This report on housing trends was generated by a Senior Loan Officer at Prospect Mortgage.
According to Fitch ratings, home improvement spending will increase 3.5% in 2010 over 2009 levels. This spur of activity is largely attributed to the first-time homebuyer incentives.
Existing home sales are traditionally a strong driver of home improvement spending, as sellers often renovate and buyers often remodel. Existing homes sales fell 13.1% in 2008, rose 4.9% in 2009 and are expected to rise 2.5% in 2010.
Current home improvement trends highlight those with universal appeal and a reasonable price tag. Seven of the top 10 projects, according to Remodeling Magazine's Cost vs. Value Report, were exterior replacement projects such as windows, doors and siding. This is because curb appeal is king. Topping the list were a steel entry door, with a project return of 128.9%, and fiber-cement siding, with a project return of 83.6%.
Increasing the number of bedrooms is also popular because adding space adds value. Converting an attic into a bedroom jumped to the third spot in cost recouped. With a costly average price tag of $49,346, it is nevertheless the least expensive way to add conditioned living space. The project provided a return of 83.1%.
Inexpensive ways of sprucing up the home, such as painting, cleaning carpets and replacing old fixtures, are popular. Improvements that increase energy efficiency and cut down on utility bills are getting a big boost because of their eligibility for federal tax credits through the end of 2010. Certain appliances also qualify for state rebate programs.
Home improvement spending is anticipated to grow. The Leading Indicator of Remodeling Activity (LIRA) anticipates growth accelerating to the double-digit range in the first quarter of 2011.
Monday, August 30, 2010
Monday, August 23, 2010
New Face of Housing
We found these demographic housing trends and projections fascinating! Our country and our real estate market will change in profound ways in the coming years. Read on for excerpts from "New Face of Housing" from Builder Magazine:
A changing population will require new thinking about where and what you build.
• The population in the U.S. will continue to grow—adding another 100 million people by 2040. It is expected that, between now and 2025, 85% of net household growth will consist of childless households. Households without children are the largest group even now, comprising nearly 70% of the total; a subset of that number, married couples without children, stands at about 28%. The number of households made up of married couples with children: 21%. These statistics should make you think twice about who you are building for and marketing to!
• Whether you call them Gen Y, Echo Boomers, or Millenials, the group born between the years 1981-1999 is poised to change the face of housing in this country. This cohort will start buying their first homes within the next few years. If they buy at the rate that generations before them have, it is estimated that "there will be more first-time home buyers in the market in 2013-2018 than ever before."
• In 1978, 60% of college graduates were men--today, the reverse is true. And, women are now the majority in the workforce. By 2015, it is predicted that WINKS (Gen Y women with incomes over $50,000 a year and no kids) will dominate the urban landscape. Winks prefer urban or "urbanite" areas for both home and work, with the option of walkability or easy proximity to transit. Even more important, they say they are willing to pay a premium for it.
• Minorities will be the new majority in the U.S., and many of them are forgoing settling first in so-called gateway urban areas and heading right to suburbia. In the not-too-distant future, Latinos will make up 40% of all first-time home buyers.
• A survey of buyers that asked about the most important factors when choosing a new home showed that 9 of the top 15 are what might be considered green concerns. These include energy savings, indoor air quality, and pedestrian-friendly locations.
• Take into account decreasing household sizes when designing new product.
• Know that suburbs are still very important (no matter what urbanists say), but they need to be reconfigured with gathering spaces, shopping, employment, and more.
• The most critical imperative (and perhaps the most difficult?) "Figure out what women want..."
By: Denise Dersin
Editor in Chief
Builder Magazine
August 2010 Issue
A changing population will require new thinking about where and what you build.
• The population in the U.S. will continue to grow—adding another 100 million people by 2040. It is expected that, between now and 2025, 85% of net household growth will consist of childless households. Households without children are the largest group even now, comprising nearly 70% of the total; a subset of that number, married couples without children, stands at about 28%. The number of households made up of married couples with children: 21%. These statistics should make you think twice about who you are building for and marketing to!
• Whether you call them Gen Y, Echo Boomers, or Millenials, the group born between the years 1981-1999 is poised to change the face of housing in this country. This cohort will start buying their first homes within the next few years. If they buy at the rate that generations before them have, it is estimated that "there will be more first-time home buyers in the market in 2013-2018 than ever before."
• In 1978, 60% of college graduates were men--today, the reverse is true. And, women are now the majority in the workforce. By 2015, it is predicted that WINKS (Gen Y women with incomes over $50,000 a year and no kids) will dominate the urban landscape. Winks prefer urban or "urbanite" areas for both home and work, with the option of walkability or easy proximity to transit. Even more important, they say they are willing to pay a premium for it.
