Housing’s New Recovery, for Better or Worse

If this is recovery, then why does it have to feel so much like the other R word?

Forecasts, predictions, crystal ball prognostications notwithstanding, it’s hard to know what’s going to come following one financial quarter of positive GDP. It’s safe to say that for home building, comps in 2010 will come in favorable to those of 2009. Fact is, that level–say 700,000 housing starts as a run-rate some time in 2010–will be up just enough to wipe out more companies who’ve been treading the brink of the abyss for the past couple of years.

Maybe we should be grateful we’ve backed up a step or two from the abyss, but that’s not going to keep many good companies from being swept into the vortex of foreclosures, commercial real estate finance turmoil, and rising unemployment.

In looking ahead, the economic environment may be ripe to brighten grudgingly in the year ahead, but that’s relative to the type of gloom and vertigo that prevailed as the world came undone a year ago.

What we may begin to finally be grateful for is that the machinations of policy will have finally played out. We’ll stop needing to be amazed at the intellectual challenges of our elected government officials, and we’ll see, eventually, markets take shape around new sets of values.

We’ve learned this lesson well: public policy limbo is private sector hell. Even as the equity market has charged forward based on cost-cut based earnings and future expectations, the rest of the normal economy has been left an eerie freeze-frame of mandates cancelled by conflicting mandates.

Too-big-to-fail made a mess of knowing anything’s intrinsic value.

So now, for those who’ll survive the storm the question could well be does the biggest challenge continue to be economic/environmental? Or is it structural?

In other words, for home builders, is our fate in our hands or not? If the answer is not “no,” then there remain operational improvements and daring innovations to achieve.

This is precisely the predicament of Big Builder 2009 Virtual’s Atlanta-based Dream Team, which is laboring to strike lightning in a bottle for a big remaining chunk of Vickery–a showcase New Urban community that opened to universal kudos in 2003 and stalled in 2006, went radio silent in 2007, and went back to the banks in 2008. It’s now a showcase of the popping of the housing bubble.

But no one questions that this community–which is architecturally refined and streetscaped for the ages–has intrinsic value.

The question is how to put that bar of intrinsic value back where it should be, given that the housing correction everywhere has overshot normalcy.

The Atlanta Dream Team–Ryland division president Chuck Fuhr, Reynolds Signature Communities’ Michael Langella, Newland Communities’ Jennifer Landers, John Thomas Homes’ Bill Evans Jr., and architect  Michael Medick–are putting the final touches on their vision to reenvalue Vickery.

Clearly, they know that they’re going to need to achieve two essential goals for building and marketing the remaining 22 acres: 1) is to retain architectural consistency with an established design ethic of sustainability and style, and 2) build homes that will sell.

They’re probably going to have to cost a good 20% less to build than they did in 2007, according to strategic estimates of Fuhr and his Dream Teammates.

Here’s a list of “assumptions” the team is making so that they can design and proffer a business plan that addresses the Fall 2009 current opportunity at Vickery.

The assumptions here are that in order to drive value back into Vickery, numerous parties with varying interests are going to have to make concessions and share risks for a project to pencil.

Partnership–not just lip service–will be the work-out solution of the next several years. It will be characterized by creativity, patience, and adaptability. Partnership–it will be hard and complicated and require trustworthiness, but it will also be more dependable than say credit backed derivatives and structured investment vehicles.

October 29, 2009 | Filed Under Financial Crisis, Home Builders | Leave a Comment 

Home Buyer Tax Credit Extension Gets Tweaks; NOL Lives

Our near-flung correspondent in Washington, with an ear to the ground on Capitol Hill, provides this bulletin, updating the shifting details and language of an extension of a stimulus credit for home buyers:

That’s the latest–although subject to change–detail on the tax credit measure in the Senate. As indicated earlier, the House has indicated a willingness to adopt the Senate bill and hand it over for President Obama’s signature.

NOL is still alive. I expect it to be part of the final bill. It’ll be a 5 yr carry back for only one tax year. (Either tax year beginning or ending in 2008 or 2009 (not both)). The 5th carry back year will be reduced by 50%. There will be no restriction on the amount of losses you can carry back, however the taxes paid and available for refund in the 5th year are reduced by 50%.

