Monthly Archives: March 2010

Homeowner Rules

I’ve spent a lot of space in many posts here in criticism of the homebuilding industry and of the financing institutions and of their mutual cowboy risk-inherent tendencies. When homebuilding is seen as a primary economic stimulant, bad judgment and greed are confused with smart business decisions. It seems wisdom and restraint are in short supply in the times they are needed most. To paraphrase Upton Sinclair, it is difficult to get businesses to understand something when their potential growth and wealth is dependent on their not understanding it. Or put another way, when the plundering is good, the philistines among us are exposed.

But the philistines are nothing without willing victims. In truth, it is the consumers who most decide what happens with homes and homebuilding.When our consumers tell us they want bigger more than they want better,square footage goes up and construction quality goes down. When they like luxurious bathrooms, every home has a spa. When they like granite countertops, the quarries work overtime. Market trends redefine what value means on a regular basis, but it’s rare when American consumer biases are more than skin deep. The industry responds by accentuating the current superficial value trends and sacrificing what isn’t seen or appreciated. As minimal as they are, its fortunate that building codes save both consumers and the industry from truly disastrous trade offs.

If better homes are going to be built on a regular basis, the only real hope is by way of more discriminating homebuyers. As the insane bubble years spawned idiotic behavior, the recession is causing homebuyers to have a new wave of rational thinking and increasingly restrained desires.

If our 2010 clients are an indication, the current consumer trends are encouraging. These points are connected; one quality imperative leads to another and they add up to important contributions to what I call theNew House Rules:

1. A home is an investment…in your life.

In this economy, people aren’t buying or building a home to flip, so they’re buying a place to live. Decisions about their home are now calculated on what is important for their quality of life, not every whim and wish.

2. The American dream is a verb, not a noun.

It’s about working, earning and building, not getting something for nothing. Future homeowners have come to their senses and realized that the American Dream is not the right to immediately have the home of their dreams, but the right to work toward the home of their dreams. They are willing to build in several phases or put off finishes and amenities to get the home built right in the first place.

3. Build small, live large.

They want their homes to be smaller. A few years ago, the standard size seemed to be well above 3000 square feet. Now people want their home to be smaller and less expensive to support in terms of energy and maintenance costs. The average home size for our customers is dropping to 2500 square feet. The next home in our shops will be around1000 square feet.

4. Avoid using your mortgage for expensive fluff.

Our customers are interested in the quality of the building itself and are willing to compromise otherwise expensive millwork, fixtures and finishes to put more of their financial resources into durable structure and energy conservation. For the first time in my building career, I’m seeing people choose lesser quality in finishes and amenities to get more quality in structure and insulation. It’s my dream come true.

5. Mortgage your house, not your life.

Our clients are figuring out how much they can afford and they’re not willing to spend a dime more. In the boom years, it seemed that all budgets were flexible. Many clients would spend way beyond the original budgets as they made changes and upgrades through the building process. The new normal is for fixed budgets, with few, if any changes, and no upgrades. Building budgets mean something again as people are unwilling to risk the possibility their income won’t easily cover the mortgage payments.

6. Invest in what you need, pay for what you want.

Some of our customers are simply putting off the installation of fixtures and finishes until they can pay for them out of pocket. It’s a sensible scheme since there are many things that go into a house, from appliances to light fixtures to carpets that don’t last nearly as long as payments on the mortgage. Over 30 years, a $300 light fixture would cost almost $850 on a typical current mortgage. What are the chances that light fixture would still be in use?

7. Fat is hot. And cool.

Good structure and insulation requires walls that are fatter. For a long time, our minimum wall has been 6 inches thick. With high density insulation, we’ve been able to achieve between R-22 and R-26 with this thickness. But more is better and we are now building most of our homes with an R33-35 standard and a wall thickness that’s closer to 9 inches. Still, some clients want more, so we have projects with walls that are 12 inches and even 16 inches in thickness. Our clients are investing in the real comfort that comes from shelter from the heat and cold with minimal or no expense.

8. Do some work yourself.

Especially with finishes, our clients are choosing to work on their homes in the building process to save construction costs. They are willing to paint, put down flooring or carpet, tackle landscaping projects, and sometimes much more. “Do it yourself” (DIY) homeowner involvement in homebuilding represents both true savings and an opportunity for people to be intimately connected with the making of their living environment. A home should adapt to those who live in it, and the beginning of adaptation is for homeowners to have experience and knowledge in making and remaking the space they dwell in.