• Minorities will be the new majority in the U.S., and many of them are forgoing settling first in so-called gateway urban areas and heading right to suburbia. In the not-too-distant future, Latinos will make up 40% of all first-time home buyers.
• A survey of buyers that asked about the most important factors when choosing a new home showed that 9 of the top 15 are what might be considered green concerns. These include energy savings, indoor air quality, and pedestrian-friendly locations.
• Take into account decreasing household sizes when designing new product.
• Know that suburbs are still very important (no matter what urbanists say), but they need to be reconfigured with gathering spaces, shopping, employment, and more.
• The most critical imperative (and perhaps the most difficult?) "Figure out what women want..."
By: Denise Dersin
Editor in Chief
Builder Magazine
August 2010 Issue
Wednesday, August 18, 2010
Homeowners and New Lead Paint Legislation
This informative article about lead paint and the EPA's new Renovation, Repair and Painting Program comes from the newsletter of one of New England's finest building suppliers: SELECTWOOD from Portsmouth, New Hampshire.
Most troubling about the new regulations, extended until October 1st, 2010, is the removal of the exemption for "Owner Occupied/No Children Under Six" rule that would have saved many homeowners from the trouble and expense that this new legislation would create.
New Guidelines for Disturbing Lead Paint
The words "lead paint" may conjure images of dust, paint chips and old homes, but lead paint is not an issue of the past. As the EPA's rules and regulations governing lead-based paint renovation, repair and painting continue to evolve; contractors will be expected to stay up-to-date on new rules and handling practices. Education is essential in ensuring contractors develop a proactive strategy when disturbing existing lead paint. One thing is for sure-- lead paint in older homes and buildings is a real problem, and it's here to stay.
Though lead paint was banned for residential use in 1978, the health issues associated with it remain. According to the Environmental Protection Agency (EPA), children under the age of six are particularly susceptible to the potentially harmful effects of lead paint chips and dust that can be disturbed during renovation. Lead can affect a child's brain and nervous system. Lead dust digestion may cause reduced IQ, learning disabilities and behavioral issues. Pregnant women can "transfer lead to their fetuses," and adults can suffer the ill-effects of low levels of lead, which include high blood pressure and hypertension.
To combat the threat of creating more lead paint dust in buildings, the EPA established the Renovation, Repair and Painting Program (RRP rule), which was published on April 22, 2008, and originally went into effect on April 22, 2010. On June 15th the EPA announced it would delay the enforcement until October 1, 2010 to allow more time for contractor training and certification. The delay in training enforcement does not mean that contractors will still not be liable for not using lead safe practices even if they are not currently certified. As the revised enforcement October 1 date draws closer, questions regarding the testing, training, and safe practices linger amoung contractors.
Aimed at contractors, painters, electricians, plumbers, HVAC contractors and other trade contractors, the rule outlines appropriate methods of containing work areas with lead based paint. Any interior or exterior surface originally painted in 1978 or earlier is considered to be contaminated by lead paint and must be tested. RRP guidelines prohibit work practices "which generate significant amounts of lead-contaminated dust. The rule requires firms working on homes built prior to 1978 receive training, complete with a certification and register with the EPA.
Even for those working to proactively adhere to the new rule, compliance is complicated. For instance, there is only one EPA-approved, LeadCheck Kit from Hybrivet Systems. The only other kit available is the State of Massachusetts Kit, available to Massachusetts certified contractors.
As the April 22 compliance date passed, concern grew over the limited availability of training classes and individuals qualified to facilitate training complicates the issue. On May 27, 2010, when April 22 was still the effective date, the Senate opted to introduce a bill (not yet passed by the house) to temporarily block fines to contractors if they aren't yet in compliance with the EPA rules. Senator Susan Collins of Maine, who sponsored the bill, said she supports efforts to "rid lead-based paint from our homes," but took issue with the burden on contractors who are not provided sufficient training opportunities from the EPA.
"The problem is there still aren't enough EPA-certified trainers in place to certify contractors," she said. "As a result, contractors face devastating fines...The intent of my amendment is to give small contractors and construction professionals more time to comply with the new rule."
The EPA has heard the concern-- though October 1 is the new effective date, contractors and renovators will have until the last day of the calendar year for training, provided they enroll by September 31. Will extra time solve the issue of training availability? Only time will tell.
Local enforceability of the new law is also in question as civic health officers and building inspeactors gain a better understanding of their role in RRP rule requirements.
According to Health Offcer/Building Inspector Kevin Kelley, based in Hampton Falls, New Hampshire, local officers grappled with their enforcement roles during a recent question and answer session with the EPA. It's become clear the onus of the RRP rule lies with local officals as much as it does with contractors and homeowners. "There is record reeping required of me too," Kelley said.