A deal has been worked out on the substance but not the procedural issues. I expect that to occur today. Depending upon the level of cooperation from Republicans it appears it’ll either pass the Senate today or they’ll have to do another cloture vote and pass it Saturday or Monday. The House will then accept the Senate language and it’ll go straight to the President.

Naturally, opponents still abound. One of the more articulate of these is the National Multi Housing Council, which makes the case that a home buyer tax credit reflects a misguided overemphasis on homeownership to the detriment of the one-third of Americans who choose to or have to rent.

NMHC president Doug Bibby’s latest email blast to his membership hurls a few slings at Congressional supporters of the home buyer tax credit, and paints the shifting compromise details in its near-final language as wins for multifamily players.

As NMHC Update went to press, lawmakers were working on a compromise measure that would likely extend the first-time homebuyer credit through April 30, 2010 and possibly allow some step-up buyers who have been in their primary residence for at least five years to take the credit.  There was also discussion of reducing the maximum credit to $7,290.  Final details are still being negotiated by key Senators.

The momentum to expand the credit was slowed by increasing media and Congressional scrutiny of the credit as an ineffective and costly stimulus that is also marred by fraud.  A Washington Post article on Tuesday called a credit extension “throwing good money after bad.”  (Additional articles critical of the credit are posted at www.nmhc.org/goto/HB-Tax-Credit.)

The credit, and analysis of the effectiveness–or lack thereof–is not solely a housing inventory issue, although stanching the deflation in residential real estate prices that fuels foreclosures is a big part of the economic tide reversal being sought. Too, it needs to be looked at as a jobs measure; for sales of homes, new and used, bring with them consumer economic activity, which helps earnings, and creates demand for people to do more work to meet the need for more goods and services.

October 29, 2009 | Filed Under Financial Crisis, Legislation | 4 Comments 

Home Buyer Tax Credit Update

Here’s word from an insider on what’s gaining traction for amendment to a bill the Senate will vote on at 6 pm today to extend unemployment benefits.

The actual amount of the tax credit gets tightened up, but the intent of the new rules is to include first move up home buyers in the mix of beneficiaries.

First time homebuyers, the income level to qualify: $75,000/150,000

For step up buyers the income level to qualify: $125,000/250,000

For step up buyers, they must have been residing in their primary residence for 5 years

The credit is 10% of the sales price, with a maximum of $7290.

The credit runs from Dec. 1, 2009 to April 30, 2010.

For legitimate sales contracts as of April 30, 2010 you have 60 days to close

There is a waiver for military.

Our man on the Hill tells us that the Senate will vote this evening, and that the House will likely vote on Friday, concurring with the Senate and avoiding a conference committee. “After that it goes right to the President for his signature.”

October 27, 2009 | Filed Under Financial Crisis, Home Builders | 7 Comments 

Notes from the Trenches: If I knew then What I know Now

Here’s a first person account from St. Lawrence Homes’ Rich Ohmann, brother of the company’s founder Bob, and a part of the management team that has weathered a year-plus trying to emerge from Chapter 11 bankruptcy protection.

I can’t even begin to count how many times I’ve heard those words in the last year. It seems as if everyone believes that we are all smarter for the experience of surviving an economic tsunami, a tidal wave of fiscal destruction. I’ve got news for the collective all, bankers, contractors, builders, suppliers, magazine publishers, cable TV outlets, jet sellers and yacht brokers….the list is endless:   We aren’t any smarter now and we weren’t idiots way back when.  

The key difference between the then and now is really only the fact that we are now forced and are therefore begrudgingly willing to deal with issues that were glaringly obvious. How do I know this?    I’ve lived in a pressure cooker for the past 12 months and have worked for a company that was forced to confront every single issue and problem head on in order to survive. Without fail at each meeting someone says the magic phrase, ‘If we only knew then what we know now.’ In retrospect I should have started an over and under pool on the length of time between the basic introduction and the uttering of the phrase.  

