be the way to thrive in those markets, he said.

“As the market stabilizes, it will be very difficult for the small builder to compete with the highly capitalized larger builder who is committed to control the housing market,” he added. “The small private builder has a very big target on his back” and must be “nimble, flexible and creative” to make the most of opportunities as they arise.

Black said that he has been able to score success by becoming a jack of all trades. “We have to start expanding how we do business,” he said.

For instance, working with restoration companies that usually outsource the work can provide an ongoing revenue stream for a builder, he said, while fostering profitable new relationships.

Black also cited retirement communities as a source of new business activity.

“These communities present a great source of work due to the constant turnover of people," he said. As residents leave independent living cottages for nursing facilities, the homes they vacate need new carpet, doors, repainting and more.

Pfeiffer agreed. “The only way home builders can expect to survive is to learn new skills, use new tools and invest their time differently,” he said. “It’s risky, but it must happen to effectively address change. That’s why hunkering down won’t work. The changing conditions and increased competition mean the change is going to be permanent — and new changes are coming,” he said.

Having an operations manual and being able to accurately value-engineer each house plan is no longer a luxury, but a necessity, he said. “You can use it to see how you can specifically react to changes in the market, the new products and segments.”

In addition, “networking is huge,” Pfeiffer said, and getting together with a group of builders or remodelers with similar businesses can reap great rewards.

In addition to spending time with other industry professionals at local home builders association meetings and events, builders can join NAHB’s  20 Clubs, which are groups of 15 to 20 members who have businesses that are alike but located in different markets across the country.

“As you build your professional network and form business relationships, it’s great to have someone to bounce ideas off of, and as you join as a group to discuss issues, this can be extremely productive and it cuts down on research time,” Pfeiffer said. “It’ll make your job a whole lot easier because you won’t have to do all of it yourself.”

Boomers Don’t Have to Budge if They Remodel Right

Baby boomers — people born in the post-World War II years between 1946 and 1964 — are entering or nearing retirement age. And research shows that Americans have a strong preference to remain in their current residence for as long as possible as they grow older, meaning they will need to remodel or adapt their homes to meet their changing abilities and circumstances. This is called aging-in-place. 

Aging-in-place is generally defined as living in one’s home safely, comfortably and independently, regardless of age, income or level of mobility.

It can be an agonizing decision to have to choose whether to move or stay put. Older Americans have always been the least inclined to move, compared to home owners of any other age group.

Research from the National Association of Home Builders (NAHB) found that more than 50 percent of those ages 55 or older have lived in their homes longer than 10 years. 

Many older home owners would prefer to stay close to friends and family, value the community that they have been a part of for many years and don’t want to start over someplace new. Also, some may have to stay where they presently live because of financial concerns and limitations imposed by living on fixed incomes. 

Very simply, “getting around” is the key to making a house compatible to the needs of the aging-in-place occupant.  Remodelers report that the most common projects for their aging-in-place clients are making more accessible accommodations, installing brighter lighting, widening doors and hallways, adding railings or grab bars to prevent falls, changing floor coverings to add traction and eliminate slippery surfaces, and installing ease-of-reach and bend systems. 

Home builders and remodelers are ready for this large population that will seek their services to help them live conveniently and safely in the home and community where they feel most comfortable.

To address the unique demands of the burgeoning aging-in-place market, NAHB Remodelers, in collaboration with the NAHB Research Center, the NAHB Seniors Housing Council and AARP, developed the Certified Aging-in-Place Specialists (CAPS) program. This designation program equips remodelers with the marketing, technical and customer service skills required to help home owners, regardless of age, maintain their independence and increase security in their present homes.

CAPS remodelers and builders have been trained in the unique needs of the older adult population, aging-in-place home modifications, and common remodeling expenditures and projects. They have been taught the strategies and techniques for designing and building aesthetically enriching, barrier-free living environments, and given the resources needed to provide comprehensive and practical aging-in-place solutions.

Finally, CAPS graduates pledge to uphold a code of ethics and are required to maintain their designation by attending continuing education programs and participating in community service.

To find an NAHB member builder who holds a CAPS professional designation in the Asheville area, contact www.Ashevillehba.com. You can also search for Certified Aging-In-Place Specialist designation holders at www.nahb.org/designationsdirectory.

Beware Foreclosure 'Bargains'

It’s an unfortunate result of the recession — many families haven’t been able to keep up with their mortgage payments and have lost their homes to foreclosure. And foreclosed homes often sell for less than market rates, making them seem like a bargain to buyers who are used to the inflated prices of a few years ago.

But comparing a new home to a foreclosure on price alone is a mistake. You can’t put a dollar value on your peace of mind, safety, financial reserves and time — all of which could be in jeopardy if you buy a foreclosed home.

For example, a foreclosure could have legal issues. Before buying a foreclosed home you will have to do thorough research — or hire a title company or lawyer — to make sure there aren’t any additional financial or legal liabilities attached to the home. There may be liens on the property for unpaid taxes, home owners’ association dues, or the home may have been put up as collateral on other loans that weren’t paid. You could become liable for thousands of dollars of debt you weren’t aware were attached to the foreclosed home.

As soon as you take ownership of a foreclosed home, anything that breaks or any problems that arise are your responsibility. This could cost you lots of time and money that you may not have budgeted for.

With a new home, maintenance won’t be an issue for a while with the brand new appliances and systems. And if something does go wrong in the first year, there is often a new home warranty that guarantees repair or replacement.
   

Foreclosed homes also often haven’t been taken care of by former owners who knew they were going to lose the home. In some cases vandals, thieves or even the owners have damaged the home, removed appliances or torn apart walls to remove copper pipes that are valuable as scrap metal.

A foreclosed home could have been sitting vacant for months or years, and if it wasn’t properly secured, there could be significant damage from water, mold, weather or pest infestations. It could cost you thousands of dollars and a lot of time to bring a home that was allowed to deteriorate back to a livable condition.

You also don’t have to spend time or money changing someone else’s design preferences with a new home. No tearing down wood paneling, repainting walls, or replacing outdated flooring. Your preferences are included as the home is built, and they are there waiting for you the day you unpack your boxes.

Finally — and most importantly — don’t forget safety.

New homes have been constructed under a strict set of codes and standards, and have to be thoroughly inspected before the certificate of occupancy is issued and you are allowed to close the sale and move in.

With a foreclosure, you don’t know how many renovations or repairs have been made over the years, or who made them. There could be faulty wiring, weakened structures, or other conditions that could be dangerous and costly to bring up to safe and modern standards.

When you are looking for a place to keep your family safe and to build a lifetime of memories, it may be well worth paying a higher upfront cost to get convenience, modern features and peace of mind — and avoid the potential pitfalls of a foreclosure that could turn your dreams of homeownership into a nightmare.

To find new home builders in the Asheville area, contact ashevillehba.com.