In addition to familiarizing himself with new record-keeping obligations, Kelley said he has already been working to assist local governments in integrating the RRP rule when requesting bids for work on town property.
In addition to training and enforceability, RRP rule language and definitions are already in question. Another point of confusion is the issue of high efficiency particulate (HEPA) vacuums for lead cleanup as required within the rule. Though the EPA has mandated the use of HEPA vacuums, standards for EPA-approved vacuums remain blurry. Though some vacuums bear the HEPA designation in name, vacuum leakage is a concern. Many machines with retrofitted filters are not necessarily up-to-standard.
Though feasibility of training, compliance, enforceability and semantics are still points of uncertainty, recent activity suggests the EPA is dedicated to working out the kinks and enforcing the RRP rule. Amendments to the rule that went into effect on July 6 place more responsibility on contractors' plates.
One amendment deals with the issue of "cleaning verification," which requires a comparison of a sample from a recently cleaned work area with an EPA Cleaning Verification card. Another mandate deals with resident notification, which demands contractors provide documentation of compliance and RRP training to residents in buildings undergoing renovation.
The July 6 elimination of the "opt-out" provision is the most telling sign of the RRP rule's permanence. The "opt-out" provision initially permitted homeowners in single-family residences to allow renovations without RRP rule adherence in homes there were owner-occupied and did not have any pregnant residents or residents under the age of 6.
In the future, those who aren't trained could face lawsuits, legal fees and be slammed with EPA fines that reach $37,500 per day. In addition to potential penalties, contractors will have to recalibrate the way in which they do business--extra costs associated with proper lead cleanup will need to be incorporated into quotes.
Now is the time for contractors to focus on education, training and the development of a plan to deal with the issue of lead. Lead isn't an issue of the past. It's an issue of the present, future, and an entire industry.
From: Selectwood Perspective in the Summer & Fall 2010 Issue of "Builder's Price Guide"
Most troubling about the new regulations, extended until October 1st, 2010, is the removal of the exemption for "Owner Occupied/No Children Under Six" rule that would have saved many homeowners from the trouble and expense that this new legislation would create.
New Guidelines for Disturbing Lead Paint
The words "lead paint" may conjure images of dust, paint chips and old homes, but lead paint is not an issue of the past. As the EPA's rules and regulations governing lead-based paint renovation, repair and painting continue to evolve; contractors will be expected to stay up-to-date on new rules and handling practices. Education is essential in ensuring contractors develop a proactive strategy when disturbing existing lead paint. One thing is for sure-- lead paint in older homes and buildings is a real problem, and it's here to stay.
Though lead paint was banned for residential use in 1978, the health issues associated with it remain. According to the Environmental Protection Agency (EPA), children under the age of six are particularly susceptible to the potentially harmful effects of lead paint chips and dust that can be disturbed during renovation. Lead can affect a child's brain and nervous system. Lead dust digestion may cause reduced IQ, learning disabilities and behavioral issues. Pregnant women can "transfer lead to their fetuses," and adults can suffer the ill-effects of low levels of lead, which include high blood pressure and hypertension.
To combat the threat of creating more lead paint dust in buildings, the EPA established the Renovation, Repair and Painting Program (RRP rule), which was published on April 22, 2008, and originally went into effect on April 22, 2010. On June 15th the EPA announced it would delay the enforcement until October 1, 2010 to allow more time for contractor training and certification. The delay in training enforcement does not mean that contractors will still not be liable for not using lead safe practices even if they are not currently certified. As the revised enforcement October 1 date draws closer, questions regarding the testing, training, and safe practices linger amoung contractors.
Aimed at contractors, painters, electricians, plumbers, HVAC contractors and other trade contractors, the rule outlines appropriate methods of containing work areas with lead based paint. Any interior or exterior surface originally painted in 1978 or earlier is considered to be contaminated by lead paint and must be tested. RRP guidelines prohibit work practices "which generate significant amounts of lead-contaminated dust. The rule requires firms working on homes built prior to 1978 receive training, complete with a certification and register with the EPA.
Even for those working to proactively adhere to the new rule, compliance is complicated. For instance, there is only one EPA-approved, LeadCheck Kit from Hybrivet Systems. The only other kit available is the State of Massachusetts Kit, available to Massachusetts certified contractors.
As the April 22 compliance date passed, concern grew over the limited availability of training classes and individuals qualified to facilitate training complicates the issue. On May 27, 2010, when April 22 was still the effective date, the Senate opted to introduce a bill (not yet passed by the house) to temporarily block fines to contractors if they aren't yet in compliance with the EPA rules. Senator Susan Collins of Maine, who sponsored the bill, said she supports efforts to "rid lead-based paint from our homes," but took issue with the burden on contractors who are not provided sufficient training opportunities from the EPA.