Here’s what we knew then:

  • Developers had no business dictating a ‘lot to package’ price for their lots. Market forces should have driven what we paid for lots. Gutting profits to pay egregious lot costs destroyed the long term financial strength of the developer’s clients and thus destroyed the developers themselves. If you extract the golden egg you will most certainly kill the goose.
  • Bankers can be your friends but the relationship with their institutions is only a money deal and friendship isn’t going to rule the day. The fact that you can (or could) borrow doesn’t have any relation to whether you SHOULD borrow. Thankfully building speculatively isn’t in the cards in the near future; it shouldn’t have been a big part of the past either. At the end of the day you can have more fun for less money betting black or red on a Vegas roulette wheel.
  • If you’re a builder, build. If you’re a developer develop. If you are banker loan money, collect payments. Do what you do best and nothing else. It’s simplistic but true. Never do anything that someone else is better at just to try and gain competitive position or make more money. Greed is good……for nothing.
  • You can’t eat wood unless you’re a termite. Holding on to real estate in a slumping market is a bad plan. It was bad in the 1920’s, the 1970’s, and the ‘90’s and certainly in 2007/2008. You can’t get away from taking your lumps. If you have children I have an example for you. I have a six year old. Getting him to take medicine is tough. I always make him do it though since it will make him better. It’s true in real estate too. The market sets pricing. Pay attention to the market. 
  • There’s only 52 weeks in the year. Make every one of them count. I’m not just talking about the obvious like selling houses and closing quickly. Manage better and constantly. Innovate, create, motivate…..anything except stagnate. 
  • It’s not what you make it’s what you keep. Profit is a worthy prize. Unit volume, dollar volume and other bragging rights measurements are just worthless if gained at the expense of fiscal performance.

There’s no substitute for the absolute unfiltered truth. Don’t take this to mean that any of us aren’t truthful. We’re just really good at dressing up the truth in fancy presentation, award winning brochures and other really wonderful disguises. Subtlety isn’t really necessary with your tradesman, your bankers, your lawyers, or your employee’s and even more so when a crisis is looming. 

When it was finally clear that we had no choice but to find a way to reorganize we approached the situation with open doors and full candor. We armed everyone who would be affected by our filing with facts and clearly stated our intentions to stay open and find a way to continue the company.   In the end it was astonishing that we rallied almost everyone who had a stake in the survival of the company around the single focused goal of survival for the future.  

We moved through our case and encountered only a few challenges, all without success against the company. We found subcontractors willing to speak on our behalf.  We had customers who took the stand to tell how they only wanted their homes finished. In the end our survival has cost everyone involved dearly. 

We are forever changed by the experience.  We certainly aren’t smarter but we’re certainly more in touch with acting quickly on the things that we know to be true.

I would encourage everyone to make a list of the things that you should change. Tick them off one at a time quickly.  You don’t need a market study, a consultant, or anyone else. You’ve gotten where you are with your street smarts, prove your worth. There’s no time for delay.

Find something that you’ll never, ever do again.  There’s an old real estate joke about the real estate prayer: ”Give me one more great market and I promise that I won’t buy a boat and a plane.”  My brother Bob, the owner of St. Lawrence Homes, has his one thing to never do again.  He told me that if he ever bought another piece of raw ground to hit him over the head.   Under my desk right now is a Louisville Slugger.Maybe we are smarter now than we were.

October 24, 2009 | Filed Under Finance, Home Builders | 2 Comments 

Hurry Up and Don’t Wait

It’s odd that it works this way, but during these slowest of times in production home building, it’s not patience nor deliberate thinking that emerges as strategic necessity. It’s speed.

Cost and time go together, so if you can eliminate one, you can get at the other. When it comes to the three imperatives that drive us-more, faster, better-a colleague of mine used to say, “pick two of them and be happy with that–you can’t get all three at one time.” For home builders, large and less large, faster and better will have to do for now. More may come much later. Do it fast and right the first time.

We’re living now with this realization. That feeling we got in 2003, 2004, and 2005, when we thought we were so good at building, and satisfying home buyers, and managing companies, and buying materials and services? That was euphoria. That was fantasy.

And the price of all that-as painfully we learn each time a batch of bills and payments come due-is that many of us cannibalized our future prospects to get to the heights of euphoria we felt in the middle of the decade.

Many of us over-capacitized at great cost in dollars and disregarded discipline. One of the only ways back from the brink has to be scary. But if we were willing to cannibalize our future before, now we’ll have to be more than willing to cannibalize past and present structures block our way to our future.

To get better, and do it fast, we’ll need to disencumber our businesses of deficiency and inefficiency we ourselves designed into them. We grow attached to our designs, and they feel as if they’re the bedrock of what we do. Still, we have to let them go.

