HBA President's Blog: Maintaining the Integrity of the Competitive Process

In today’s highly competitive market we are all looking for ways to expand our opportunities. Many of us are accepting a new reality -- we must bid more and more jobs in order to secure even one contract. We are painfully aware that buyers today are asking multiple builders to bid on their home construction project. Often times we discover that we are bidding against friends in the industry.

Recently, three of our HBA Board of Directors builder members discovered that we were bidding against one another for a large job. We also discovered that we were bidding against several non-HBA members. Our research further uncovered that at least one of those builders got his “tip” on this job from an employee of one of our associate members, and may have gained valuable contact information from another employee of an HBA associate member. Thanks to receiving proprietary information contained on documents submitted by other builders who had already been selected by the client to participate in the competitive process, this non-member builder contacted the out-of-state clients to enter into an already underway bidding process.

The HBA Board has authorized me to share this information to remind our members that ANY & ALL materials submitted for a bid are the confidential property of the builder submitting that information and should be treated accordingly. The Board also wishes to encourage businesses to examine the dynamic of environments with multiple salespeople in which a spirit of “survival of the fittest” can exist with such intensity that a salesperson would unethically obtain proprietary information to bring “their” builder into the bidding process on plans that they may come across, rather than miss out on the chance for a commission.

We trust that all of our members desire to follow the highest professional standards and we are confident that a simple reminder is the only course of action necessary. Please contact a board member or the HBA office with any comments or suggestions. We value your input and continued friendship.

Rusty MacLachlan
President, HBA Board of Directors
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Attack on Housing

The sobering theme of National Association of Home Builders Fall Board of Directors meetings last week in New York is that housing as we know it is under direct attack by the federal government. The Mortgage Interest Tax Deduction that millions of home buyers have counted on since 1913 is on the Congressional chopping block.   The recently-signed Small Business Jobs and Credit Act saw AD&C (Acquisition, Development & Construction) finance relief pulled out in the 11th hour.  That provision of the original bill would have eased credit restrictions that have crippled efforts to re-start the near dead housing industry (In 2009 we built the fewest number of homes in any one year since World War II - and 2010 is only marginally better).

Over the past 70 years, every recession that our nation has survived was led into recovery by the return of a robust housing market.  Our current government leaders have made it clear that they do not support housing growth, and in fact are implementing federal policies to deter what they call “urban sprawl.”  A recent article in Time Magazine (The Case Against Homeownership) predicts and supports a complete paradigm shift in our industry.  Obama administration officials have made clear their belief that our society needs to move towards a larger population of  high density, center city renters, and has promised to use regulatory pressures to “encourage” such change.


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President's Blog: A Winning Season May Be Just Around the Corner

“I’m just ready for all of this to be over.” Those words of pain have been uttered by many loyal St. Louis Cardinals fans recently. It’s become pretty obvious that our beloved team has given up. A quick look at the league standings only drive the point home. The team’s season is about to slide into the record books as officially over.

It can be a good thing, though, when the stats point to a negative season being officially finished. For example, our housing market slide appears to be over, as well. The internationally renowned financial magazine, Forbes, lists none other than Springfield, MO, as one of its top 10 housing markets for investors. We have made a list of front runners that includes Indianapolis, Denver, Colorado Springs, Nashville, and Austin, among others.

Forbes contends that real estate investment is gaining momentum. Overall, the housing slide has stabilized in some respects and those markets that were least volatile (prices never gained too quickly, and hence have not tumbled so severely,) are the markets Forbes finds are the safest bets for home investors. And let’s face it – all home buyers are essentially home investors.

The Forbes piece generated a fair amount of press around here this weekend. It is comforting validation from a credible source. But it shouldn’t shock those of us who have been carefully following the MarketGraphics reports and construction forecasts the HBA has offered during the last two years from data gurus like Joe Zanola and Edsel Charles. These guys have been studying housing stats for a long time. That’s why the HBA partnered with them in the first place: knowledge is power. MarketGraphics provides meaningful market data and analysis, the likes of which our area has never before seen. By bringing it to our market, the HBA is helping builders, developers and investors make better informed and ultimately more profitable decisions.

So, what has MarketGraphics analysis taught us along the way? While our market certainly has had its share of hard times, there are meaningful underlying advantages we have over most other markets. And that’s not just cheerleading. It is quantifiable. Those underlying advantages have led us to work through our once overbuilt new homes inventory more quickly, while most other markets still struggle with a glut of new (and now not-so-new) unsold homes. In fact, since May, we have actually experienced new home shortages in many price points throughout the Ozarks!