"The problem is there still aren't enough EPA-certified trainers in place to certify contractors," she said. "As a result, contractors face devastating fines...The intent of my amendment is to give small contractors and construction professionals more time to comply with the new rule."
The EPA has heard the concern-- though October 1 is the new effective date, contractors and renovators will have until the last day of the calendar year for training, provided they enroll by September 31. Will extra time solve the issue of training availability? Only time will tell.
Local enforceability of the new law is also in question as civic health officers and building inspeactors gain a better understanding of their role in RRP rule requirements.
According to Health Offcer/Building Inspector Kevin Kelley, based in Hampton Falls, New Hampshire, local officers grappled with their enforcement roles during a recent question and answer session with the EPA. It's become clear the onus of the RRP rule lies with local officals as much as it does with contractors and homeowners. "There is record reeping required of me too," Kelley said.
In addition to familiarizing himself with new record-keeping obligations, Kelley said he has already been working to assist local governments in integrating the RRP rule when requesting bids for work on town property.
In addition to training and enforceability, RRP rule language and definitions are already in question. Another point of confusion is the issue of high efficiency particulate (HEPA) vacuums for lead cleanup as required within the rule. Though the EPA has mandated the use of HEPA vacuums, standards for EPA-approved vacuums remain blurry. Though some vacuums bear the HEPA designation in name, vacuum leakage is a concern. Many machines with retrofitted filters are not necessarily up-to-standard.
Though feasibility of training, compliance, enforceability and semantics are still points of uncertainty, recent activity suggests the EPA is dedicated to working out the kinks and enforcing the RRP rule. Amendments to the rule that went into effect on July 6 place more responsibility on contractors' plates.
One amendment deals with the issue of "cleaning verification," which requires a comparison of a sample from a recently cleaned work area with an EPA Cleaning Verification card. Another mandate deals with resident notification, which demands contractors provide documentation of compliance and RRP training to residents in buildings undergoing renovation.
The July 6 elimination of the "opt-out" provision is the most telling sign of the RRP rule's permanence. The "opt-out" provision initially permitted homeowners in single-family residences to allow renovations without RRP rule adherence in homes there were owner-occupied and did not have any pregnant residents or residents under the age of 6.
In the future, those who aren't trained could face lawsuits, legal fees and be slammed with EPA fines that reach $37,500 per day. In addition to potential penalties, contractors will have to recalibrate the way in which they do business--extra costs associated with proper lead cleanup will need to be incorporated into quotes.
Now is the time for contractors to focus on education, training and the development of a plan to deal with the issue of lead. Lead isn't an issue of the past. It's an issue of the present, future, and an entire industry.
From: Selectwood Perspective in the Summer & Fall 2010 Issue of "Builder's Price Guide"
Tuesday, August 17, 2010
Why Using A General Contractor or Construction Manager Makes Sense for Homeowners
When contemplating a construction or remodeling project – many homeowners receive “sticker shock” when the prices come in. As a result, in an effort to save money, some are tempted to circumvent the services of a General Contractor (GC) or Construction Manager that will coordinate and manage the job. If a detailed breakdown of costs is given – homeowners often look at the general contractors fees and are tempted into believing that they can eliminate these costs and save money simply by acting as their “own GC”.
To make a professional analogy, this is like acting as your own lawyer. Ever hear how that turns out?
Yes, a general contractor earns money by adding a percentage to the subcontractor’s fees and to the materials on the project. However, the general contracting project delivery scenario will typically not cost the homeowner significantly more money and when all is said and done – it may actually cost less.
Here's why: the general contractor handles all the details from a global perspective including: client contact, negotiations, building permits and inspections, subcontractor bidding, scheduling, materials procurement, and customer billing. A professional GC will get preferential pricing from his subcontractors because they supply them with work on an ongoing basis. The GC is looking out for a homeowner’s financial interests by getting a better deal on the work than the homeowner could get for themselves.
The “General Contracting” process essentially means that the people who are good at "managing the work" do their thing and the people that are good at "doing the work" do their thing. The GC’s Project Manager supervises and schedules the specialty subcontractors to make sure efficiency through specialization is achieved.
In addition to making sure that the right subcontractors are on the job when needed, the GC is also responsible for getting them paid. Immaculate and professional work is rewarded by timely payment. A well-run job with timely requisitions for payment to the homeowner (at predetermined completed work milestones) will ensure that the subs are paid promptly and your job runs smoothly. This scenario is win-win for everyone. The result is that your job is done better, faster and for competitive prices.
When a homeowner elects to “go it alone” and hire individual tradesman to do the work, several things usually happen.
1. The homeowner pays more: Subcontractors will charge homeowners premium prices because they have learned that dealing directly with homeowners is only profitable when the fees are high.
