Home Builders Mount New Call for Unity Versus Lenders
The thing we’re all left to worry about and somehow solve: The main economy has not started working yet. It’s still stuck. The central banks’ monetary strategies may have been brilliant in reining national economies back from a too-well-imagined abyss. But, the continued erosion of the jobs universe directly correlated to the continued erosion of home values and residential real estate assets tell us the real [non-stimulus] economy is clogged up, still broken.
We understand TARP was a double-edged sword; it cushioned world finance from systemic failure, but it also blocked up the business of people working out new deals to set new values to what was there. Banks haven’t re-priced what they hold because they haven’t had to. They explain their paralysis on the lending and credit side of their business for the past 18 months by saying they’re caught in a regulatory Catch-22.
If they re-price based on what many a thing’s worth today, then many of the regionals can’t stay in business, let alone do new business. To date, inertia paid for the lenders because the hand of Too-Big-To-Fail stalled the system, and it kept bankers from working on least-worst alternatives to keeping the main economy operating.
So TARP has worked as an inferred if not specified umbrella for many lenders. Beneath it, they’ve opted to work out terms neither with struggling homeowners nor with home builders on acquisition, development, and construction loans.
The lenders are hearing it today and will continue to get heat from their patron saint, the U.S. Treasury, about their not putting TARP money to use to stanch the deterioration of property values thanks to the flood of home foreclosures glutting the system.
Here’s the Wall Street Journal’s diplomatic description of the kick-in-the-ass the government wants to give lenders hiding behind a shield of regulatory rules:
The Treasury Department on Monday will announce plans to appoint officials to monitor the actions of the largest mortgage servicing companies on a daily basis. It also will announce it is requiring mortgage companies to develop and report to the administration their plans to increase the number of completed modifications, a Treasury spokeswoman said.
But that’s only half the story when it comes to lenders having no incentive to work with commercial customers, i.e. home builders, to settle on new go-forward terms that re-price assets and sustain viable operations. Instead, many banks have taken what suffering home builders regard as a damaging and wrongful approach to navigating through the housing market recession. Forcing home builders and developers into foreclosure, gulping away hard-earned equity, and going after their personal wealth are the kinds of things lenders are more apt to do if they’re not bound to share consequence for their part in the calamity.
So builders are angry. They’ve been that way now for 18 months, early Spring 2008, when banks started playing hardball with acquisitions, construction, and development loans, and the market was collapsing, and builders started falling out of compliance with the letter of their loans.
“We started our group–the Building Industry Coalition for Economic Recovery–in June 2008,” says Michael (Mick) Pattinson, CEO of Barrett American, a home builder whose land and project assets have been stuck in foreclosure for the better part of a year and a half. “Sadly, after all the work we’ve done with the trade associations to make our cause theirs, we’re still here.”
Pattinson happens to think we’re onto something in our earlier post about “The Fix Housing First Job Not Done.”
Bob Cummings, president of the Barratt Group, and co-founder with Pattinson of the BICER group last year have been clamoring for a national lobbying platform. Now that Congress seems to have opened its eyes to how new home building could generate jobs, Cummings and Pattinson have been raising the volume again in hopes of getting the NAHB and the public home builders to take a united, aggressive stand against bankers who refuse to work with builders in good faith.
Here’s the manuscript of a letter they sent me just before the Thanksgiving holiday.
Back in June, 2007, Mick Pattinson and I founded a group (now called the Building Industry Coalition for Economic Recovery – BICER) to help builders through their contrived default situations with their lenders. Now, with about 230 builder members nationwide, we represent a group that wants nothing more than to revive our industry, create jobs, and breathe life back into our Nation’s economy.
Over a year ago, we made the NOL issue a top priority and tried to piggyback the Fix Housing First agenda. It was a long road to get NAHB on board, and heading into January of this year, the public builders (with Ken Gear leading that group charge) didn’t want to make NOL a primary issue. The irony of it all was that our own industry organization was responsible for establishing the $15 million cap, rendering it nearly useless to the majority of our brother builders. Anyway, long story short, our group teamed up with Ken’s group to help give them a face to their new charge. Our lobby efforts were well coordinated and an obvious success.
On a go-forward, BICER is committed to continuing to make change that will have a long term positive effect on our industry. I invite you to check out our web site at www.pathtodefault.com . We see the horrible housing numbers from last week as a direct result of builders being unable to get finance and banks not releasing foreclosed assets. We see big problems still unresolved for private homebuilders. We are up for the challenge.
Mick Pattinson, a former California BIA president who also was the leading individual force behind California’s SB 800 legislation, has been at the heels of NAHB to pursue the correct battles. He sent the following message to Jerry Howard a couple weeks ago and has yet to receive a response.
Dear Jerry,
Our industry will be greatly helped by legislation enacted last week that will extend the down payment tax credit through next March and remove the $15 million cap on the NOL 5 year carry back.The NOL in particular will be a lifeline for thousands of distressed home builders and sub contractors across America who are either trying to stay in business or get back into business.
I hope that the coalition of groups that finally came together to achieve this legislative success including NAHB, The Major Home builders and our own group BICER can continue to work together and tackle the biggest issue that has faced our industry in our lifetime which is the banking crisis. This country is still losing home builders and the vendors who serve them daily. There has been no turn around in the attitude of lenders despite the massive bailout they have received. TARP funds remain in the bank vault to shore up bank balance sheets rather than re-stimulate the economy. Your member companies are still under attack from banks under the terms of personal guarantee’s and I worry that many banks will try to re-coup the NOL tax benefits from builders to settle those guarantee’s. Several banks have indicated that they will.
The use of “contrived defaults” often using “made to order appraisals” continues as banks scour the small print in lending agreements as a means to remove themselves from their lending obligations. Nothing has changed except that we are now seeing banks finally bringing distressed land assets that they have foreclosed back to market. The equity and credit needed to buy these assets and kick start housing are the missing ingredients. The loss of equity has been massive and has to be replaced if America is going to re-create a home building industry. Where will it come from and on what terms? The same question applies to credit.
I believe there are three major issues before us
How do we replace the equity and credit?