This economy is a hardship on many, but these New House Rules are better than the rules that steered us to the waste and excess that ran rampant in the boom years. I had hoped that it would be a vanguard of well-intentioned homebuilders that would lead us to a better standard of homebuilding, but we can only do so much. The real path to affordable, sustainable homebuilding is through the adjusted aspirations and attitudes of our clients. As homebuilders, we need to be able to deliver on the the new requirements, but it is our customers who truly pave the way.

Good news is bad news; bad news is good news

In this economy, any way in which jobs are lost is a shame. On the other hand, it is pretty clear that this “great recession” has been both destructive and cleansing. It has not been kind to bad ideas and narcissistic indulgences. Jobs that were buoyed by lavish habits and idiocy were always at risk.

Hummer is bankrupt. The Hummer idea was always bankrupt; it just took awhile for its physical manifestation to drop off the cliff with it. Actually, it probably was never an actual idea. It may have been more of an observation: when fuel is cheap and wealth comes without effort, people will buy really stupid things.

If nothing else, the Hummer is stupid. It might have been pretty good as an open truck in a desert battlefield, but it’s nearly useless as a work truck: too high for hand loading and too hard to maneuver in real work situations. It’s not good for suburban human transport for the same reasons. Its bigness begets uselessness. It also must be the worst 4-wheel drive vehicle for actual 4-wheel drive situations. It’s too heavy, too wide and too unstable. I had an encounter with a caravan of Hummers on an old mining road in Moab, Utah. I was on a bike. I passed them about mid-day and then came upon them hours later after I doubled back to go back to town. They hadn’t gotten far because two of their vehicles had faltered, hung up, and were broken down. Like me, a similar caravan of Jeeps had driven around them, no doubt wondering as I had, if they knew how silly they looked with all that money and metal, but no useful vehicle; no common sense.

But the foolishness of the vehicle is only half defined by how useless it is; the real highlight is its fuel inefficiency. It had to have been made to maximize fuel consumption, or it wouldn’t be so bad. Its drivers say they average about 10 mpg, so we know it’s commonly much less. Because it has a gross vehicle weight rating over 8500 lbs, the US government does not require it to meet federal fuel efficiency regulations. Its excess was even subsidized through a business equipment deduction that many wealthy people used. The recent bankruptcy therefore ends a loophole in which excess-seeking people could essentially purchase a bigger hose to ensure that they get their fair share of the fossil fuel sucking binge.

Oh yes. Hummers are also ugly. It’s ugly like mutations are ugly; like bad manners are ugly. It’s like when the lack of consideration, refinement, scale and proportion are all mixed together, they will surely produce ugly. It’s an ugly that is far more than how it looks, because the very worst part is what it intentionally projects. What it means is, “I don’t care about the rest of you. I’m going to get mine.”

Therefore, except for the jobs that are lost in its downfall, I say good riddance to the Hummer. May its demise usher in a new era of sanity and improved attitudes.

But that’s about cars and everyone knows I don’t have much appreciation for cars, and that this blog is not about cars, so what’s my point?

It’s about McMansions. Everything I just said about Hummers is also true of huge, gaudy homes, which are widely known by that well-defining, sarcastic appellation. Although McMansions don’t have a singular aesthetic outcome, as Hummers do, we all know them when we see them.

McMansions are also bankrupt. It’s not in the news because no single builder is going down with the sinking McMansion ship. But for all intents and purposes, they are gone. Ask Toll Brothers.


Except for the jobs lost in the process, the loss of McMansion building is a very good thing.

Like Hummers, McMansions aren’t being built because they were always a stupid and wasteful idea.

Like Hummers, McMansions don’t perform their function well; they do it worse. They make comfort and security harder. It takes extra effort to live in them; and effort to support their daily demands.

Like Hummers, McMansions require very big hoses of energy; they suck it with profligate abandon.

Like Hummers, McMansions were made possible by easy financing and tax loopholes. In the real world, they are senseless.

Like Hummers, McMansions are ugly in that same out-of-scale and out-of-proportion way, and they also are ugly in that same mean-spirited way.

And so it is that good news is bad news when a better economy and lower fuel costs spawn human excesses that reveal the worst in us; and bad news is good news when tough times bring out our ability to be frugal and judicious.