2. The work scope changes & the price goes up: Homeowners are at risk to overpay again when the scope of work changes - and this happens on virtually every job. Whether it's from unforeseen circumstances or homeowners changing their minds, it will happen. This can be a huge "profit center" for a subcontractor because they basically have you locked into a "take it or leave it" negotiating position while your home is torn apart. Just like your auto mechanic!
3. The job takes considerably longer: When multiple subcontractors are involved, things will take longer because the project is not professionally phased and coordinated. Work gets done slowly, out of sequence, or not at all… because subs are not showing up precisely when they are needed.
4. Things go wrong: The possibilities for things to go wrong increase at an exponential rate because it's "every man for himself". No one is taking responsibility for the whole project and for the customer's satisfaction with the complete job. When conflicts arise over building standards, best practices, and possible solutions you may not get the best or most objective advice. One sub can blame another or offer you a remedy that may be in his best interest, but not necessarily yours. A subcontractor’s solution may also not be in the interest of the other tradesmen and could create more unnecessary work for them. Conflicts, contradictions and chaos. Guess who pays for all of this? Once again, no one is looking out for your best interests with respect to the whole project.
5. Problems with materials and supplies: Your suppliers don't deliver or what you received is not what you thought you ordered. If materials are not on the job when you need them – you’ll lose more time. If it was ordered wrong and was custom-made, guess who's paying for these mistakes? If subs are standing around waiting for materials, guess who ultimately pays? A good GC has far more leverage with building suppliers and getting the right products at the right time is his responsibility. And…when it is not right, he’s at risk, not you.
6. Quality Control: While some quality control issues are obvious to all – many are not. How familiar are you with industry standards and general building practices? Arcane issues with technical details and “means and methods” are not usually common knowledge among homeowners. A GC will ensure that your project – including important things hidden in the walls - are done to code and to industry standards.
7. You’re on your own with city officials and building inspectors. Who's going to make sure the inspections are done without holding up the project? If something does go wrong, a GC is far better equipped to resolve building code conflicts by virtue of their experience. Will a bunch of bureaucrats hold you up indefinitely? Will you be running in circles asking your subs for advice? If your subs installed code deficient work, who's going to pay for any inspector mandated changes?
8. Project Coordination issues and delays: When things slow down or go wrong - more of your time and your money are wasted. Are you a skilled negotiator or conflict resolution specialist? What about unreturned phone calls to the subcontractors and broken promises? You already have a full-time job… do you really need more aggravation, more dust, more noise and strangers wandering around your house for who knows how much longer?
9. Peace of Mind: The homeowner often finds themselves completely and utterly frustrated and they can lose their mind, or their marriage, or both! Quite often, after their experiences, many will emphatically say "never again!"
When you have a professional General Contractor or Construction Manager running your project, you can actually SAVE money. Getting a high quality project completed for a competitive price, considerably faster and with less aggravation is a huge plus for everyone I've ever worked with.
In conclusion, most homeowner's simply do not have the time, expertise or patience necessary to really make a construction project go smoothly and affordably. Many may try under the common perception of trying to "save a lot of money". When all is said and done however, only the smallest percentage of homeowners are successful and when you add it all up, even they probably didn't save any money - or enough money - to justify their time and aggravation.... and the job took longer!
In 25 years of being in construction, I have never heard even a single homeowner say: "I ran the job myself, it went exactly as planned and took less time and cost less money then I expected".
James Mitchell III
Design / Builder, Construction Manager / General Contractor, Realtor
Mr. Mitchell has worked for large and small Construction Managers and General Contractors for over 25 years. His writing and work have appeared regionally in: The Boston Globe, The Boston Business Journal, Banker & Tradesman, The New England Real Estate Journal, The Boston Society of Architects Chapter Newsletter and Nationally in: Engineering News Record, Ladies Home Journal, and Yankee Magazine.
To make a professional analogy, this is like acting as your own lawyer. Ever hear how that turns out?
Yes, a general contractor earns money by adding a percentage to the subcontractor’s fees and to the materials on the project. However, the general contracting project delivery scenario will typically not cost the homeowner significantly more money and when all is said and done – it may actually cost less.
Here's why: the general contractor handles all the details from a global perspective including: client contact, negotiations, building permits and inspections, subcontractor bidding, scheduling, materials procurement, and customer billing. A professional GC will get preferential pricing from his subcontractors because they supply them with work on an ongoing basis. The GC is looking out for a homeowner’s financial interests by getting a better deal on the work than the homeowner could get for themselves.
The “General Contracting” process essentially means that the people who are good at "managing the work" do their thing and the people that are good at "doing the work" do their thing. The GC’s Project Manager supervises and schedules the specialty subcontractors to make sure efficiency through specialization is achieved.