How do we deal with businesses that were destroyed through no fault of their own. They were butchered by self serving lenders. Lenders who over leveraged themselves and were then bailed out by the government.
How do we learn from the treatment we have received and make sure this does not happen again.
These are three very important questions. On the last point I believe it would be a tragedy if our industry did not confront critical issues such as personal guarantee’s, participating lenders, the use of appraisals to create defaults, mark to market and the term of loans to ensure project completions.
America’s financial services industry and their Wall Street accomplices were clearly at fault for the housing bubble and it’s bursting and yet in it’s aftermath they took no responsibility for their actions. They reverted to business as normal meaning NOD’s, foreclosure and the legal hounding of their customers until those customers were broke. This course of action is now widely recognized and understood and America is rightly disgusted with it’s banking industry. Watching C-Span recently I could see Committee Chairman Barney Frank was ready to bring down the hammer on these people. I and I believe many builders all over this country feel we need to be part (a big part) of the effort to bring regulatory reform upon banks for our good and the good of the country. We can not put ourselves and tomorrows home builders in a position whereby our industry would ever face this again. Relying solely upon regulatory agencies for protection would also be a mistake.
The Building Industry Coalition For Economic Reform (BICER) was created in June 2008 to fill a vacuum that existed within our industry representation. It was created by home builders who were under attack from banks (there is no other way to put it) and who had no one to turn to because our local and state associations refused to take up the banking issue. Today BICER has over 220 members with half in California and the remainder spread throughout the country. Sadly we have not been able to change the behavior of banks but we have helped members find assistance in defending themselves and we have drawn attention to the terrible circumstances builders face.
Many of our members feel betrayed by local BIA leadership because of it’s failure to step up and tackle the biggest issue we have ever encountered. They know that while they were being put out of business and financially ruined BIA was holding a seminar on green building or fire sprinklers. BIA leaders have failed to confront this issue and claim that if we keep our mouths shut and behave nicely the banks will come to our rescue.
We know this is utter nonsense. We tried being nice to the Trial Lawyers (construction defects) and the environmentalists and NIMBY’s and it never worked. It hasn’t worked with the banks either. They are not coming back unless forced too. Talk to any local banker and he will tell you that housing is finished and he has seen too many banks get in trouble through real estate lending that he isn’t going to do it.
I believe we have a last opportunity to build on the legislative success of last week and take advantage of the mood of Congress. By tackling this critical issue we can redeem ourselves in the eyes of distressed home builders of whom there are many. Too many. We can also help put back to work some of the millions of home building workers currently unemployed. Within the California home building industry unemployment is 80%.
Through you I urge the leadership of NAHB to set it’s staff free to tackle this issue. I have called The Major Builders about this and I will try to stir things up in California as well. I believe their is an opportunity to create a climate for recovery but it will depend on us telling the truth and confronting our opponents. No more Mr Nice Guy.
I know that there were congressional hearings in Georgia last week into the lack of funding for housing and the treatment of builders by banks. One of our BICER members was invited to speak. Hearings like this should be held all over the country and in Washington DC. There are some terrible stories to tell including builders being pushed to the point of suicide by their lenders.
On that somber note I will leave this e-mail. I hope we can continue to move this issue forward. Let me know what I can do. Feel free to share this e-mail if you wish.
All the best. Mick
Like I said, no response yet. Mick and I would love to talk to you about our efforts in an effort to continue the momentum to create correct and needed change.
The efforts are to get the NAHB, the public home builders, and private builders aligned to fight for good faith treatment by lenders.
As we’ve written here, we think that Federal and state policy have done about all they’re going to be effective at doing. Recovery is really in the hands of those who survive and resurrect from the ashes. Unity will get home builders farther right now than competing head to head with each other for the few home buyers out there. Foreclosure sales are the No. 1 competition for new home builders, not other new home builders.
A semi-related thought occurs to us on the 174th anniversary of the birth of Samuel Clemens, and it is this. He lost his job as a steamship pilot, which he was very good at and paid good money to learn to do. If he didn’t lose that job–because of the onset of the Civil War–we would not know the work of Mark Twain.
It’s America. Thankfully, we can still hope that good can come of very troublesome times.
Twin Deadlines for Home Builders
As the ink dried on President Obama’s signature on November 6, formalizing passage of the Worker, Homeownership, and Business Act of 2009, the world that is the big business of home building shifted once again into deadline mode.
Now familiar to us all, the more inclusive terms of a home buyer tax credit have been extended through April 2010. As home builders learned from the prospective sunsetting of the current $8,000 first-time home buyer tax credit at mid-night Nov. 30, 2009, the new deadline means that effectively, they’ve virtually got to do all their business with home buyers by the end of February.
One can see from existing home sales’ breakout month of October that the threat of the end of the stimulus program, along with affordability such as it is, and interest rates continuing to benefit from the government’s mortgage backed securities purchase program, together fed the tide of demand for home purchases. One can also see that this demand didn’t help new home builders appreciably, since unless they had spec homes ready to deliver as the rush occurred, they were not going to be able to deliver in time to make the Nov. 30th deadline.
We’ll see more of the same when we look at March sales–except this time, more new home builders will be putting up more spec homes to have them ready by the time the next craze occurs, when people will feel compelled to act on a home purchase to avoid the risk of missing the last chance of a lifetime to to get the government, the banks, and the builders stars to align in such a supernova.
After that moment, who knows what all will occur as far as pressure on interest rates, especially if the Federal Reserve concludes is planned MBS purchase program?
So that accounts for the deadline mode of both public and private home builders, some of whom will be taking on a life or death risk to pour what remains of their private cash reserves into building homes speculatively to generate cash for another push through the lean months of 2010.
There’s another deadline that’s causing gyrations in home building these days since the passage of the bill to extend unemployment benefits, which included the home buyer tax credit expansion.
This deadline has public home builders’ regional and divisional presidents and their respective land pros on a mission to get rid of lots. Funny they should be clamoring to unload lots even as they clamor to secure other lots, but that’s exactly what’s happening.
