Home Construction: An Industry Rebounding with Optimism

The home building niche and its associated businesses have been instrumental in bringing about numerous cycles of economic recovery. This has helped the nation to recover from the aftermath of the economic crisis. Today, the home construction industry is actively addressing the renewed interest in home ownership and long term home rentals.

It Could Have Been Better

The number of homes built for occupancy and rentals grew steadily during 2013. This positive outlook is expected to sustain through 2014. As impressive as this might seem, it doesn’t reflect the potential of the industry. Home builders usually take upon 1.7 million homes during a year that is not hammered by recessionary cycles. Addressing the demands of younger, smaller families and home rental-seekers, the industry could have done much better. The resurgence has been impaired by the devastating effect that the slowdown had on the entire housing sector.

Understand How Recession Took a Serious Toll

During 2005, the home construction sector was at its peak. No amount of supply could meet the ever-rising demand. During this period, homeownership statistics were very high across the nation. However, some policy mistakes and regulatory oversights combined with the forthcoming recession ensured that an unprecedented shock was delivered.

Demand gradually declined and rising interest rates further mocked interest homebuyers. As the national and global economy started crumbling, house prices declined but not sufficiently to stimulate a rise in demand. Potential home buyers grew more skeptical about their sources of income and lending had already become too stringent.

It should be noted that the industry was among the first to show signs of recovering in a battling economy. The process has taken five years but its former glory hasn’t been restored, yet. Yes, the housing construction business grew impressively by double digits for two consecutive years—2012 & 2013. However, this growth seems impressive because during the preceding years, the demand was abysmally low. The journey of recovery has been slow and steady so far but now it seems ready to push through.

Having Recovered, Industry is set to Grow Insatiably in 2014

The overall picture seems rather encouraging for the next two years. A number of reasons explain this optimism across the industry.

For starters, genuine buyers who had been stuck during the slowdown years are set to return, i.e. demand homes. Whether they are first-time buyers wanting a new apartment or families trading for a bigger home, this is genuine demand that will drive ownership. In the last few years, homeowners have been very cynical about home ownership. This sentiment is fast changing. Job growth rate had impressed during 2013 and this trend will continue during 2014 with no palpable reasons for hiring to decline. Young adults are increasingly finding more jobs and getting better wages. Leading economic, trend-analyzing firms expect household incomes to increase and smaller businesses to recruit more during 2014.

Optimism Mixed with Some Caution

Construction firms are keeping a close watch on prices of building materials, ensuring that they are prepared for an unwarranted price hike. The national economy can do little if a major, international catastrophe emerges. More jobs need to be created across the nation to ensure that demand from first-time home buyers doesn’t decline.

Concluding Thoughts

The market is looking ripe for more home-ownership deals. Savings rates have dipped, bringing a cheer to families who have been waiting for normalcy to return. The stock market seems renewed and lending is becoming easier with financing institutions feeling more confident. Some mortgage trends are still in the negative but the numbers aren’t too alarming to halt the overall optimistic trend. The political instability that plagued the economy now seems largely cured. The much-argued stimulus packages and spending cutbacks aren’t derailing the enthusiasm of an upbeat market. Hiring is rising across the industry as demand for new homes is no longer being speculated.

Why Energy Efficient Homes are the Norm Today

Builders conduct quite a few studies before launching a residential project because the stakes are usually high. They do feasibility studies and analyze the market. And only the most viable projects are approved. Still, all that pro forma work merely reduces the risk; it doesn't eliminate it.

Until recently, builders only needed to focus on codes for guidance on ensuring energy efficiency of their homes. However, in many markets across the country, houses with third party energy efficiency certifications are attracting more buyers. In fact, some prominent builders now only offer homes with energy efficient certifications. This has made it necessary for builders to incorporate some form of energy efficiency into their projects.

In today's housing market, the number of buyers who factor in the cost of ownership is steadily increasing. Since energy efficiency is crucial for reducing utility bills, more people are looking for homes boasting of Energy Star certifications.