In addition to making sure that the right subcontractors are on the job when needed, the GC is also responsible for getting them paid. Immaculate and professional work is rewarded by timely payment. A well-run job with timely requisitions for payment to the homeowner (at predetermined completed work milestones) will ensure that the subs are paid promptly and your job runs smoothly. This scenario is win-win for everyone. The result is that your job is done better, faster and for competitive prices.
When a homeowner elects to “go it alone” and hire individual tradesman to do the work, several things usually happen.
1. The homeowner pays more: Subcontractors will charge homeowners premium prices because they have learned that dealing directly with homeowners is only profitable when the fees are high.
2. The work scope changes & the price goes up: Homeowners are at risk to overpay again when the scope of work changes - and this happens on virtually every job. Whether it's from unforeseen circumstances or homeowners changing their minds, it will happen. This can be a huge "profit center" for a subcontractor because they basically have you locked into a "take it or leave it" negotiating position while your home is torn apart. Just like your auto mechanic!
3. The job takes considerably longer: When multiple subcontractors are involved, things will take longer because the project is not professionally phased and coordinated. Work gets done slowly, out of sequence, or not at all… because subs are not showing up precisely when they are needed.
4. Things go wrong: The possibilities for things to go wrong increase at an exponential rate because it's "every man for himself". No one is taking responsibility for the whole project and for the customer's satisfaction with the complete job. When conflicts arise over building standards, best practices, and possible solutions you may not get the best or most objective advice. One sub can blame another or offer you a remedy that may be in his best interest, but not necessarily yours. A subcontractor’s solution may also not be in the interest of the other tradesmen and could create more unnecessary work for them. Conflicts, contradictions and chaos. Guess who pays for all of this? Once again, no one is looking out for your best interests with respect to the whole project.
5. Problems with materials and supplies: Your suppliers don't deliver or what you received is not what you thought you ordered. If materials are not on the job when you need them – you’ll lose more time. If it was ordered wrong and was custom-made, guess who's paying for these mistakes? If subs are standing around waiting for materials, guess who ultimately pays? A good GC has far more leverage with building suppliers and getting the right products at the right time is his responsibility. And…when it is not right, he’s at risk, not you.
6. Quality Control: While some quality control issues are obvious to all – many are not. How familiar are you with industry standards and general building practices? Arcane issues with technical details and “means and methods” are not usually common knowledge among homeowners. A GC will ensure that your project – including important things hidden in the walls - are done to code and to industry standards.
7. You’re on your own with city officials and building inspectors. Who's going to make sure the inspections are done without holding up the project? If something does go wrong, a GC is far better equipped to resolve building code conflicts by virtue of their experience. Will a bunch of bureaucrats hold you up indefinitely? Will you be running in circles asking your subs for advice? If your subs installed code deficient work, who's going to pay for any inspector mandated changes?
8. Project Coordination issues and delays: When things slow down or go wrong - more of your time and your money are wasted. Are you a skilled negotiator or conflict resolution specialist? What about unreturned phone calls to the subcontractors and broken promises? You already have a full-time job… do you really need more aggravation, more dust, more noise and strangers wandering around your house for who knows how much longer?
9. Peace of Mind: The homeowner often finds themselves completely and utterly frustrated and they can lose their mind, or their marriage, or both! Quite often, after their experiences, many will emphatically say "never again!"
When you have a professional General Contractor or Construction Manager running your project, you can actually SAVE money. Getting a high quality project completed for a competitive price, considerably faster and with less aggravation is a huge plus for everyone I've ever worked with.
In conclusion, most homeowner's simply do not have the time, expertise or patience necessary to really make a construction project go smoothly and affordably. Many may try under the common perception of trying to "save a lot of money". When all is said and done however, only the smallest percentage of homeowners are successful and when you add it all up, even they probably didn't save any money - or enough money - to justify their time and aggravation.... and the job took longer!
In 25 years of being in construction, I have never heard even a single homeowner say: "I ran the job myself, it went exactly as planned and took less time and cost less money then I expected".
James Mitchell III
Design / Builder, Construction Manager / General Contractor, Realtor
Mr. Mitchell has worked for large and small Construction Managers and General Contractors for over 25 years. His writing and work have appeared regionally in: The Boston Globe, The Boston Business Journal, Banker & Tradesman, The New England Real Estate Journal, The Boston Society of Architects Chapter Newsletter and Nationally in: Engineering News Record, Ladies Home Journal, and Yankee Magazine.
Friday, August 13, 2010
Balance Shifts in Rent vs. Own Debate
Some purchasing based on 'consumption' reasons, not financial
By: Steve Bergsman, Friday, August 13, 2010.
Inman News
An associate of mine who analyzes the real estate investment trust market for Barclays Capital recently held a press conference, which he titled, "U.S. Apartment Markets: Recovery Arrives."