To avail of the Net Operating Loss tax carry back extension that was also part of the unemployment benefits measure enacted Nov. 6, many home builders will be meeting fiscal year deadlines to transact — i.e. sell — lots essentially for what they can get for them, 10 cents, 20 cents, 30 cents on the dollar, because if they do, they’re eligible for Uncle Sam to refund them tax money they paid during previously profitable years, right back to 2004.
When a two-year clawback rule was in effect, a fair number of home builders took advantage of the government bounty on taxes paid during 2006 and 2005, but now they can put markers on a refund for payments made to the Internal Revenue Service for another record-profit year: 2004.
One division president I spent time with last week said he was under orders to sell lots “at any price,” just to get them off the books and eligible for the tax refund–which, in aggregate for this company, may total $100 million before the end of the year.
For buy-and-holders, this is a moment where people will pay for lots that were overpriced in the early part of the decade, but are probably underpriced now. At that same time, the push to unload, particularly among public home builders, will further clarify what is under the hood of their operations, and will allow them to focus on operational improvement, product design and development, and greater alignment of their enterprises.
By the time each company’s fiscal year deadline comes up for the 5-year tax look backs, public home builders will have tapped out every possible means of generating cash that is not from home building operations. They’ll have their cash troves maxxed out, and all that “path of growth” land that they overbid on during their reckless days, will be written down, written off, and in somebody else’s grateful hands.
The deal making has begun in a big way. Those who are buying are also selling. Those who are selling really need to sell. This is a moment that we can look back on as an opportunity for those who have two luxuries–cash and time–in hand.
The Fix Housing First Job is Not Done Yet
When Raleigh, N.C.-based St. Lawrence Homes executive Rich Ohmann speaks, we know we have to listen.
Yesterday, it was what Rich made of the media’s take on housing starts, which portrays home builders collectively as a villainous drag on a fragile economic recovery. Here’s Ohmann’s reaction:
I love this story. It blames housing for dragging down the ‘budding economic recovery’. I would submit that the prior turns of homebuilding were fueled by the creation of new homebuilding firms (we were one of them in the mid 1980’s). Today’s languishing condition is only partly due to the condition of the market (no disputing the fact that things are awful in our economy as a whole). I would place the blame for a majority of the lack of vibrancy in homebuilding on the fact that innovators and new business creators aren’t able to secure ANY funding for a venture large or small. (emphasis added by Housing Crisis) A young entrepreneur can’t start up without cash and there’s no credit. The old world entrepreneurs are still trying to figure out what to do with what they were left with when the world came to a screeching halt.
There’s no recovery without a credit source to fuel it. Am I the idiot here or am I just one of many?
You are not alone, Rich.
As you know we’ve been on the road this week. Everywhere everyone in residential real estate–single-family, multi-family, affordable, etc.–wonders to us aloud, “What’s happening out there? What are you hearing?”
What we’re hearing is that there’s no consensus on what’s going on, as much as we crave a pattern, and want to see a trend develop. Where there are bright spots, they’re bright for isolated reasons. The theme and broader backdrop is still hugely challenging, save in part for the public home builders, whose almighty balance sheets will see them through another treacherous stretch of 12 months or more.
- We’re hearing cheery one-offs from home builders such as Irvine, CA-based MBK Homes, that they’re not only sold out on their planned homes through their current fiscal yearend, ending April 1, 2010, they’re also 50% sold out for their coming new year.
- We’re hearing this phrase repeatedly, and in more and more places: “We’re buying finished lots. We have to.”
- We’re hearing that public companies that were doing 1% of their market’s homes on volume of 1,400 homes a year, now have 4% marketshare doing less than a run-rate of 200 units a year. The publics can build; many privates can not given the cost of money to go vertical today.
- We’re hearing that as long as a company has access to ”internal finance,” they can build. If they don’t, they’re SOL, and ergo a “drag on the economy,” as the Associated Press story referenced above would contend.
- We’re hearing that company after company that succumbed to the credit squeeze of 2008 and 2009 has a principal or three who’re locking and loading to reenter the fray as Messrs. NewCo in 2010.
- We’re hearing rumblings that the FDIC has begun operating in similar ways to the Resolution Trust Corporation in the 1990s. When a bank goes into zombie mode, and can’t move on its real estate holdings because doing so would throw its entire capital structure into turmoil, the FDIC now comes in and takes the bank, and begins deploying the commercial real estate for 10 or 20 or 30 cents on the dollar, just like the RTC back in the day. The noteworthy thing is that the FDIC is trying to keep from letting the land go to speculators–rather, it’s trying to place the residential land portfolios with companies who earnestly want to make a longer term go of building communities out.
- We’re hearing that job loss, job loss, job loss is the issue policy and policy-makers need to give their full attention for the next year, or many of them won’t be in office after next year’s mid-term elections.
In Phoenix alone, points out Marcus & Millichap VP for Investments Peter TeKampe, 300,000 people have lost their job since the economic heyday that ended in 2007. In Atlanta, the number is 60,000. Apartment vacancy rates are on the rise. Household formations are stagnating. The structural drivers of the residential investment component of the GDP are challenged.
So, we’ve been wondering for months now, when home builders say, “I’m buying lots,” what’s on the other side of that equation? Are they buying lots to replace lots they’ve sold at full value? Is the scarcity in good finished lots in Phoenix, parts of Southern California, and even in Florida, Atlanta, and the D.C. metro area a scarcity caused by home buyer demand? Think again.
How can it be now, when other than a few exception veins of economic fortitude, earnings and well-being are so uncertain?
Among the biggest questions we face in our time, and we appear to be out of time to evade them, are these:
- How will Americans pay for healthcare?
- How will Americans both a) transition from dependence on non-domestic energy sources, and b) reduce its negative impact on climate and the environment?
- How will Americans segue into a new economy that can create demand for its workers?
Home builders–it is clear from a growing number of economists’ diatribes and media muckraking–are being held up as chicanery-prone, money-hungry beneficiaries of both the up and the down side of the economic parabola.
So, we have a thought, and it springs from what we feel was a highly effective unified effort among home builders in support of the extension/expansion of the home buyer tax credit and the telescoping backward of the NOL tax carry back provisions for larger companies.