As we speak, folks at Pulte–which as of August 18, 2009 became the combination of Pulte and Centex–are going through each and every land parcel they own and giving it a litmus test. If the test shows the land is best for an entry-level community, that piece will get the Centex brand. If it is first- or second move-up, it will become a Pulte community. If the tract lends itself to active adult lifestyle community development, it will get the Del Webb name.

This means that many communities currently called Centex will become Pulte, and–vice versa. This means that the parts of the combined Pulte and Centex organizations will submerge into the whole.

Few national home builders have succeeded in organizing their multi-regional, multi-divisional businesses around an operating company model. The rest are holding companies with limited ability to manage knowledge, processes, and outcomes across their roll-up of semi-autonomous regional or divisional units.

In the Pulte-Centex “combination,” as CEO Richard Dugas likes to call it, we see a story for the moment. It’s about being courageous enough to acknowledge that separately, companies can’t get the job done as well as they intend to. They need to partner. They need to disrupt the way things were, even at the risk of cannibalizing some of the pet initiatives that worked well in the bygone economic era.

Here’s what Bill Pulte says of Dugas, the man who would be king of high volume home building:

“When I first met Richard, I saw someone with high integrity, high intelligence, and someone worth keeping an eye on. Richard moved quickly through the ranks because he would win discussions by using facts, not just words, to back up his points of view. When Richard was named COO, he took that opportunity to travel the country and meet every division president in the company and build a rapport with them. After seeing his relationship-building ability and leadership skills, along with what I knew of his integrity and intelligence, I made him CEO. The fact that he was only 38 didn’t bother me at all.”

October 22, 2009 | Filed Under Home Builders | Leave a Comment 

Big Builder Model Behavior

Flash. The new home business sits squarely in the consumer credit business, so should it be any surprise that those who build homes for a living are more dour in their outlook now than they were during the summer?

Until jobs and income turn tide, we’re reminded of this stunning statistic noted in this month’s Harvard Business Review:

While a little off its high point, the [consumer debt to disposable income ratio] number now stands at around 130%. In other words, it will take American consumers nearly 16 months ( 1.3 years), on average, to pay off their debt, assuming that they spend absolutely nothing on housing, clothes, or food.

The HBR provides a calculator for businesses to map their “consumer leverage exposure” ratios.

Still, home builders must use another calculator as they put together budgets for 2010 and beyond, because it’s probable that their CLEs would all be off the charts. One of the lessons learned this year–the third consecutive year of hard times for home builders–is that “waiting out the downturn” is not an option. For private builders, it’s either find cash within one’s own universe of resources to go vertical and get orders in hand to keep the trains running, or it’s give back one’s rights to the rest of the lots.

For publics, you’ll recall their CEOs making this clarification: “We didn’t say the industry was no longer cyclical, we said we were better prepared to endure and secure opportunity through the cycles.”

For them, waiting out the pain has also been a non-starter as an option. Public home builders have had a critical business model change to make as they cut costs and eliminated as many as six of every 10 employees.

They’re making this change, which some will say is a sacrifice of that “entrepreneurial spirit” and “local autonomy” that their divisions enjoyed during the halcyon days of yore, when headquarters could make money hand over fist running a holding company model.

Clearly, now, home builders public and private need to be operating companies. They need a business system that applies across regions, divisions, and communities, so that variability is taken out of the equation, so that they’re products can do battle with foreclosures. Foreclosures will likely come in measured waves, on and on, for the next few years, and increasingly, they’ll show up at every price point imaginable.

So home builders must have operational systems and product positions to battle foreclosures at every price point. Public home builders like KB Home, D.R. Horton, Meritage, MDC, and MI Homes responded strategically to the need to have foreclosure-fighters at the entry-level where monthly payments have been the story for home buyers.

Key to CEO Richard Dugas’ strategy at the newly merged Pulte-Centex is to heavy up headquarters systems and controls so that every community in its portfolio–Centex, Pulte, Del Webb, and a to-be-named luxury brand–operates according to accountability to consistency standards.

