November column for Builder & Developer magazine now online

My column for the November issue of Builder & Developer magazine is now posted online.

For this issue, entitled "Where Will the Boomers Live?,"since I had already written this year about issues including single-person households, multi-generational households and Millienials, I wanted to also write about the very important cohort of Baby Boomers, how they're saving for retirement, and where they expect to live.  An excerpt:

Fortunately, Pulte Homes’ Del Webb subsidiary, which has long had its own army of market researchers, has been conducting its own Baby Boomer survey since 1996.  For these surveys, the company separates out younger Boomers (those turning 50 years of age in the next year) and older ones (about to turn 64), and separates them into four groups:  younger Boomers, older Boomers, boomers who were 50 in 1996 and were about to turn 65 in 2010, and current residents of Del Webb communities, most of whom were age 60 to 76.

Some of the differences between the surveys of 1996 and 2010 are striking. Compared to 50 year-olds in 1996, today’s younger Boomers plan to retire four years later (age 67 vs. 63) and are half as likely to be prepared for retirement (16% vs. 34%).  Over four in ten think they’ll never be financially prepared to retire, and nearly four in ten haven’t started to save for it...

To read the entire column, click here.

To read the entire November 2012 issue in digital format, click here.

Where will the Baby Boomers live?

When I was teenager, my recently widowed maternal grandmother sold the home she’d shared with her husband for many years, and moved to the safety and security of Seal Beach Leisure World, one of the first age-restricted communities built by Ross Cortese in the early 1960s. 

However, this was a move my paternal grandmother didn’t quite understand at the time, as she much preferred aging in place and living out her own life in a classic neighborhood of more mixed demographics.  Since both grandmothers made the right decisions for their own circumstances, it made me wonder:  where will the Baby Boomers live, and in what numbers?

If you asked this question in the late 90s, as the stock market was rising and pensions were swelling, many Boomers envisioned a leisurely retirement filled with ocean cruises and vacation homes.  Fast forward to 2012, however, and given a combination of fewer pensions, a housing market in the beginning stages of a rebound, and individual investors who largely missed out on the latest stock rebound, for many Boomers the new plan is to work longer and either downsize to a smaller, more manageable home or simply age in place.  But that still means plenty of opportunity for both builders and remodelers.

Fortunately, Pulte Homes’ Del Webb subsidiary, which has long had its own army of market researchers, has been conducting its own Baby Boomer survey since 1996.  For these surveys, the company separates out younger Boomers (those turning 50 years of age in the next year) and older ones (about to turn 64), and separates them into four groups:  younger Boomers, older Boomers, boomers who were 50 in 1996 and were about to turn 65 in 2010, and current residents of Del Webb communities, most of whom were age 60 to 76.

Some of the differences between the surveys of 1996 and 2010 are striking. Compared to 50 year-olds in 1996, today’s younger Boomers plan to retire four years later (age 67 vs. 63) and are half as likely to be prepared for retirement (16% vs. 34%).  Over four in ten think they’ll never be financially prepared to retire, and nearly four in ten haven’t started to save for it.

Consequently, 72% of young Boomers plan to work, but that’s actually pretty close to the rates for older Boomers (74%) and Del Webb residents (70%). Still, the reasons for continuing to work aren’t just financial – they also include keeping busy and self-satisfaction. Nonetheless, just 40% of current retirees are actually working, but this rate may rise along with the growing acceptability of home offices.

The most consistent response to these surveys was whether or not to move:  over one-third of respondents in all four groups – or just over 26 million people -- plan to move during retirement (the rate is even higher at 42% for young boomers).  Of those planning to move, half think they’ll move to a new state.

Not surprisingly, when considering age-restricted communities, older Boomers prefer the option by 2-to-1, and existing Del Webb residents favor a similar community by a factor of 10-to-1.  For younger Boomers still wearing skinny jeans and going to rock concerts, however, less than 10% of them are interested in age-restricted options.

For both younger and older Boomers, cost of living and healthcare remain by far the most important considerations when choosing a retirement home (Del Webb residents added ‘amenities’ to that list).  Other important factors for all groups surveyed included a better climate, being close to children and grandchildren, and networking opportunities.

Interestingly, the idea that retiring Boomers would depart the suburbs in favor of the hustle and cultural options of cities has not yet been supported by census data.  Recently, Forbes magazine, with the help of demographer Wendell Cox, compared population numbers for Boomers ages 45-54 in 2000 and compared them with those ages 55-64 in 2010.  During that ten-year period, cities actually lost over 10% of these urban empty nesters, and the rate of decline was even higher (12%) for older retirees ages 65-75.