We feel that in light of how successful companies were in harmonizing their interests and telling their stories to elected officials, home builders should sustain their momentum, and keep their act together.
The Fix Housing First brand, in other words, could take on a new mission. It could build off its collaborative outreach among home building, real estate, the AARP, and other organizations, to go another step or two to move the economy where it needs to go.
Fresh from the victories achieved on Capitol Hill, we’d suggest the following for Ken Gear and the organization that lobbied so well to sustain the stimulus of housing demand.
- Keep the consortium of builders together to Fix Housing First;
- Focus the educational and policy influence program on housing’s direct impact on jobs
- Get public home builders actively involved with the FDIC’s bank take-over programs to identify workforce housing districts in metro areas nationally
- Bring public and private home building companies together–using some percentage of the public home builders’ accrued cash supply as a guaranty–to capitalize acquisition of land parcels from FDIC banks, set up fee-building opportunities, with municipal workforce needs as a primary driver.
This would be a story that elected officials could both understand and act on.
We’re beginning to come to grips with the fact that the arduous, unbearably flat and grudging recovery ahead of us will continue to take a toll on what we knew as the home building landscape circa 2006. That world is done.
Home building companies need to account for how good and how trustworthy they have been and continue to be. That need goes 24/7. The minute one of them stops that, trust goes by the wayside, and a company is no longer a business.
Right now, home builders have an opportunity to seize on what they gained recently with Congress and the President, and continue the crusade to Fix Housing First, bringing their story to the public. This means staying together as a group, and putting resources and focus toward new economy solutions for one of our nation’s chronic problems–workforce housing.
If the big builders can become part of that solution–and they have the means in both capital and skills to do it–then it will go far toward easing Rich Ohmann’s, and many many others’, anxieties about getting blamed for being both the cause of the catastrophe, the beneficiary of the rescue, and the dampener of sparks of economic momentum.
Housing Heads Up
As localized as residential real estate is, it should come as no surprise that there are as many views on the timing and shape of a housing recovery as there are people in the room.
We’re with those who feel that volatility and uncertainty will figure powerfully into the next 12 to 18 months as people’s resilience and resourcefulness counter the heavy weight of foreclosures, a commercial real estate meltdown, and a 21st century economy that to date is very unsure of its footing.
What is clear is housing is an economic issue, but one where politics and policy are involved at every turn.
Whoever didn’t see Gretchen Morgenson’s New York Times piece on home builders’ efforts to win an extension of the Net Operating Loss carry back period to five years ought to have a look. This analysis typifies the demonization of home builders. It is not reporting so much as it is advocacy journalism.
The Big Builder ‘09 Virtual Program Line Up
Click image for registration site.
Big Builder Week is set to kick off Monday, Nov. 16. All in the home building community are invited to participate in this five-day event, which offers a rich educational program that will help event participants from up and down the management ranks at home building organizations nationwide sharpen their skills. Through live seminar events, online collaboration, and on-demand learning, this multimedia program teaches participants how to detect opportunity in a market, better reach target home buyers, manage more meaningfully and measurably, and get on plan for the 2010 calendar year.
All you need to do to take advantage of some of the best industry-specific educational programming both on-demand and in real time during Big Builder Week is register at www.bigbuilderconference.com. It’s fast, easy, and best of all-it’s free.
Expand your view of the state of the industry while gaining a deeper understanding of some of home building’s most pressing issues with our National Interest section of the conference Web site. We’ve assembled a notable team of experts to provide perspective on what’s happening in the industry today as well as outlooks for tomorrow.
Looking to sharpen your skills in a specific discipline? It’s a one-stop shop in the Best Practices portion of our site. Choose from a 10-plus program menu, offering educational opportunity across disciplines as varied as design, finance, and sales and marketing.
But the main event during Big Builder Week is a series of live Webinars, which you can access through the Regions section of the Web site. We’ve assembled five cross-disciplinary teams in five markets and assigned each of them a tract of land in their respective markets. The challenge is for each team to craft the best business and development plan for their specific parcel. Every day this week, one team will present their final plan via Webinar, followed by a live Q&A session. Tune in to find out what some of the brightest minds in your favorite markets have come up with.
NATIONAL INTEREST
Belsky Unplugged
Harvard’s Joint Center for Housing Studies director Eric Belsky takes a fresh look at a post-meltdown housing economy and plots the trajectory and timing of regaining the “new normal.” His outlook will focus on national economic drivers, household and employment formation impacts, and local economics supply and demand influences for an exclusive story on what to look for in the year ahead.
Crystal Ball Economics: What’s the outlook for 2010?
Real estate consultant de rigueur John Burns serves up his latest take on what the market will do in the year ahead. From projections on new-home demand to insight into the banking industry’s next gyration, by the end of this video, you’re guaranteed to be seeing 20/20 on what to expect in 2010.
Tax Credit 3.0
Get a behind-the-scenes look at the wheeling and dealing that led to the Nov. 6 extension-and expansion-of the federal $8,000 first-time home buyer tax credit program with this exclusive interview with NAHB president and CEO Jerry Howard and tax economist Rob Dietz, recorded just days before the final vote. The dynamic duo gives the lowdown on what was at stake for the industry as Congress battled over the prospect of extending the credit.
The Future of Foreclosures
Wayne Yamano of John Burns Real Estate Consulting shares his foreclosure forecast. (And here’s a hint: It’s not pretty.) Find out what effect the next wave of foreclosures will have on inventory, home prices, and appraisals in this short video interview with Big Builder editor Sarah Yaussi.
The Doctor’s In: A Look at the Healthiest (and Unhealthiest) Markets in 2010
Hanley Wood Market Intelligence’s Jonathan Smoke takes the pulse of the new-home economy in our five key markets, outlining which metro markets are on the mend-and which ones have taken a turn for the worst. Open up and say, “Ahh … .”
The Next Great Land Rush
Michael Reynolds from land use and real estate development consultants The Concord Group offers a deep-dive into where-and, most important, when-recovery in the land market will take place in five of our most-watched markets. Tune in for the lowdown on where to focus your attention as you look to restock your land pipeline.