According to his and others' research, the multifamily housing market has finally turned the corner since the start of the economic downturn in 2007. Or, as my friend wrote, "Apartment demand has recovered more rapidly than most observers expected."
That's surely a relief for the owners of apartment buildings, but tangentially, it is also good news for potential homeowners because in the shifting metrics that contrast the value of homeownership vs. renting an apartment, the forward balance is once again with owning a residence.
The pressure on apartment owners came as a bit of a surprise. When the housing market turned and people started losing homes, it was initially assumed these former homeowners would end up renting apartments. That didn't happen.
The economic downturn was so severe that vast numbers of Americans who lost homes or jobs moved back in with family or moved in with other existing renters. They could not afford to rent an apartment on their own.
To compound the problem, so many formerly owner-occupied homes were turned into rentals that apartment owners faced a new wave of competition. The results were declining occupancies and falling rental rates.
Apparently, the bleeding has stopped in most cities and rental rates are firming up again -- except for the most severely damaged markets like Las Vegas or most of Florida.
Historically in the United States, it was always cheaper to rent than to own, but when numerous federal housing programs were introduced in the 1950s, American homeownership increased, and, according to the Wall Street Journal, by 1970 it was cheaper to buy than to rent.
The long-term appreciation of housing further imbalanced the equation. Homeownership was only around 40 percent in the United States during the 1940s, then for a 30-year period beginning in the 1960s, homeownership ranged from 60 percent to 65 percent. Coming with the new decade, a volatile combination of low interest rates, galloping appreciation and government incentives pushed the homeownership percentage to an all-time high of just under 70 percent in 2004.
Due to the tax benefit of homeownership, coupled with capital gains over the course of the last decade, at least until 2006, it was clearly less of a financial burden to own a home, said Michael Lea, the director of the Corky McMillin Center for Real Estate at San Diego State University.
"There was a strong incentive to get into homeownership, but now it is much more equalized," Lea said.
In other words, for a couple of years renting was probably the cheaper alternative --although it was close. However, the equation is shifting again and homeownership has become the less expensive alternative.
While average apartment rental rates have fallen over the past few years, the decline for the most part has been moderate. In comparison, home values in some places around the country have come down 30 to 40 percent. So deeper cuts in home values vs. rental costs, combined with low interest rates, make homeownership look good again, at least on paper.
Earlier this year, the John Burns Market Intelligence report declared: "Housing cost to income ratio dropped 25 percent, and housing affordability remains excellent compared to history," and, " Affordability is so good that owning the median-price home is now less expensive than renting the average apartment."
There are two problems with all of this: one is psychological and the other financial.
"This is probably a good time to buy, (as) mortgage rates are the lowest in a half century, but people are just not reacting to that," observed Michael Carliner, an economic consultant and visiting fellow at the Harvard University Joint Center for Housing Studies.
After decades of rampant home-value appreciation, ownership decisions had as much to do with financial gain as they did about finding the perfect place for family.
Part of homeownership is having a place to live and part of it is an investment, the latter of which morphed from a long-term stragey into short-term speculation. When the prospect of capital gains went away and negativity equity set in, that took a lot of wind out of the demand for homeownership.
"The cost of owning is dominated by capital gains, which if you are making a homeownership decision, means, 'What are your expectations?' said Carliner. "And expectations have been tarnished by recent experience. A lot of people were overconfident with capital gains -- now they are overly pessimistic."
A second psychological consideration to arise in this downturn is the entrapment predicament.
"One of the real negative consequences of the whole bursting of the housing bubble is that a lot of people are now locked into their house," said Lea.
"They don't feel then can move because of negative equity. It is a real inhibitor for people who want to move to find jobs, and probably contributes to unemployment."
The other factor in regard to buying vs. renting today is that even though mortgage rates are down, more upfront money is required and that makes buying a home costly.
As a result, Carliner offers this common-sense suggestion: If you are going to be in a location for just a year or two, the cost of buying is such a big expense that it does not make any sense to acquire; if you are going to be in a location for 10 years, you are better off buying.
Lea's son, who lives in San Francisco, was trying to decide whether he should continue to rent or to own. Lea counseled ownership, due solely to "consumption," not financial reasons -- and that he should factor out capital appreciation.
"So, he is going to end up paying more than he was in a rental, although he is only moving three blocks," Lea says. But, he's getting a nicer place; he's in control of his own environment; monthly costs are stable; and he knows he can stay there as long as he wants."
Steve Bergsman is a freelance writer in Arizona and author of serveral books. His latest book, "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade," has been ranked as a top-selling real estate investment book for the Amazon Kindle e-reader.
By: Steve Bergsman, Friday, August 13, 2010.