We’re telling our local operations, ‘focus where you can add the most value,’ which is in two areas: ‘You pick the right consumer group to focus in on in your market based on the supply demand imbalance. That is not a Detroit decision. So, if you, Mr. Dallas president, want to focus exclusively on Centex and on Del Webb because you think that we’re overbuilt for the Pulte brand, fine with us. No problem. That’s one area you can add the most value.’

Number 2… how to literally put that land strategy together, because land is very local and unique to each market. So whether you’re buying developed lots or whether you’re auctioning property from the government, or buying big raw tracts and developing it yourself… all of that is the local decision.

So, consciously, instead of it being unspoken in the past, we’re going to consciously say ‘we’re focusing you, specifically at the local level, on which consumer groups to go after and the land strategy.’ And the rest of it, we’re saying, ‘leave up to experts who are really good at understanding what drives each of these local brands.’

I envision taking it down to specifying what’s inside the home, what mortgage programs we use… everything about how to operationalize that.

So, one of the bigger changes we’re likely to see coming out of the housing recession is an end to the roll-up mentality in new home building corporations, and the beginning of nationals needing to become real operating companies with success at their core, rather than as a loose confederation of independent-minded builders working under one stock symbol.

We’re seeing evidence of this in our work on the Big Builder ‘09 Virtual event, where we’ve created mash-ups of big time talent working to solve a present or future land position challenge in five different markets.

In Phoenix, the team consists of:

They’re working on cracking the code for Mt. Pleasant Heights, a 1,100-acre parcel, currently being marketed to potential builder/developer buyers by AmTrust Bank, in Phoenix’s Northwest Valley, in the town of Peoria, just east of the Vistancia master planned community.

The big challenge of the project is to deal with a currently overserved competitive market for new homes, not to mention some difficult topography and access issues. The flip side is that the completion of the Rte. 303 loop in the near future, as well as access routes into the Mt. Pleasant Heights community, will bring good traffic from downtown Phoenix to within a stone’s throw of the community, and that the topographical challenge translates into remarkable views of rough terrain rips and rills–a rare natural amenity.

The Big Builder Dream Team needs to strike a harmonious balance among the needs of the land, the competitive offerings of neighboring master plans, and the new economics of demand in that region, i.e. “The Who” that lies at the base of a community’s value proposition.

Going back to what Pulte CEO Dugas was saying, a Dream Team might crystallize the consumer buyer need, and bring strong local land knowledge to the party, two critical aspects of the operating company equation. After that, a big builder needs to have a system in place–construction operations, merchandising management, and selling optimization–to make a plan such as the one the Big Builder Dream Team will conceptualize work profitably in the marketplace.

Where’s evidence of that fire-in-the-belly cultural entrepreneurialism that private home building companies say is their secret sauce in finding and satisfying home buying customers?

Dugas’s answer:

If, as I predict, we’re going to be more financially successful this way, everybody wants to work for a financially successful firm. That’s the way you transition that. I’m not too worried.

Look for more forceful corporate headquarters control, and less on-site variability in the public home building model in 2010 and beyond.

October 19, 2009 | Filed Under Financial Crisis, Home Builders | Leave a Comment 

The 1 Percent Rule of Housing

Just one of every one hundred households lives in new construction. The other 99 out of a hundred of us lives in used homes. So what’s all the fuss about?

Dowell Myers, USC professor

Dowell Myers, USC professor

Dowell Myers, a professor at the University of Southern California school of Policy, Planning, and Development calls this 1%–which holds generally true in good years as well as bad years–the “Minority Dictatorship of New Construction.”

His assertion is that the growth or decline, the recovery or the downturn, the V or the L or the W of the broader economy, all spring essentially from what happens to this 1%.

When the 1% of those of us who are in new construction have a lot of people who are there by virtue of the combination of “ease of financing, production constraint, and a proliferation of buyers,” that destabilizes the world for the 99 out of 100 households living in the nation’s existing home stock.

Pretty simply, it’s where the thought and theory that “housing is the engine” that drives the economy springs from.

The issue with that 1% of households is that some of them have lost a job, some of them are having trouble getting one (at the younger end of the spectrum), some of them are afraid they might lose their job, and some of them need to save money either because they spent too much or they just haven’t earned enough.