What this data suggests it that both of the choices selected by my grandmothers are expected to remain popular in the years ahead.  Although the Del Webb model will always have its fans, builders can also benefit from addressing those Boomers who choose to stay in place – if not in their existing home, at least in the same community. In turn, the apocalyptic future of suburban ghost towns in favor of city living will likely turn out to be just a fantasy.

August column for Builder & Developer magazine now online

My August column for Builder & Developer magazine is now posted online. For this month's issue -- which is oriented towards green home building and entitled "Green Building Success Equals Proper Execution" -- I wanted to discuss how the most forward-thinking builders such as Pulte and Pardee are profiting by educating buyers throughout the sales and process and partnering with outside providers to troubleshoot once the sale has closed.

An excerpt:

For the building industry, given the complexity of marketing, merchandising and selling the benefits of sustainability and green technology, education during the sales process and customer service after the closing are critical components that not all builders provide.

To this day, I still remember walking through models in the late 1990s when builders were trying to showcase options such as home theater systems, whole-house audio and structured wiring. And yet more often that not, I’d see TV sets flashing a “signal missing” message, fake computer monitors, sales agents who could only refer my questions to an outside vendor, and brochures that gave only a passing glance on these new features...

You can read the entire article by clicking here.

Green Building Success Requires Proper Execution: Education and Customer Service are Critical

Recently, I walked into a retail store to pick up a bottle of wine for a party. And yet despite the enormous selection provided by this national chain, the line was so long – and the store so chronically under-staffed – that I immediately went somewhere else. That visit reminded me that even if a company offers great products and selection, if they drop the ball on execution, they risk losing customers.

For the building industry, given the complexity of marketing, merchandising and selling the benefits of sustainability and green technology, education during the sales process and customer service after the closing are critical components that not all builders provide.

To this day, I still remember walking through models in the late 1990s when builders were trying to showcase options such as home theater systems, whole-house audio and structured wiring. And yet more often that not, I’d see TV sets flashing a “signal missing” message, fake computer monitors, sales agents who could only refer my questions to an outside vendor, and brochures that gave only a passing glance on these new features.

Fortunately, builders such as Pulte Homes have clearly improved on that history, and now feature a Quality Construction Center as part of the sales complex in some communities. Inside one of these centers in Las Vegas, the builder provides three-dimensional displays comparing Pulte construction techniques versus what the code dictates. For example, potential buyers can feel how well low-e glass holds back the desert summer heat while dual thermometers compare differences between the air-conditioned center and the attic above, thereby showcasing how much better cellulose insulation works when stapled to the roof struts as opposed to the ceiling deck.

And, since the best HVAC systems are only as good as the quality of the installation, Pulte hires independent inspectors to conduct critical duct tests and visual inspections before any sheet rock is installed. Other green features include a right-sized 15 SEER HVAC system (which is matched to the size of the home so it operates at peak efficiency instead of constantly cycling on and off), pressure balancing between rooms to avoid hot and cold spots, and a focus on ensuring the entire exterior is sealed to avoid the loss of conditioned air.

For skittish customers not entirely convinced of green building techniques, Pulte also offers a guarantee through its Environments for Living (EFL) package, which promises that savings on heating and cooling bills will live up to their promises. Started by MASCO in 2001 and now offered on all area homes built by Pulte, the program provides a framework for green building that often frequently exceeds traditional Energy Star® standards.

For potential buyers not able to make it to the model complex, Pardee Homes has created a separate area on its Web site which showcases green building features related to solar power, engineered wood, carpet recycled from plastic soda bottles and low-VOC paint. Building green isn’t new for Pardee, which built the first Energy Star®-branded home in 1998, launched its own LivingSmart program in 2001 and last year committed to building 100% green homes in all future communities. For customers already living in these green homes, forward-thinking builders have also beefed up their customer service departments with additional training and out-sourcing to experts when appropriate.

Finally, since any chain is only as good as its weakest link, in 2007 Pulte launched its internal Green Team. Reporting to senior management, the team’s role is to stay on the cutting edge of green building products and practices, review divisional performance, stay on top of new legislation and ensure that new initiatives fit overall corporate strategy.