If only good news generated as much wisdom as bad news, a sustainable world would be closer at hand.

Oh Canada!

I’m in Victoria, British Columbia, at the Canadian Home Builders’ Association (CHBA)conference. I was the luncheon speaker yesterday, in a session sponsored by the Canadian Wood Council (CWC). My presentation and message were warmly received, but perhaps only because our country was properly humbled with the Olympic hockey loss. After I acknowledged their hockey superiority, everything else I had to say sounded a little wiser, or at least worth politely listening to. I can’t imagine any words from an American would have been appreciated had the hockey gold not been won by Canada.

It’s not just in hockey that we’ve been humbled, however. The average Canadian home is better than the average American home*. The CHBA has consistently sought to raise standards, lead the research into better materials and methods, champion good innovations, and support education and training. They take pride in the quality of Canadian housing, and are dedicated to continually improving it. In the discussions and meetings I’ve had with the builders here—and in all the CHBA reports I’ve been reading—there’s a consistent theme about raising the bar, whether the subject is energy, durability, safety, or construction efficiency. It’s what trade associations are supposed to do and they do it with diligence.

The U.S. homebuilders’ association (NAHB), on the other hand, gives lip service to standards improvements, but spend much of their leadership effort in lobbying against code or regulatory changes that would help to enact what they say they are for. Instead, they fight hard to minimize standard upgrades with the might of their “experts” and attorneys, using funds from their membership dues. If we were scoring a game of homebuilders’ associations in a competition of doing what is right for their consumers and their country, this one is not nearly as close as the hockey game.

But that’s not all. The Canadian banks didn’t get caught up in the sub-prime lending disaster. They have constraints built into their regulations that prevent that kind of wild, free-for-all gaming of homebuyers. Since Canada is so affected by what goes on south of their border, their economy and market was deeply influenced by the bubble mania, but the builders I’ve been talking to didn’t let it steer their business plans into risky territory.

On the other hand, the U.S. economic collapse in late 2008 did pull the Canadian homebuilding industry down with it. They were, and are, innocent victims. Still, the Canadians have been buffered from deeper problems by their stronger banks, by the lack of foreclosures, and by the wisdom of the building community to stick to building homes rather than chasing baseless profits.

Yesterday, in one of the conference reports, an economist said that they are already in a “post recession growth phase.**” Though the recovery is somewhat fragile (again, mostly due to U.S. problems), the mood at the conference has been upbeat and optimistic. Several of the builders I talked to said they actually haven’t suffered much. Because they didn’t get greedy on the upside, they didn’t get unduly punished on the downside. Overall, the Canadian housing start numbers are currently down about 30% from the pre-recession peak.

That sounds pretty bad, but the recenthousing news from the U.S. is much, much worse. According to the following chart, we’re now at the very lowest point in the last 45 years.

Homebuilding Downturn ChartWe’re down to a seasonally adjusted annual housing start rate of 309,000, which is a full 80% off our peak in 2005, 2006. And with this news, there is absolutely no discussion in the U.S. homebuilding industry about post-recession anything. In fact, on our side of the border, we are clearly in the throes of a homebuilding depressionthe likes of which not many living builders have seen before. So score this one for Canada too, but pity them as well because this wasn’t a game of their choosing or creation.

It is time for us to recognize that in many things we are not the best. Really. We don’t have the best hockey team. Our economic policies are not guided by the best policies or the most common sense. Our citizens can’t expect to have the best homes that can be built for the money they spend. Our trade associations don’t always strive for better because they tend to get caught up in striving for more.

It’s time to show a little humility. We would do well to go north of our border and listen to a little Canadian wisdom.

*This is a subjective statement and I’ll stick to it, but my caveat is that U.S. homebuilding right now is very slow, but the quality standard is pretty high for those that are being built. The low-skilled labor is off doing different low-skilled jobs, or they’re unemployed. The quick-buck builders aren’t building because there are no quick-bucks slipping from anyone’s fingers. The good and dedicated builders and tradespeople are hanging on and continuing to do good work. So the quality of the average American home may be equal right now.
**Here’s a stark difference that helps to explain the quicker turnaround: In the U.S., only 10% of homeowners have fully paid for their homes and 1 in 5 of those still paying are “underwater” on their mortgage, with many of those heading for foreclosure; in Canada 42% of homeowners have fully paid for their homes and the underwater problems aren’t significant because home values weren’t as seriously affected.