Posts Tagged ‘real estate market’

This video documents the progress of Week 9 of construction.  It marks a very important stage of the process. Cosmetic finishes start to appear and the homeowner gets to the see their selections start to give the home its feel.  In this video, cabinets arrive, ceramic tile is installed, custom built ins and shelving are installed, and mechanical finals begin.

The pantry in this home is amazing and is an example of how this process can create spaces that fit they way people live.  Its a pretty good feeiling to move into a home that is exactly what you want and need for your lifestyle. Its very rewarding and a result of the collaborative process created by Piedmont Realty and Construction.

You may recognize the title from the Preamble to the Realtor Code of Ethics.  Working with builders and developers as I do, I am often in conversations about unimproved property values and how they impact the overall market.

I was recently asked for an opinion of value for a 1.5 acre unimproved lot in Northfields. This wooded, cul de sac lot is surrounded by homes built in the 60′s, backs up to train tracks and is pretty unique to the market place in this “urban ring” location.  In the absence of comparable sales, I usually turn to industry trends for the value of the land as a ratio to the value of the improved property. In this case, I estimated what I would consider an appropriate price range for the property, if it were improved, and backed into a value.

So how does one figure out the value of unimproved properties in newer communities these days? That’s a little more complex. In the absence of speculative builder demand, the builders and developers (and banks) are having to forge new relationships to sell lots and new homes. At the top of the market, the demand was so strong, developers could name their price and the builders would compete to get an opportunity to purchase.  The builder would then add their construction and soft costs, set a price, and usually sell before finished.  Increasing new home prices definitely had an impact on overall property values.

That model is flawed.  To determine lot value, one must work in the opposite direction. If you take the total value of the property as constructed, remove the construction and soft costs, what is left is the lot value. We are seeing more “joint ventures” between developers, banks, and the builders to figure out what the market wants and needs and determining values with new sales. All parties are invested in the process until the home’s completion and sale.

I could go on an on on this topic, but wanted to share some insight in to how I analyze the market. I believe you if you understand the unimproved lot inventory and follow the new home sales, you will gain valuable insight into understanding the over all market.

There is plenty of market data and analysis available these days both on a local, state, and national level.  I find myself doing less “macro” analysis in favor of very specific or “micro” analysis for my clients.  I do keep spreadsheets and track elements of the market to try and identify trends.  Trends to help me develop an opinion of where the market may be headed, and trends to help me identify other area to research for clues.   I enjoy helping my buyer clients develop an opinion of value in order to devise a negotiation strategy. I also spend time trying to determine what opportunities exist in the market to share with my builder client.

This leads me to the point of this post. Its important to educate yourself and follow some “macro” trends in the market. But it’s more important to get information specific to your situation.  If you are in the market to buy or sell a home in the coming months, make sure you get some analysis to help frame your decision making process.  Check out the report below for a comparison of some key elements of the market over the last 5 years. 

1st Half 2010 CAAR Market Report

In my day to day routine, I get to have conversations with prospective home purchasers on a lot of topics. One of my favorites is new construction. I love to talk about new construction vs resale and the overall marketplace. I love to talk about the different communities and how their design creates a different environment or social experience. I also love to help people understand how to compare the different homebuilder choices in the marketplace.

I am a huge fan of the feeling one gets when moving into a home that has never been anyone elses.  I’m lucky enough to get to be exposed to the latest and greatest our building community has to offer.  The first concept I will point out is the different business models within the arena of home builder choices.

On one end of the spectrum is the “production” home builder. The production home builder usually offers a selection of floor plans and a limited variety of options from which to choose. The process is very structured and customization is limited. Quite often this is the least expensive option or lowest cost per square foot option.  By building the same home or homes over and over again, its the system and process that allows the builder to take advantage of economies of scale. Limiting the customization of the home streamlines the process and cuts down on the builder’s overhead.