April 2010 column for Builder & Developer magazine now online

My column for the April 2010 issue of Builder & Developer magazine is now online. In this issue, entitled "New Home Quality and Customer Service Improving in Recession," I wanted to review how builders have leveraged the downturn in volume to improve building quality, led by homebuilding giant Pulte Homes. You can read it by clicking here. An excerpt:

If there is one silver lining to be found from The Great Recession, it’s been the significant increase in both product quality and customer service from the nation’s largest home builders, which should position builders to grab market share from the existing home market in the years ahead. In fact, according to the 2009 New-Home Builder Customer Satisfaction Study by J.D. Power & Associates, overall customer satisfaction among 26,231 buyers of newly built homes averaged 811 on a 1,000-point scale, up by 32 points in 2008 (the survey can be found online at www.jdpower.com/Homes.)...

New Home Quality and Customer Service Improving in Recession

If there is one silver lining to be found from The Great Recession, it’s been the significant increase in both product quality and customer service from the nation’s largest home builders, which should position builders to grab market share from the existing home market in the years ahead. In fact, according to the 2009 New-Home Builder Customer Satisfaction Study by J.D. Power & Associates, overall customer satisfaction among 26,231 buyers of newly built homes averaged 811 on a 1,000-point scale, up by 32 points in 2008 (the survey can be found online at www.jdpower.com/Homes.)

Now in its 13^th year, the study surveys buyers in 24 different markets and analyzes nine factors including workmanship & materials, warranty and customer service staff, price & value, sales staff, construction manager, home readiness, the builder’s design center, location and any recreational facilities provided by the builder.

Paula Sonkin, vice president of the real estate and construction industries practice for J.D. Powers, argues that it’s actually been the building bust itself that has forced homebuilding companies to bolster their operations throughout the entire process. In the end, that’s been a great boon to buyers, as Sonkin says that builders are offering “unprecedented high levels of quality, value and service at relatively low prices.”

Leading the pack nationally for 2009 was Michigan-based Pulte Homes (which at the time also included the Del Webb and DiVosta brands), which ranked highest among builders in 12 different markets, but builders such as Brookfield, Pardee, Lennar and K.Hovnanian were also leaders in specific markets.

But what I found most interesting about the survey is how different the same company ranked in different markets (in some cases scoring a 5 in one market and a 2 in another), which points directly to the importance of division presidents’ leadership in a largely decentralized industry. Yet in view of the growing importance of a builders’ brand name in a cluttered home buying universe, allowing one division to remain the weakest link in a multi-city chain could arguably be costing its reputation – and therefore potential sales -- for the entire organization.

The study also found that as the importance of workmanship and materials have increased, factors such as the sales staff, construction manager and home readiness are less important than in the past. Still, in 2009 the proportion of homes that were delivered finished and on time increased to 76%, or up from 70% the previous year, which is definitely more good news for an industry still under great duress.

J.D. Powers also survey buyers for its New-Home Quality Survey, which is in its third year for the same 24 markets nationally, and in this case build quality has improved from an average of 11.51 problems per home in 2009 to 9.55 problems per home in 2009. Again, Pulte Homes led the pack nationally, with other builders such as KBHome, Ryland, Standard Pacific and Taylor Morrison leading in individual markets.

What was also interesting from the survey was that while 31% of new-home owners consider their homes to be environmentally friendly, nearly two-thirds reported that their builders did not identify ‘green’ features in these same homes. Adds J.D. Powers’ Sonkin, “Builders that neglect to point out environmentally friendly home features to buyers are missing out a very important opportunity.” And the top three reasons owners gave for choosing a green home? Saving on energy costs, reducing water usage, and minimizing their impact on the environment.

The 2010 survey is now underway, and if recent history is any indication, the nation’s best-known builders will continue to improve their product quality as well as their customer service rankings. The industry may be down – at least temporarily – but I think the survey proves that it is far, far from being out.

Public builders report more losses, announce action plans

Fights with analysts! Poison pills! New promotions to sell homes! Yup, it's reporting season for the public builders, with an interesting wrap-up at builderonline.com:

In a move that could become common among home building companies desperate to preserve tax write-offs for their operating losses, Hovnanian Enterprises has installed a poison pill provision that would dilute the company's stock in the event that an outside entity purchased 4.9 percent or more of the company's outstanding stock...

If the U.S. government's $7,500 tax credit is intended to lure would-be first-time home buyers off the proverbial fence, Pulte Homes has a plan that will all but yank them off of it. Beginning tomorrow, Aug. 5, the company is rolling out a new sales campaign that will allow first-time buyers to double their tax benefit...

Emotions ran high today during D.R. Horton's fiscal third quarter conference call, as CEO Don Tomnitz spoke passionately to analysts about his company's performance, his feelings on the recently passed housing legislation, and management's stubborn commitment to spec building.