REGIONS
ATLANTA
[Live Webinar airing on Thursday, Nov. 19, at 1:15 p.m. Eastern]
Atlanta: Victory at Vickery?
Designed as a New Urban TND mecca 35 miles north of downtown Atlanta, Vickery hit on hard times in 2007, and in 2008, it went back to its bank-then Wachovia and now Wells Fargo. The Atlanta dream team will adapt, re-envision, and re-pencil the lots for a realistic re-launch in the next couple of years.
Team members:
- Bill Evans Jr., John Thomas Homes
- Chuck Fuhr, Ryland Homes
- Jennifer Landers, Newland Communities
- Mike Langella, Reynolds Signature Properties/LingerLonger Communities
- Michael Medick, architect, fmr John Wieland Homes & Neighborhoods
[On-demand Webinar]
Atlanta Market Overview
Jonathan Smoke, senior vice president of products and innovation at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Atlanta new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.
[On-demand Webinar]
Atlanta Market Insights
SmartNumbers’ John Hunt gives a drill down on what’s hot-and what’s not-in Hot ‘lanta real estate.
DALLAS
[Live Webinar airing on Wednesday, Nov. 18, at 1:15 p.m. Central]
Dallas: To Profit in Prosper
Good schools, great access to employment centers, and less expensive land made Prosper an attractive alternative to nearby Frisco during housing’s boom times. But housing’s setback has created a disconnect between market demand and municipal vision. This team’s challenge will be to recalibrate expectations for the 270-acre tract known as Legacy Lakes.
Team members:
- John Landon, John Landon Homes
- Jamie Bigelow, Bigelow Homes
- David Copenhaver, BSB Design
- Bob Boyd, BSB Design
- Charles Merdian, LGI Homes
- Paige Shipp, fmr Mercedes Homes
[On-demand Webinar]
Dallas Market Overview
Jonathan Smoke, senior vice president of products and innovation at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Dallas new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.
[On-demand Webinar]
Dallas Market Insights
Residential Strategies Inc.’s Ted Wilson answers some of the market’s hot-button questions in this Q&A interview.
PHOENIX
[Live Webinar airing on Tuesday, Nov. 17, at 1:15 p.m. Mountain]
Phoenix: Will It Play in Peoria?
The Phoenix team will pencil and plan a refreshed community concept for Mt. Pleasant Heights, a 1,000-acre section of land in the thick of Phoenix’s Northwest Valley hive of new-home communities.
Team members:
- Kimberley Clifford, Newland Communities
- Kevin Egan, T.W. Lewis Homes
- John Fortini, Silver Fern Property Management
- Jim Jenkins, Shea Homes
- Michelle Mace-Basha, M3B Inc.
- Brad Sonnenburg, BSB Design
[On-demand Webinar]
Phoenix Market Overview
Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Phoenix new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.
[On-demand Webinar]
Phoenix Market Insights
Hanley Wood Market Intelligence’s Ken Lewandowski outlines the underlying market forces driving some of the fiercest big builder competition for new land.
SOUTHERN CALIFORNIA
[Live Webinar airing on Monday, Nov. 16, at 1:15 p.m. Pacific]
Southern California: SOL on a TOD?
Sandwiched between a commuter rail line and a busy freeway, this seven-acre site’s biggest asset-proximity to transit-is also its biggest drawback. Figuring out how to accentuate that value while down playing some of the parcel’s industrial surroundings could transform this pioneer site into a desirable home base for commuters.
Team members:
- Tim Kane, MBK Homes
- Randy Jackson, The Planning Center
- Jason Perrin, Greencrossing Real Estate Cos.
- Mike Disler, fmr Pulte Homes
- Manny Gonzalez, KTGY
- John Martin, Martin & Associates
[On-demand Webinar]
Southern California Market Overview
Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the Southern California new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.
[On-demand Webinar]
Southern California Market Insights
It’s a double play with Hanley Wood Market Intelligence’s Greg Doyle and Michael Ellison talking about what’s humming in the Southern California market.
WASHINGTON, D.C.
[Live Webinar airing on Friday, Nov. 20, at 1:15 p.m. Eastern]
Washington, D.C.: A Balancing Act
A combination of shifting demographics and a new metro line planned for two miles from this rather large tract nestled in a discrete corner of the master-planned community of Brambleton suggest an opportunity to rethink the current land plan. The challenge is to figure out what densities will maximize the value of the lots by the time this parcel is ready for market in 2014-2015.
Team members:
- Alan Shapiro, Winchester Homes
- Dan Ryan, Dan Ryan Builders
- Paul Yeager, Dan Ryan Builders
- Craig Collin, Pulte Homes
- John Clarke, Elm Street Development
- Debbie Rosenstein, Christopher Communities
- Rohit Anand, Cubellis
[On-demand Webinar]
Washington, D.C., Market Overview
Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence, offers a top-line look at some of the macro forces at work in the D.C. metro new-home market. From employment and permitting trends to household formations and affordability measures, this executive overview offers the objective market data and independent analysis builders need to shape their business plans for 2010.
[On-demand Webinar]
Washington, D.C., Market Insights
Hanley Wood Market Intelligence’s John Birge explains why it’s no surprise that the D.C. metro market may very well be the nation’s best housing market.
ADDITIONAL REGIONAL PROGRAMMING
[On-demand Video]
The Doctor’s In: A Look at the Healthiest (and Unhealthiest) Markets in 2010
Hanley Wood Market Intelligence’s Jonathan Smoke takes the pulse of the new-home economy in our five key markets, outlining which metro markets are on the mend-and which ones have taken a turn for the worst. Open up and say, “Ahh … .”
[On-demand Webinar]
The Next Great Land Rush
Michael Reynolds from land use and real estate development consultants The Concord Group offers a deep-dive into where-and, most important, when-recovery in the land market will take place in five of our most-watched markets. Tune in for the lowdown on where to focus your attention as you look to restock your land pipeline.