What if you don't already offer energy certifications on your homes? That is no cause for major concern now because you can choose from several certification options. The National Green Building Standard is a voluntary certification developed by the International Code Council and the NAHB in 2009. This has been approved by ANSI.

Over the last 5 years, about 30,000 new houses received NGBS certification, and almost 2,000 homes are waiting for approval.

Since the certification is non-prescriptive, there is no way builders can take short cuts. That also explains why NGBS is the only green certification approved by ANSI.

There are several other competing standards and each one has its proponents and benefits.

Depending on the kind of competition you face in your local market, you need to know more about each of these certifications and choose the one that allows you to differentiate your products from your competition.

This year will be remarkable for builders in many ways. The housing sector is expected to register exponential growth in 2014. This year, buyers of all segments are expected to enter the market. In 2013, the real estate market received a major boost from investors who purchased a large number of properties. This helped dry up the existing inventory and also drove the prices up.

In 2014, the market will see the participation of more entry level buyers. And then we will also get to know more about the specific buying preferences of people aged 18 to 32. Since many of these buyers have waited several years to enter the market, they will have a decent understanding of the products. They will also be more interested in learning about ways to make their home more energy efficient and comfortable.

There is enough evidence to prove that buyers are showing greater willingness to pay slightly higher prices for homes that possess energy-efficient certifications.

In fact, energy efficiency has become the norm today, and builders can no longer ignore it. The year 2014 will be a great year for builders who have exciting projects on offer. But the risks associated with the trade are also becoming bigger. Not offering homes with energy-efficient certifications is the biggest mistake that builders can commit now.

Green Building That Is Out Of The Box

As a builder, you want to build high-performance homes that will stand the test of time, be beautiful, and give your clients maximum function. It is important, however, to do your part in being more sustainable as well. That is why you want to consider taking existing homes and turn them into products to build a new home, which is good for the environment and can offer materials that you may not even be able to get anymore.

Rethinking Building A Green Home

Most people think of a green home as one that is energy and water efficient, but it can be so much more than that. Reusing materials, such as bricks, flooring, windows, and molding, can be a way to be sustainable and green as well. Deconstruction can be more expensive and time consuming than a classic home demolishment, but its benefits to the environment, homeowner, builder, and the community more than outweighs the extra cost. You may even be able to get a tax deduction for donating materials that were saved.

What is deconstruction and how is it different than demolishment? It is when a building is permanently dismantled in a way to salvage as much of the materials possible. From windows to bricks to wood flooring to moldings and more, most any material can be saved to allow it to be reused in another home or to serve another purpose. Demolishment does not concern itself with salvaging and takes the broken and unusable materials to the dump.

The best benefit to deconstruction and reusing materials is that many materials, such as those found in a 100-year old home, may not even be available anymore. Bricks from long closed down brickyards and old-growth wood cannot be purchased at your local home improvement store. They offer not only a functional purpose, but also a richness and beauty that cannot be found with new materials.

Builders Should Think Green

What if there is not an existing home to deconstruct? A builder should be thinking about green long before the site is even cleared. Whether they purchase reclaimed materials from a supplier or include more environmentally friendly materials found at the building supply, being green is not just a color for St. Patrick’s Day. It is a way of life that many clients are choosing to espouse not just in their everyday life, but in their building choices as well.

By finding a deconstructed material store or site in your community, you can not only build with materials that have stood the test of time, but also save the environment by decreasing the distance that they will be transported and the energy used in manufacturing new materials. This is an important consideration for many buyers, which is why you want to be sure that you consider adding this to your business practice.

If you are looking for a way to bring new clients to your building business, think green. It may be the key to taking your company to a new level with an entirely new demographic of clients. Consider deconstruction for your projects. You may find that it can make your homes even more beautiful, as well as green and environmentally friendly.

How to Save Money on Building Costs

Who doesn't like to live in a house that has not been occupied by another family? However, the cost of building a new house can be unaffordable. That is the main reason people turn to the resale market. But there are ways to cut costs and save money.

Use thin bricks

Bricks are known for their strength and endurance. They also add a touch of elegance to the building. But bricks are expensive. If you are trying to cut costs, you should consider cheaper alternatives.