The opposite end of the spectrum is the custom home builder. This process usually involves starting with the design of the home with the help of an architect. Once the home is designed, the buyer is also involved in customizing the home from top to bottom. Not all buyers are prepared to do this. I speak from experience when I say the process can be overwhelming. The level of supervision and client interaction required often leads to this being the most expensive option when building a home or the highest cost per square foot. This is for the home buyer who really knows what they want and is willing to pay for it.

Finally, somewhere in between is what is commonly referred to as the semi-custom home builder. I think this business model affords the average buyer the most overall value. I will support this opinion in a future post.

Sometimes working with builders and developers affords me the opportunity of being a little bit ahead of the curve. Working with builders and developers, we are often trying to “find” the market. That is, what needs to be created to represent value in the marketplace as compared to all options new or otherwise. I often share that I think understanding the new construction market is vital to understanding the overall market. Working with Drew Holzwarth of Piedmont Realty and Construction, I think he has “found” a few of segments of the market in which the Piedmont offering has been well received by the marketplace.

In fall of 2009, Piedmont developed The Riverton for Old Trail’s West End Square. Single family homes (detached) under $300,000. This was the first time detached homes were availabe in this price point. Some of these lots are smaller and do not offer garage opportunity, but serve the buyer not willing to consider attached choices. What happened next is interesting to me. We immediately discovered demand for a little bit bigger home with garage and/or basement in the $350-$400k+ range. Piedmont’s semi-custom process allowed the flexibility to immediately adapt to the marketplace. As it turns out, Phase V of Old Trail offered 6 lots with room for garages and/or basements. When all of these lots were sold in short order I was disappointed, as this was such a perfect for this “new” real estate market.

And then came Village Commons, Old Trail’s newest phase. Adjacent to the town center, this phase offers more lots with room to add garage and even room to widen the footprint of the home. Streets are not in and there are no model homes yet, but the opportunity is there for those with vision. Last week we made the first sale of Village Commons. This buyer started with the Riverton, widened the home by 2 feet, and added a third floor for 4th bedroom and third full bath. They also added a two car garage with a finished room above for a perfect studio or home office.

What I’ve seen over the last year confirms many of my suspicions about the market. There are buyers looking for quality in the form of design, finish, and energy efficiency not present in the resale market. Why is that? Because at the top of the market it got to easy. Not everything built in those years is relevant now. One of the best ways to get exactly what you want is working with a semi custom home builder. I will explain more about this concept in coming posts.

I often meet people interested in new construction but not familar enough with the process to be comfortable. I am also meeting more and more people who have seen what is on the market and are deciding new construction may be the only way to get what they want at the right price. I am a huge fan of the new construction process and really love helping people explore the possibilites and navigate the process. It can be extremely rewarding. One key component is choosing the right builder. I will get into that topic in a later post, but I am watching people have exceptional experiences with Piedmont Realty and Construction. They have created a “semi-custom” process that really works well in this market. Since I am their Realtor Marketing Representative, I am going to follow a home they are building in Old Trail to try and shed some light on the process. One of the most important considerations when building is how the home is to be situated on the lot. The video explains this further.

I’ve been thinking about starting a blog now for quite some time. Now that I finally have, I thought I would share a little background on myself and some topics you might see in the future on this blog.

I’ve been a Realtor since 1997 and licensed broker since 2000. I’ve work with buyers, sellers, builders, and developers. I eat, drink, and sleep real estate. I enjoy the sales or transactional side of this business, but also enjoy brokerage management as well. The industry is important to me so I participate on a volunteer level with the local association. Currently serving as the 2010 CAAR President, I am a student of all things leadership and enjoy the professional and personal development that comes with the territory.

I plan to try and share insights from my unique perspective.  That is, the perspective gained from working with builders and developers, buyers and sellers, as well as managing agents and the business of real estate brokerage. I’ve been fortunate to be involved in a wide variety and high volume of real estate transactions in my career.

There is also a conversation about personal vs professional and where that line is for Realtors.  The consumer’s interaction with the real estate market is very personal so I tend to let that line get blurred. I’ve learned alot about the real estate market dealing with my housing for my family in the past two years, as well as the challenges created by the economic conditions.

I leave the house each day with that same plan. That plan…. Be a part of the solution.