BEST PRACTICES
[On-demand Webinar]
Judo Product Development: How to use process to gain an edge on competitors
FMI consultant Clark Ellis and architect Jerry Gloss show mixed martial arts strategy belongs as much in your company’s culture as in the UFC octagon. By following a path of discipline and control, your company can create a solutions-oriented organization that can outmaneuver rivals by bringing competitive product to market faster and more profitably.
[On-demand Webinar]
Portfolios & Profits: How to make money from bulk land deals
As banks try to unload real estate assets from their balance sheets, there’s a lot of temptation for builders and developers to try to pick up lots on the cheap. But how do you know if you’re buying dogs? Don Walker, a senior vice president with John Burns Real Estate Consulting, identifies the dos and don’ts of buying portfolio land deals.
[On-demand Webinar]
The Shift from Scale to Efficiency: A Not-so-Modest Strategic Proposal
Consultant Robert Held steps back from the trenches of home building operations for a long view at process strategy, management, capital flow, and manufacturing efficiency… Take out the variability, and home builders will instantly add “P” to their P&L.
[On-demand Webinar]
Commercial’s Gone Soft: So What?
The commercial real estate market cycle has historically lagged the residential cycle. But with talk of a commercial real estate meltdown reaching a fever pitch is the worst really behind us? John Burns Real Estate Consulting’s Lesley Deutch deciphers what fallout the commercial real estate downturn could have on housing.
[On-demand Video]
What’s Selling & Who’s Buying
In this short video, Tim Sullivan and Peter Dennehy of Sullivan Group Real Estate Advisors tag-team to show you a handful of communities that really are outperforming peers. They’ll dissect each community to show you what’s driving buyers to these builders’ doors-from price to product to place. Jim the Realtor and his video blogs have got nothing on these two.
[On-demand Webinar]
Foreclosure Fighters: Not just for the first-time buyer market anymore
Many builders have been successful in nabbing buyers from the resale and foreclosure markets with the rollout of value-oriented product lines, which are more affordable and less expensive to build. But as the first-time buyer pool runs dry, will builders be ready to meet the move-up market? Designers Kerrin West of Studio 81 International and John Thatch of The Dahlin Group weigh in on how to retool to have a foreclosure fighter at every price level.
[On-demand Webinar]
SEO S.O.S.
Search engine optimization-otherwise known as SEO-is the online marketing buzz word du jour. Builders’ ability to stay competitive on the Web hinges on how well they can manage it. But what is it exactly and how can you use it to your advantage? Mitch Levinson of Internet marketing, social media, and public relations firm mRELEVANCE lays out all the answers in this slidecast.
[On-demand Webinar]
Who Wants to Be a Zillionaire?
Chances are your sales force is looking a little deflated after three-plus years of the new-home market heading south. A market recovery is headed our way, so it’s time to revive your offensive lines. Former sales execs Karen Murray and Lynn Palmer, now co-founders of RenewalZone.com, share four exercises from their training system plus loads of tips on how to pump up your sales staffs by making them smarter, more competitive, and ultimately more successful.
[On-demand Webinar]
On the Road to Recovery
Bob Hafer and Jon Fogg of The Berke Group offer a four-segment sales training and management program that will focus on the basics as well as the advanced skill sets you need to counter the tsunami of challenges that continues to sweep over the new home landscape.
- Building a New Selling System Strategy
- Finding and Hiring the Right People
- Better Managing Your Sales Staff
- Breaking Down the Barriers to Sales Success
[On-demand Webinar]
The Message & the Medium
Face it. Your customers have changed. The challenge in 2010 is to find new ways to target your buyers, create a compelling message that synchs with their changing values, and deliver your message in the right format. And increasingly that means getting it right online. Marketing expert Jon Bailey of BG Creative will show you how.
[On-demand Webinar]
The New-Home Community Meets the New Economy
Between today’s economic uncertainties and major structural demographic shifts, the next generation of would-be home buyers has a new definition of value that is governing what they buy, how they buy, and what they expect out of the buying experience. Newland Communities’ vice president of research Malee Tobias explains what matters most when it comes to a new home and a new-home community.
The only way to see all these programs is to register. Register Now. Log In Monday.
Get Ready for BB09 Virtual, Get Ready for 2010
The news, you all know by now is that Bob Toll is starting to feel better about things in the home building business. Still, sales trends won’t feel comfortable as they knife up and down and everybody overreacts to immediate, short-term data, volatility reigns, banks continue to fail, consumers continue to owe more than they can spend, and people keep on getting pink-slipped.
The headlines will report glowing recovery tidings one week, and two weeks later will be blasting out word of sputtering gains and imminent relapses into the worst of times. It won’t be true, but it will be what happens.
Meanwhile, the 80% of Americans who manage to remain well clear of the job loss wand will hopefully start to flex their collective consumption muscle, evict their grown children from their nests, and go about the business of producing goods and services for a global economy still bent on creating middle class lifestyles in a few of the most populous nations.
Fact is, over the past eight months, we’ve learned that with stimulus, price declines, and favorable interest rates, there are buyers. We’re going to have those conditions for at least another six months. If a sense of scarcity–particularly in new home supply–trumps the sense of oversupply and risk to demand, then post-April 30, 2010, when the extended and expanded tax credit for home buyers winds down, we’ll have a new home market capable of standing on its own two legs.
Most likely, the direction will trend more positive than negative, and the big theme is of the moment is what operators can do themselves to get by and gain some traction when many fundamentals are fragile and money is tough and very expensive to get.
That’s why we’ve created a Big Builder ‘09 Virtual Event that addresses both high-level strategic issues, and mid-managment executional opportunities for the big builder community.
Between now and Monday, Nov. 16, all you see when you go to the link is a registration console.
The first thing we’re hearing what home building operators–public and private–need to do has to do with discipline. Demand for homes at the entry level will likely continue, and with expansion of the tax credit rules to include move-up buyers, operators will need to move quickly to meet the newly stimulated demand, seizing on lots to open communities that can be sold, built, and delivered for closing before the end of the extended deadline.
So, the sharpened need for discipline comes around what products and communities you can produce to meet the market and just how aggressive you can become in taking down the lots. We’re hearing that banks and developers alike are increasingly amenable to creatively structured, soft take down schedules, but not if the operator lacks discipline on vertical costs and the ability to meet the market with products that sell.