Bricks don't play much role in ensuring the structural integrity of the house, so it is possible to get away with something less costly. For example, thin bricks, a popular alternative, are not as thick as regular bricks. They are also much less expensive. By substituting regular bricks with thin bricks, you can give your home the classic beauty and elegance of brick housing. And these affordable housing materials won’t burn a hole in your pocket.

Use stock house plans

Getting a custom plan drawn up can be expensive. There is one way out - use a stock plan available with builders. There will be plenty so finding a beautiful plan is not all that difficult. Be sure to choose a plan that is more or less similar to the one in your dreams. When you use a stock plan, you can save several thousands of dollars. There is yet another advantage to choosing a stock plan. These are designed by experienced engineers and may be structurally and conceptually more sound than your plan.

Be your own contractor

If you know a thing or two about construction, you could perhaps be your own contractor. This is perhaps the most effective way to cut building costs. There are some downsides as well. You will have to be present at the construction site most of the time. You will need to choose and buy building materials on your own. You will also need to supervise the works done by your subcontractors. As you may have already imagined, this is not easy and requires a lot of skill. But the monetary benefits make it worth your time and efforts.

Go vertical

Land cost is perhaps the biggest cost involved in building a new house. If you already own the land, this is not a problem. But if you have to purchase a lot, you will have to shell out tens of thousands of dollars.

The only viable solution, in this case, is to buy a small lot and build up. A two-story building of 3000 square feet will cost much less than a single story house of the same size because you need much less land when you go vertical. However, be sure to use simple and clean construction lines. If you use complex geometry, building a multi-story house can be much more costly.

Paint the home yourself

If you have got a few spare hours, you could perhaps paint your own home and save up to $10,000. If you can get the help of a few friends or family members, you will need only a couple of days to finish painting a full house. In addition, you can save money on materials and paint.

Building a new home is possible, even if you are on a tight budget. You just need to be really handy and a little more involved in the work.

Home Building Increases Signal Economy Recovery

Great news! Home building is on the rebound at last. In almost every time of economic recovery, the housing market has led the country’s economy out of recession and into recovery, except for the most recent time. That is why it is good news for not just builders and those who work in construction, but also for the economy as a whole, because it signals that the economy may be on an upward swing after several years of upheaval and decrease.

Hope Is Increasing In the Home Building Market

Normally, a little over 1.5 million homes are begun each year. This includes single-family homes, as well as apartment units. When the housing market was at its peak, this number was at more than 2 million to try to keep up with the demand. The last few years, however, an average of less than 600,000 homes were started and, in 2013, the number increased to 900,000. This year, that number is expected to climb to over 1 million, which is a sign of hope in the real estate and construction world.

Even though we are beginning to see good news, it will take a while before it will get back up to the normal range. The housing market collapse was immense, and its effect upon the economy was immense as well. While ups and downs are a normal part of the economic cycle, this event contributed to the entire collapse of the financial market and affected not only our economy, but also economies all over the world. The key is to gradually begin building more homes until you are sure that the demand is there.

Housing Market Recovery Will Be Slow

The recovery from this collapse has already taken five years and it will most likely take several more. Even though the rate of housing construction grew in 2012 and 2013 at double-digit rates, this was largely due to the fact that the numbers were at a very low level to begin with. Recovery seems to be on its way, which is the good news. We are on a course to see great growth in the next two years, due to:

·         Demand from young adults beginning home ownership & from existing homeowners

·         Job growth increases

·         Net worth replenishment, due to increase in home values and revival of stock market

·         Government economic situation more stable

While this is all good news, it is important to note that we are just at the beginning of the upswing. However, it is better to be in the midst of it going up, than at the bottom, which is where most homebuilders were just a few years ago. It may be time to amp up your marketing efforts to connect with more clients who may be thinking about building a home in the near future.

With home construction numbers on the rise, it is important to rethink how you are reaching clients and make plans to reach even more. With the younger adults entering the workforce and beginning families, and existing homeowners beginning to feel better about building, you have the opportunity to grab your ride on the upswing and reach the peak in great condition.