The Forbes article references many of those advantages in our market. But if you’ve been a part of our HBA/MarketGraphics forecasts and updates, they shouldn’t greatly surprise you: Markets with a stable job mix and population growth before the bust, and growing populations in the immediate future are factors that Forbes looked for in compiling their Top 10 list. Landing at #9 Springfield experienced 8% population growth from 2000 – 2005 and we expect another 7% growth over the next 5 years. Combine that with rising housing values, relatively low inventories, a growing job market (a CNNMoney.com study showed the fastest-growing county in Springfield’s Metro Area, Christian County, was ranked 12th in the nation among top counties for job growth,) and a low cost of living, (a recent CNBC special report “America’s Top States for Business 2010” ranked Missouri fifth in the nation for the cost of doing business.) And, as we all know, this is a beautiful and safe place to live. The Springfield area is one of the nation’s “sweet spots.”

Now, if someone would just tell the investors and lenders what a great opportunity there is here…wait…I think someone just did! Thank you Forbes.com!

The Cardinals season may be coming to a close, but it looks like a new winning season for us is just around the corner. Let’s “Play Ball”. Keeping the Faith!

God Bless

Rusty MacLachlan

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Housing Conference Recap - Finding the New Normal

The "good old days" of housing are gone for good. If you are waiting for the housing industry to get back to normal, you’re in for a surprise. It’s not going to happen. The old "normal" is gone, a new "normal" is evolving. Springfield’s 1st regional housing conference served as a road map for success in navigating the new normal.

Our growing population alone will drive the need for new homes, but the "Mega-Mansions" of recent years will not return. There will certainly always be large, even luxurious homes built, but that will be a rarity. Rising utility costs, increasing material expenses, and a “green” mentality of conservatism all point to a paradigm shift in the housing industry. In short, the homes we build are catching up with the shift the auto industry went through beginning in the 80’s. The end product will be similar: smaller, more efficient, with nicer amenities.

As much as I would love to give the Reader's Digest version of the conference, it would be impossible to include in one article. The speakers were all incredibly knowledgeable and on the cutting edge of our industry. We heard from Debra Bassert, an NAHB veteran who is Editor in Chief of Land Development magazine. Joe Zanola summarized an enormous volume of local statistics to clearly spell out the facts on lot development and new construction for our market, and in relation those to the other 21 states they track. (We are still at the top of the pack in reasons to be optimistic.) Other speakers led break out sessions that were relevant to those in attendance. The day was full of invaluable information -- for example, to download the most up-to-date new housing supply and demand chart for our six county area, click here.

Our keynote speaker Edsel Charles was far more than I expected. His credentials were impressive enough, but the more he “taught” us (he was clearly more than a polished speaker), the more all of those in attendance were aware that we were in the presence of a national housing giant. Mr. Charles was among the final four in President Obama’s hunt for a new Secretary of HUD, in spite of his Republican background. He is a former home builder, developer, and owner of a real estate company where he trained and employed nationally known radio host Dave Ramsey. The founder of MarketGraphics research group, Edsel Charles is mentor to 9 of the top 10 builders in the United States. His list of clients include municipalities, banks and builders that include David Weekly, Centex, Pulte and other nationally-known companies.

The road map for success was presented at the conference -- we are already planning for next year's event. The pitfalls were defined and the path to a different, yet exciting, future was clarified. And while attending this one event will not guarantee success, operating in the dark is not an option for those professionals who will be the leaders in the new "normal". I look forward to learning, adjusting, and moving forward with confidence into an exciting future in building the American Dream. I am still “keeping the faith.”

God Bless,

Rusty MacLachlan

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Help for Builders, Remodelers & Developers - Cost of Doing Business Program

BUILDER/REMODELER-ONLY BREAKFAST & PROGRAM ON DECEMBER 17
As builders, we know our industry is weathering difficult times and that the last couple of years have been challenging, to say the least. At this point home builders have a couple of options: We can sit around and complain about how bad it is; or we can take steps now to prepare ourselves and our companies to be ready when the building industry begins to hit its stride again. I am choosing to be proactive so that I am ready to hit the ground running when the houses start to go up again. And I’d like to offer you an opportunity to do the same.

The Home Builders Association of Greater Springfield has arranged to bring in Steve Hays, a CPA with RubinBrown LLP, out of St. Louis, to come and visit with local home builders about financial management issues unique to our profession. Steve is a nationally-renowned speaker in the building industry whose seminars cover subjects like how to properly evaluate construction cost percentages, gross profit percentages and key operating expenses. He also helps builders identify which reports, technology tools and key statistics and ratios that will be important as home builders prepare for success in the changing times ahead. As well, this type of crucial, market specific data is now available through the HBA, thanks to an exclusive agreement with MarketGraphics research company.

Due to the value and importance of what Steve will present in Springfield, we have decided to combine this presentation with the HBA’s fourth quarter Builder/Remodeler-Only Breakfast on Thursday, December 17, 2009. The Builder/Remodeler-Only Breakfast will begin at 8:00 am at the Library Center (4653 South Campbell in Springfield). At approximately 8:45 am Steve will begin his presentation, which will conclude around 11:30 am. Thanks to the generous support of breakfast sponsor Connell Insurance, the Builder Breakfast and the presentation are offered at no cost to you.