Your margins need to be sustainable. That means speed, getting things mapped for maximum value (often greater density), and getting things done right the first time.
You’re in the final stages of budget planning for 2010. Uncertainty is a given, continued volatility is probable, and a leg or two downward while the market claws its way back to gains is highly likely.
So Big Builder has put all the focus in its 2009 Virtual Event on collaboration, market insight, demand analysis, what’s working, and financial discipline. We’re passionate about the big builder community, so we’ve produced more than 18 hours of programming that you can log into at your leisure.
The part not to miss though, are the “Live Web Cast” Dream Team presentations that we’re doing one at a time, starting Monday, November 16, at 4:15 pm ET, 1:15 Pacific.
Our program, as you may have noticed, features your peers in action. Each of the following teams has taken on a challenge that we put to them in the form of a parcel of land that’s currently on the market in Southern California, Phoenix, Dallas, Atlanta, and the D.C. metro region.
Here are the folks and the challenges:
Monday, November 16 Southern California: SOL on a TOD?
Sandwiched between a commuter rail line and a busy freeway, this 7-acre site’s biggest asset-proximity to transit-is also its biggest drawback. Figuring out how to accentuate that value while down playing some of the parcel’s industrial surroundings could transform this pioneer site into a desirable home base for commuters.
Tuesday, November 17 Phoenix: Will It Play in Peoria?
The Phoenix team will pencil and plan a refreshed community concept for Mt. Pleasant Heights, a 1,000-acre section of land in the thick of Phoenix’s Northwest Valley hive of new home communities.
Wednesday, November 18 Dallas: To Profit in Prosper
Good schools, great access to employment centers, and less expensive land made Prosper an attractive alternative to nearby Frisco during housing’s boom times. But housing’s setback has created a disconnect between market demand and municipal vision. This team’s challenge will be to recalibrate expectations for the 270-acre tract known as Legacy Lakes.
Thursday, November 19 Atlanta: Victory at Vickery?
Designed as a New Urban TND mecca 35 miles north of downtown Atlanta, Vickery hit on hard times in 2007, and in 2008, it went back to its bank-then Wachovia and now Wells Fargo. The Atlanta Dream team will adapt, re-envision, and re-pencil the lots for a realistic re-launch in the next couple of years.
Friday, November 20 Washington, D.C.: A Balancing Act
A combination of shifting demographics and a new metro line planned for two miles from this rather large tract nestled in a discrete corner of the master planned community of Brambleton suggest an opportunity to rethink the current land plan. The challenge is to figure out what densities will maximize the value of the lots by the time this parcel is ready for market in 2014-2015.
What’s more, we have partnered with our colleagues at Hanley Wood Market Intelligence, as well as with Dallas-based Residential Strategies, Inc., Atlanta-based SmartNumbers, and The Concord Group, to offer a an exclusive package of on-demand Web programs on regional and local market data and analysis drill-downs on trends, outlooks, and market drivers that you need to bring to bear as you look at opportunities and challenges in the year ahead.
And for that macro insight that can guide strategy and prepare you for opportunity around the corner, we have a line-up of national economic and housing analysts, who’ve prepared an exclusive, timely take on what’s happening and what’s coming as the recovery finds its timing and trajectory.
Starting Monday, November 16, when you log in as a registrant in our Big Builder ‘09 Virtual Event, you’ll have a one of a kind opportunity to view these presentations at your convenience.
It should be mentioned that we could not have produced more than 18 hours of exclusively available programming without heroics. Late nights and weekends for more weeks than we’d like to count have been devoted to bringing you this programming (providing your register now).
Marketing director Kim Grover has been tirelessly creating the messaging and the distribution and community engagement strategy that will make Big Builder’s event different this year. Once Big Builder Week ends on Friday, Nov. 20, the conversation, the challenges, and the forums will live on in user groups, and easily accessed networks that we’ll host for your continued conversation.
Virtual program manager Lauren Lewis has been working ’round the clock to align the stars of both people and technology in hopes of bringing our audience a quality experience online when you log into Big Builder’s virtual event starting next week.
Last but not least, Big Builder editor Sarah Yaussi, who must take great pride in having created and engineered so many of the individual parts of our educational and informational program, has been clocking untold hours in planning, producing, coordinating, and strategizing the event. As we step back and take a look at the curriculum and its events as a whole, it’s mind-boggling.
We thank Kim, Lauren, and Sarah for going beyond the call to prepare what we hope will be an unforgettable experience for the home building business community that we are honored to serve.
So join us. Register now, and log in Monday. It’s home building insight and engagement history in the making.
Housing Policy Places a Big Bet on Home Builders
An extended, expanded home buyer tax credit and an expanded Net Operating Loss tax carryback measure last week rode the coat tails of the passage of law adding to the benefits period for those who are unemployed.
Don’t think this outcome is not a triumph for those who fought for every Congressional vote, and don’t think for a moment that all this government beneficence was a given. Many, many other advocates and champions lobbied hard to have their respective proposals and resolutions bolted on to the freshly signed Worker, Homeownership, and Business Assistance Act of 2009.
The mantra “Fix Housing First” came to light just before all the stuff hit the fan in September and October last year. It took a good hard look into the economic abyss and a unvarnished look at the certain pain still ahead for many people on Main Street, Wall Street, and Capitol Hill to get that Fix Housing First is more than a magic marker placard motto for those with vested interests in housing and real estate.
It’s the economy, …. You can fill in the blank.
Now, the fact is, where ever you might come down on the side of Red or Blue, bigger or smaller, liberal or conservative, Smith or Keynes, there are three take-aways from the outcome of this particular vote:
- In one year’s time, housing rose from its rank as an also-ran issue–among health care, energy, immigration, and financial regulatory reform–to one at the center of focus for a nation determined to work its way out of more than a decade of recklessness and wrongheadedness.
- The bill is a wake-up call, recognizing that housing is not just a function of the economy but an engine–albeit not the only engine of the economy. It’s a job maker.