After spending a couple of days with folks who make their living in the for-rent and the land development worlds, we’re getting a sense of deja vu from that community. There’s a lot of talk about distressed sale opportunity, a lot of talk about vulture fund cash waiting on the sidelines to pounce, a lot of talk about solid fundamentals, a lot of talk about balance sheet management and patience to see assets through to their eventual value.

In multifamily there’s resolve, there’s flashes of realism, and there’s a fair amount of hope at work. Just like their was among single family for-sale builders in late 2007, who said that that year would “suck,” fully believing that 2008 would be a happy recovery story.

We keep hearing of frenzied demand for homes at the margin. We keep hearing of multiple, motivated bidders and hesitant, reluctant sellers who feel that selling into the teeth of the down market is not the time. We keep hearing that deal structures, return multiples, risk appetites are all seeming to show flickers of sanity.

But clearly, just as events plunged many of us into a “where’s my bailout?” funk last October and November, the new “where’s my bailout?” is “where’s my recovery?”

News articles keep cropping up that talk of a recovery among “the builders,” noting that they’re generating some orders, and they’re in the market for lots in submarkets that have some volume.

At the same time, we’re talking every day with “the builders” and here’s a news flash for you, “the builders” aren’t in recovery. A few of them–i.e. well-managed publicly traded home building enterprises are managing the siege game well, and are flexing their muscles to drive volume, capture market share, and position for higher margins when they own more of the market.

Others–namely privates–are playing out brilliant counter programming strategies, based on pre-selling, differentiation, staffing levels that border on burn-out productivity, and hope.

To a person, nobody we’re talking to has certainty around two essential parts of the real estate equation–value and demand.

Value is still an unknown because demand is an unknown. Even the “buyer frenzy” of today doesn’t add information to real demand. The “what” and the “how many” of real demand can be discussed, USC’s Professor Myers probably has a better grip on that than many we’ve listened to.

It’s the other, extremely important part of demand–i.e. timing–that is completely clouded out for the time being. Myers attributes part of that to the fact that people don’t like to buy houses when prices are going down.

Why? Because we’ve begun to think of houses like an investment, vs. just our homes.

That’s why there’s such a fuss about the 1% of U.S. homes that lives in new construction. It’s where the money is.

October 15, 2009 | Filed Under Consumer Spending, Financial Crisis | 1 Comment 

Big Builder’s Atlanta Dream Team Seeks Victory at Vickery

Amid the ongoing economic and real estate storms, many new-home communities have a big question to answer.

Will new economic realities take away from the special character designed into a community that came online during real estate’s mad run to its 2006 peak? In other words, can the second half of a place be as special as the first half when the first half took off during the “funny money” days, and the second half needs to scrap it out when greenback dollars and the ways to earn them are scarce?

That’s exactly what the Big Builder ‘09 Virtual event Atlanta Dream Team faces as it takes on its land parcel challenge–the “future Phase 8″–of the lauded Vickery community, which hit a wall in late 2007, and which has seen its assets go back to Wachovia by late last year.

The team–a hand-picked Dream Team of planning, design, business, and marketing executives from different organizations competing Atlanta’s market–will focus on what to do with 22 acres of undeveloped land at the Southwest end of Vickery’s 214-acre traditional neighborhood expanse. Their goal as they brainstorm ideas about how to bring value to the land and offer a viable big builder business vision for a distressed parcel?

Here’s the current land plan:

Click image for access to Vickery home page.

Click image for access to Vickery home page.

Do it so that it keeps the sense of place Pam Sessions and the original design teams infused in Vickery, but also build an affordable product in the “new normal” definition of the word affordable.

The Atlanta team:

Among the challenges, Vickery is a total EarthCraft certified community, so the team will have to figure compliance with this certification in its cost planning for the project.

Here’s a brief video in which Big Builder editorial director John McManus discusses the project and the talented team who’re working on generating a Big Builder ‘09 Virtual plan to present the week of Nov. 16-20.

October 11, 2009 | Filed Under Financial Crisis, Green Home Building, Home Builders | Leave a Comment 

Builder Hearthstone Winner Tom Gipson Shines on ABC’s “The View”

Amid all the tribulations in America’s home building landscape, here’s the opposite.