I encourage you to take a few hours and come and listen to Steve as he presents “The Cost of Doing Business – Best Business & Tax Practices for the New Decade”. (Download event flyer by clicking here.) Get your business management questions answered and prepare for success as the coming recovery arrives.

Again, the complimentary breakfast program is ONLY for builders, remodelors, and developers. The staff must have an accurate head count to order food so you MUST RSVP by Tuesday, Decemer 15 if you plan to attend. So, please RSVP by clicking here, or by calling 881-3711.

Keepin' the Faith,
Rusty MacLachlan
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Change and the Art of Survival

A very large Oak Tree was uprooted by a storm and thrown across a stream. It fell among some reeds, which the powerful tree addressed, “How is it that these winds can knock me down, but you who are so weak and frail survive?”

They replied, “You fight and contend with the wind, and consequently are destroyed; while we have learned to bend, and therefore survive.” The art of survival is not to avoid life’s storms, which we cannot, but to learn to adjust.

The time to adjust is here. In fact, a new state law affecting all new homes (custom built and spec homes,) is now in force. Any contract signed after August 28, 2009 must include an offer by the builder to install a fire protection sprinkler system at the expense of the buyer. The choice is fully up to the buyer as is the financial responsibility for the cost of the system/installation. As builders we should supply the buyer with an informational pamphlet endorsed by both the Home Builders Associations and the Missouri Fire Service Alliance, and ask the client to sign a form that confirms their intentions. Both forms are available at the HBA office. State law requires that builders make the offer; including the form as part of your contracts is your proof of compliance with the law. The HBA is requesting that you also provide us with a copy of the Offer Form. As you will come to discover these forms will provide invaluable data for future building code development. The current law sunsets December 31, 2011. At that point each municipality is free to decide for themselves whether or not to adopt the full IRC code that requires fire sprinkler systems to be installed in all new, and many remodeled homes.

The times they are a changing. In fact, in response to our ever changing and ever hungry for instant news society, your HBA has been testing, and is now ready to improve the way that you receive industry news. The printed newsletter that you are accustomed to seeing each month will become a quarterly printed report, and we will be adding a weekly e-Housing News. The board is receiving the test runs and we are more than impressed with the real time, useful reports. This e-newsletter is possibly the most professionally prepared report that you will find anywhere on the web. The navigation, the up-to-date information, and the easy click format is very user friendly. I am confident it will be a welcome new marketing option for those of you who want cutting edge, targeted advertising options.

The HBA is working tirelessly to make sure that our members are the best informed, best represented, and best prepared for success, industry professionals. Hey, now that the storm is over, the weather is looking pretty good. Sales are up and gaining strength. Permits are up, and new home inventory is getting very low. Watch for your weekly e-news reports for more details. God Bless.

Keeping the Faith,
Rusty MacLachlan

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President's Blog: A Tale of Two Sams

A wise grandmother once said, “If you’re having a bad day, then do something good for someone else. You will brighten their day and yours, too”. In the midst of a slow housing market, two of our builder members took the advice of Grandma.

At a time when conventional wisdom tells us to look out for #1, to scale back, to cut out ALL unnecessary expenses, the two Sams rose to the occasion. With the support of countless HBA members and other volunteers, Sam Bradley and Sam Clifton gave of themselves and changed lives. Two families and a hospital that provides cutting edge care to heal critically ill children were the direct beneficiaries, but the lives of all those involved have been forever changed.

Sam Bradley built the 2009 St. Jude Dream Home in our area, a collaborative project of the HBA Charitable Foundation and several other worthy partners. The home, located in Lions Gate subdivision, was a huge success. In spite of a slowing economy, our members (too many to list) donated time, materials, and sweat to produce a stunning home. Under the careful direction of Sam Bradley those involved put forth their very best. This 2009 Parade home was a work of art. This HBA Charitable Foundation project has actually raised approximately $1.7 million over the past three years to assist in the fight to find a cure for childhood cancers. The Dream Home has successfully raised money, but more importantly it has raised hope.

And, before anyone could catch their breath, Sam Clifton announced that he had been chosen to build a home for “Extreme Makeover - Home Edition”. With a groundbreaking date only weeks away, and an allotted construction time of one week, there was no time to waste. Sam Clifton called on the good people of our area and asked them to roll up their sleeves one more time. Many of you responded to the call by saying, “When can we start? What do you need?”

It looked like the State Fair had come to a Greene County farm road. Large circus tents were everywhere. Clifton truly was the ring master of a 24/7, three ring circus. The folks at “Extreme” said that this was an outstanding build and a top quality home. Again, many, many of our best stepped forward to give their all. With little or no sleep, volunteers poured out their hearts as they labored around the clock to assist a family in need. Months of work was squeezed into hours, even minutes. The EMHE’s theme this year is “Heroes”. Sam, you and all those who helped are truly Heroes.

Sam and Sam, and really everyone who had a hand in these events, you have made your grandmothers proud. God bless you all.

Keeping the Faith

Rusty MacLachlan, HBA President

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