- Congress’s across-the-aisle embrace of the bill mirrors an uncommon degree of unanimity among companies and associations and other parties who more often conflict, and diverge, and polarize around their own self-interest.
We applaud the year-long seven-days-a-week efforts of Fix Housing First executive director Ken Gear, and the National Association of Home Builders’ leadership, and the high production home builder leadership that forged a forceful stand to tell Congress the story, and make the case for the bill. Even earlier this year, the issue divided and ultimately conquered home builders’ best interests because large and small companies split on what was good for whom.
Now, the future landscape and story of home building divides itself into two parts. The first part is now through April 30, 2010.
Policy–which serves as our best-known proxy for what American voters have placed their faith in–now supports housing, real estate, and home building to a star-aligning extent. Housing, and in particular, the home building part of housing, is an agenda wild card because it is an organic creator and sustainer of what we need most right now. Jobs.
Think about the elect-ability of every incumbent having to run in the 2010 mid-term elections, including every seat in the House. Now think of how momentum on the jobs front could possibly turn from so negative to better in the least amount of time.
So now through April 30th, policy will support home builders. With interest rate support, the new, more inclusive terms of tax credits for home buyers, and the ability to transact assets at a loss to claim taxes paid on company profits going back to 2004, policy will support those in residential real estate and construction.
After that, it’s up to you. Inflation pressure will build. Finally, the help of tax credits for home buyers will have run their course.
It’ll be your ability to price and produce homes at a quality and cost that captures prospective buyers from a resale market flooded with forced sales.
Amid all that’s uncertain and all that’s doubtful, you can bet money on that.
Now, here’s where we–at Big Builder–can help. You’re finalizing your 2010 budget right now, and you’re probably presenting it to your boards these days. No doubt, whether you’re planning for a year that’s flat with 2009 or slightly better (given that the first few months of 2009 occurred in the gravity-free twilight zone that came after Wall Street melted down last year), chances are there’s some guesswork in your projections.
And, probably, if you’re like us, you’re being overly optimistic about how you’re going to make your numbers.
The balance of ideas and execution, creativity and teamwork, motivation and focus, determination and leadership has never been more delicate. Which basics will you get back to?
- There are about 140 working days between now and April 30, 2010–do you have at least one idea per day to constantly improve your operation to both avail of the tax credit and then keep on plugging when it sunsets?
- About 80% of the workforce will dodge the bullet of the deteriorating jobs environment–and some of them will be able to sell their homes now, with a tax credit that allows for a step-up buyer level. Do you know who they are and how to target those seller/buyers?
- You’ve got to get more out of fewer players, replacing headcount with teamwork and focus. Where are the disconnects in your team and how can you build trust, efficacy, and morale?
You and every one of your associates should register for the Big Builder ‘09 Virtual Event. Whether you’re in leadership, management, or in the trenches, in the headquarters or in the field, in design or in finance, there’s something in our program that will help you do better.
Sign up now by clicking on REGISTER FOR BIG BUILDER ‘09 VIRTUAL. It’s cost-free and we assure you it’ll be worth your time. We’ve worked hard to make this event unique and valuable.
The unique part is that we’ve made the learning fun by putting together five reality TV-like Dream Teams of executives from different companies to engage in a challenge in each of five markets. The challenge is to take a land parcel and create a plan for it. Simple, right? Well, now try to do it in just five weeks–on top of your day jobs.
At the very least, you should tune in and register to support and challenge them. They are your peers, your competitors, and where your next best idea to get your company back on track through April 30, 2010, and beyond.
Again, press here to REGISTER. It takes seconds. You and your team should plan to join us as we unveil the first programs of Big Builder ‘09 Virtual for a week-long best practices academy, from November 16 through November 20, every day next week.
Housing Data Brightens, Just Around the Corner
Attention! Attention! There’s good news. Real good news–but it’s around the corner. That means you not only have to be able to see around the corner, you have to be able to survive to get there.
Only issue is, those who wait to see around the corner or wait to get there, probably won’t do either. It’s a matter of meeting it at least half way.
The good news is that demand for new housing units–new single-family homes, and multifamily homes, homes for young adults, and homes for families, and homes for soon-to-be-retirees, and homes for senior, homes for longtimers, and homes for new-comers–should average north of 1.7 million per year, starting in January through 2020.
That means that if you remove the “noise”–the volatile ups and downs–that will occur during the next decade, the need for a new housing unit will occur about every 20 seconds, seven days a week for as long as it will take a bunch of us to make it through to retirement and beyond. That’s a trend an economy on the brink can take encouragement from, providing that economy on the brink can maintain fortitude and pay back some big funny money bills in the next year and a bit.
Here’s the money slide from Eric Belsky, executive director at Harvard’s Joint Center for Housing Studies. Eric’s entire forecast–”What Next? Home Building after the Storm Fully Parts–willbe exclusively available for those who register here for the Big Builder ‘09 Virtual “Accelerate the Positive” event, which goes live Nov. 16-20, at a laptop or desk top near you.
Click Image for enlarged version of slide.
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Make the tough topography part of the value in views, natural beauty, and distinctiveness.
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Counter-balance the magnitude and variety available in Vistancia and other surrounding master plans with a more intimate, personal ethic.
The team, which has been preparing a land plan, streetscapes, product types, a marketing and sales plan, and a business pro forma for all of about five weeks, will go live with their vision for Lake Pleasant on November 17th, as part of an exclusive Big Builder week of Virtual Web casts.
If you register to take part in the Big Builder Virtual program, here’s just some of what you’ll get.
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More than a dozen exclusive “best practices” webcasts, aimed at everything from reinventing your business model to driving your sales team to plotting out a process improvement plan for operational excellence.
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Highly exclusive market intelligence analyses on five of home building’s most important markets of the moment — Atlanta, Dallas, D.C., Phoenix, and Southern California.
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Insight into where your operational opportunities, your land strategies, where your risks and where your rewards are for the near and longer term.
And we’ve got Eric Belsky like nobody else does. He’ll lay out what the landscape in 2010 and beyond looks like so that you can prepare for what’s really there, and not just wait around for the good news that’s coming around the corner.