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Recently, I was asked by Adam Kritzer of the Mortgage Calculator Blog to participate in a Q&A-type interview. That interview was just posted, and you can find it here. An excerpt:

Mortgage Calculator
: It seems both the housing bubble and its bursting have been characterized by important regional disparities, so it’s not really meaningful to make generalizations on a national basis. Do you think that the recovery, whenever it cements itself, will also adhere to this pattern?

Absolutely. The areas to recover the first will be those that didn’t participate in the bubble in the first place, states like Texas or parts of the mid-West that still have sound economies. The next areas to recover will be those that did have price run-ups but also have relatively strong economies and have barriers to more building, which are mostly located along the coasts with the exception of Florida, which is a basket case unto itself.

What will take longer to recover are areas popular for vacation homes and those markets that have served as bedroom communities for larger job centers in places like Los Angeles or the Bay Area and require a commute. Here in California, that means the Central Valley, the low and high desert areas and much of the Inland Empire.

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

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

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

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

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

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

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

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

My monthly column for the July issue of Builder & Developer magazine is now online. In this article, entitled "Gold Nugget Winners Evolve," I discuss how the demand for smaller and more energy-efficient homes has returned some builders to their roots as artisans and not just providers of commodities. You can read the entire article by clicking here.

An excerpt:

For months we’ve been reading and hearing about how builders have been downsizing both the size and specification levels of the homes they build to cater to today’s more frugal buyers. In the first stage of that transformation, it was a practical move, and often catered more to function than form.

But now that industry architects and building pros have become more comfortable with homes that are smaller yet also more affordable, urban-oriented yet energy efficient, these second-stage homes are showing the type of creativity that win awards.

At the 2010 Gold Nugget Awards this past June, however, the winners demonstrated that only the right combination of form and function will ultimately win the accolades of the most important judges – the buyers...

For months we’ve been reading and hearing about how builders have been downsizing both the size and specification levels of the homes they build to cater to today’s more frugal buyers. In the first stage of that transformation, it was a practical move, and often catered more to function than form.

But now that industry architects and building pros have become more comfortable with homes that are smaller yet also more affordable, urban-oriented yet energy efficient, these second-stage homes are showing the type of creativity that win awards.

At the 2010 Gold Nugget Awards this past June, however, the winners demonstrated that only the right combination of form and function will ultimately win the accolades of the most important judges – the buyers. See the list of winners here.

In the case of 1Mission in San Diego, developer CLB Partners chose to restore a somewhat faded city block more to its 1920s glory at the street level while copying architectural cues from surrounding buildings for the upper floors. Set at the junction of the very walk-able neighborhoods of Hillcrest and north Mission Hills, the mixed-use retail and residential project combines front-facing townhomes along with flats attached to large balconies.

To tie it together, architect M.W. Steele Group introduced a public paseo and courtyard that help the two restaurants better capture potential customers. Like a much smaller version of the award-winning Uptown District project nearby that was built in the early 1990s, 1Mission proves that mixed-use projects can work even in a recession, but only if created with the right combination of location and execution.

In the City of Westminster in Southern California, Bridgecreek Development also made safe connectivity to the local community a priority when developing Morian Asian Gardens, an age-restricted condominium project in the Vietnamese-dominated Little Saigon. By blending feng shui design models with a French-inspired aesthetic, architect Danielian Associates wanted to evoke a classic Vietnam environment while also providing the more practical and social aspects of two clubhouses that bring in the best of the local climate via adjacent courtyards.

For energy efficiency, it’s harder to get greener than Los Vecinos in Chula Vista south of San Diego, which was named Green Sustainable Community of the Year. Earning the coveted LEED Platinum status and built on the site of an abandoned model (of which 84% of materials were re-purposed for the new building), this affordable Wakeland Housing & Development rental project also requires residents to complete a green training course. Given the combination of its solar array which provides 90% of its electrical needs, a turf area requiring no water and most services located within a half-mile walk, it’s certainly no surprise that Los Vecinos was accepted into the Zero Energy New Home (ZENH) program of the California Energy Commission for ongoing education purposes.

And yet for sheer creativity, Nelson Development’s Arden Estates in the West Portal neighborhood of San Francisco proves that urban infill doesn’t necessarily mean high density. After carving out seven 4,000-square-foot lots from a single undeveloped 28,000-square-foot parcel, each 3,200-square-foot home promises luxury finishes with high ceilings, generous setbacks, gardens and views, and also claims one of the highest green building ratings offered by the city.

Awarded Green Point Rated Community of the Year, the considerable architectural challenge was to blend in with both the surrounding homes as well as a the site’s keynote: Arden Wood, a Normandy-style chateau built in 1930 that has since been operating as a multi-purpose Christian Science center for spiritual healing, nursing services and education.

Yet by remaining sensitive to the neighborhood’s history and not building to maximum density, it’s projects like this that remind buyers that many builders are also artisans.

For many months we've continued to hear about the sturm und drang in the commercial real estate market. Where's that crash we keep hearing about? It is just over the horizon, or has that sector of the real estate industry learned the lessons of the housing crash and decided to manage revaluations in a different way? According to a story in the L.A. Times, not only may the worst be over for office buildings, retail stores and industrial properties, but funding is now starting to emerge from the sidelines. From the story:

After nearly three years of declines there are signs that Southern California's beaten-down commercial real estate market has struck bottom — setting up the possibility of a rebound later this year.

In a sign of the easing, heavyweight investors armed with buckets of cash are on the prowl, looking to snap up office buildings, warehouses, shopping centers and apartments at the market's low, industry observers say. The buyers are choosy, but the most desirable buildings elicit bidding wars when they come up for sale...

Although commercial building landlords in many markets are still struggling with high vacancy rates and weak rents, the erosion in some sectors has slowed, piquing the interest of buyers. In addition, reinvigorated banks have been able to postpone or avoid liquidating billions of dollars' worth of distressed real estate loans sitting on their books, helping to solidify prices.

In a similar fashion, Southern California's housing market hit bottom more than a year ago and prices have been trudging higher ever since, partly because a feared wave of fresh foreclosures hasn't materialized.

If the commercial real estate market continues to gain strength it would represent a significant shift in economic risk because many experts had feared that mass defaults by landlords on their loans could cripple banks and drive the country deeper into recession.

"It's true that thousands of commercial loans must be worked out and some of these properties will enter the market in 2010," investment banker David Rifkind said. But "federal policy has been accommodating to banks and they are not being forced to realize losses."

With rents falling and the economy trembling, commercial real estate transactions had been rare during the downturn. Owners were holding on in hopes that prices would stop falling and buyers were holding back, waiting for the low point.

But a philosophical change has become apparent among investors, Rifkind said.

"There is so much money sitting on the sidelines that when distressed assets or even small pools of loans come to market, there is a flood" of interest, said Rifkind, managing partner of George Smith Partners.

"That became palpable to us in the first quarter," he said. "Money can't stay on the sidelines for long periods of time. It has to retool and be put to use."...

Click here for the entire story.


      
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