ABC’s “The View” is running The Ultimate Volunteer contest. From more than 1,000 applicants, Raleigh, N.C.-based custom home builder Tom Gipson — a 2008 Builder Hearthstone Award winner — was one of 10 on ABC’s short list. Here’s why:

Tom Gipson, 2008 Builder Hearthstone award winner

Tom Gipson, 2008 Builder Hearthstone award winner

Early in 2002, homebuilder Tom Gipson had an idea. He wanted to give something back to the community for his success, so he recruited 11 other builders in Raleigh, North Carolina, to join him in a philanthropic undertaking: each would build a Habitat for Humanity house for free, engaging their subcontractors and suppliers to participate in the venture. Over the next eight months, the group met monthly to develop this Habitat Homebuilder Blitz program, and in one week in November they built a dozen homes, 100 percent complete, carpeted, landscaped, and move-in ready. The endeavor was so successful that the effort was doubled the following year, and 24 homes were built. Buoyed by the success of the program, Tom approached Habitat International to make this a national effort. Over the next two years, Tom traveled to more than 60 cities at his own expense recruiting homebuilders to participate. In June 2006, more than 1,000 homebuilders joined Tom and in a single week constructed 459 Habitat homes in their communities. Considering that approximately 50 subcontractors and suppliers worked on each house, the magnitude of the involvement of building industry professionals in this project can be appreciated. In 2008, despite the greatest crisis the building industry ever has faced, another 269 homes were built. The total value of the approximately 1,000 homes built so far as gifts from the homebuilders to their communities exceeds $50 million. Tom is now traveling the country for the 2011 Build.

Here’s how a peer-competitor brought our attention to the contest:

Have you seen the story that a local Raleigh builder is one of the finalists for the Ultimate Volunteer Contest on The View?   I received a message urging me to vote and thought I’d pass it on to you.   Incredibly homebuilders still built and donated $50,000,000 worth of Habitat homes in the midst of the worst time we’ve ever seen!

Here’s the link to vote for Gipson, (one vote per email address each day through Oct. 11).

The economy and individual fortunes may have upturns and downturns. What is extraordinary is that generosity and resilience seem to defy cyclical swings.

October 9, 2009 | Filed Under Financial Crisis, Home Builders | 1 Comment 

Late Update on Home Buyer Tax Credit Status

Here’s the latest update we can get on possible extension or expansion of a tax credit for buyers of primary residences.

From the time the abysmal August employment numbers came out last Friday, talk of more stimulus intensified on Capitol Hill. Of course, the cost-benefit analysis becomes a classic exercise in political economics, or economic politics.

Still, when the raw unemployment numbers came in and even the second-derivative remained at a worrisome rate of deterioration, it seemed that more elected officials would be willing to look anew at home buyer tax credits and their effect.

Given the ferocity of the foreclosure rate and the Sherman March-like effect foreclosures have on home prices and peoples’ ability and willingness to pay their mortgages, it’s no surprise that even the densest of our Congresspeople might begin to link demand for housing with stabilization of prices.

If one plays out the negative feedback loop of destabilized home prices through its endgame, the toll on earnings, jobs, consumer spending, and recovery is sickening. It took us a while to understand that these forces aren’t each a discrete, decoupled phenomenon, but rather a strand of triple, quadruple, and quintuple helices that relate to and effect the others at every instant.

So, as talk of new Stimulus, job formation credits, small business tax credits, etc. gathers steam in the corridors of the House and Senate office buildings, we hear that Speaker of the House Nancy Pelosi (D-Calif.) has been quoted in Roll Call about the presense of a home buyer tax credit making its way forward in the House.  

Too, we hear that Senator Christopher Dodd (D-Conn.) may “attach” an expanded, more inclusive, and increased (to $15,000) tax credit for primary home buyers to an emergency unemployment insurance extension measure that could magic carpet its way through both Houses and Presidential approval.

American tax payers have already taken on a huge price tag with the funding of public sector jobs that are just barely keeping the economy’s head above water. Investment in sustainable private sector activity, to keep and grow the ranks of workers employed by small, medium, and large companies would also seem to make sense.

The connection between housing, particularly new housing, and the health of the economy sometimes gets forgotten. Now, it’s getting remembered.

So, when sunset of the current tax credit for home buyers occurs, it’ll be more than just another new day on Dec. 1. 

However, it’d be a mistake to take a favorable outcome for granted.

October 8, 2009 | Filed Under Financial Crisis, Legislation | Leave a Comment 

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