Inman News
An associate of mine who analyzes the real estate investment trust market for Barclays Capital recently held a press conference, which he titled, "U.S. Apartment Markets: Recovery Arrives."
According to his and others' research, the multifamily housing market has finally turned the corner since the start of the economic downturn in 2007. Or, as my friend wrote, "Apartment demand has recovered more rapidly than most observers expected."
That's surely a relief for the owners of apartment buildings, but tangentially, it is also good news for potential homeowners because in the shifting metrics that contrast the value of homeownership vs. renting an apartment, the forward balance is once again with owning a residence.
The pressure on apartment owners came as a bit of a surprise. When the housing market turned and people started losing homes, it was initially assumed these former homeowners would end up renting apartments. That didn't happen.
The economic downturn was so severe that vast numbers of Americans who lost homes or jobs moved back in with family or moved in with other existing renters. They could not afford to rent an apartment on their own.
To compound the problem, so many formerly owner-occupied homes were turned into rentals that apartment owners faced a new wave of competition. The results were declining occupancies and falling rental rates.
Apparently, the bleeding has stopped in most cities and rental rates are firming up again -- except for the most severely damaged markets like Las Vegas or most of Florida.
Historically in the United States, it was always cheaper to rent than to own, but when numerous federal housing programs were introduced in the 1950s, American homeownership increased, and, according to the Wall Street Journal, by 1970 it was cheaper to buy than to rent.
The long-term appreciation of housing further imbalanced the equation. Homeownership was only around 40 percent in the United States during the 1940s, then for a 30-year period beginning in the 1960s, homeownership ranged from 60 percent to 65 percent. Coming with the new decade, a volatile combination of low interest rates, galloping appreciation and government incentives pushed the homeownership percentage to an all-time high of just under 70 percent in 2004.
Due to the tax benefit of homeownership, coupled with capital gains over the course of the last decade, at least until 2006, it was clearly less of a financial burden to own a home, said Michael Lea, the director of the Corky McMillin Center for Real Estate at San Diego State University.
"There was a strong incentive to get into homeownership, but now it is much more equalized," Lea said.
In other words, for a couple of years renting was probably the cheaper alternative --although it was close. However, the equation is shifting again and homeownership has become the less expensive alternative.
While average apartment rental rates have fallen over the past few years, the decline for the most part has been moderate. In comparison, home values in some places around the country have come down 30 to 40 percent. So deeper cuts in home values vs. rental costs, combined with low interest rates, make homeownership look good again, at least on paper.
Earlier this year, the John Burns Market Intelligence report declared: "Housing cost to income ratio dropped 25 percent, and housing affordability remains excellent compared to history," and, " Affordability is so good that owning the median-price home is now less expensive than renting the average apartment."
There are two problems with all of this: one is psychological and the other financial.
"This is probably a good time to buy, (as) mortgage rates are the lowest in a half century, but people are just not reacting to that," observed Michael Carliner, an economic consultant and visiting fellow at the Harvard University Joint Center for Housing Studies.
After decades of rampant home-value appreciation, ownership decisions had as much to do with financial gain as they did about finding the perfect place for family.
Part of homeownership is having a place to live and part of it is an investment, the latter of which morphed from a long-term stragey into short-term speculation. When the prospect of capital gains went away and negativity equity set in, that took a lot of wind out of the demand for homeownership.
"The cost of owning is dominated by capital gains, which if you are making a homeownership decision, means, 'What are your expectations?' said Carliner. "And expectations have been tarnished by recent experience. A lot of people were overconfident with capital gains -- now they are overly pessimistic."
A second psychological consideration to arise in this downturn is the entrapment predicament.
"One of the real negative consequences of the whole bursting of the housing bubble is that a lot of people are now locked into their house," said Lea.
"They don't feel then can move because of negative equity. It is a real inhibitor for people who want to move to find jobs, and probably contributes to unemployment."
The other factor in regard to buying vs. renting today is that even though mortgage rates are down, more upfront money is required and that makes buying a home costly.
As a result, Carliner offers this common-sense suggestion: If you are going to be in a location for just a year or two, the cost of buying is such a big expense that it does not make any sense to acquire; if you are going to be in a location for 10 years, you are better off buying.
Lea's son, who lives in San Francisco, was trying to decide whether he should continue to rent or to own. Lea counseled ownership, due solely to "consumption," not financial reasons -- and that he should factor out capital appreciation.
"So, he is going to end up paying more than he was in a rental, although he is only moving three blocks," Lea says. But, he's getting a nicer place; he's in control of his own environment; monthly costs are stable; and he knows he can stay there as long as he wants."
Steve Bergsman is a freelance writer in Arizona and author of serveral books. His latest book, "After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade," has been ranked as a top-selling real estate investment book for the Amazon Kindle e-reader.
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