What This Year’s Business Trends Forecast for 2012

It’s that time of year again when economists and other experts start crystal balling where they think the beleaguered U.S. economy and its housing industry could be headed in the next two years.

Those projections, as often as not, are based on historical factors, such as household formation. So Builder scoured the stories it has published in its magazine and online this year to identify trends we believe might spill into 2012 and influence how builders adjust to compete profitably.


The sudden rush of overseas builders and developers entering the U.S. housing market in 2011 could continue next year, especially if economic conditions don’t stabilize. Recent arrivals have included Japan’s ubiquitous Sekisui House, which forged strategic alliances with Newland Real Estate Group in California and Miller & Smith in Virginia. Australia’s G.J. Gardner Homes, which already operates franchises in California, Colorado, and Indiana, had its expansionary eye on Texas, Massachusetts, and Tennessee. Sanyo Homes in Japan broke ground in Portland, Ore., on its first steel-framed earthquake-resistant house in the U.S. And Sumitomo Forestry is investing $100 million in America’s Pacific Northwest over the next few years, and is using a subsidiary, Australia-based Henley Properties, to buy land in that region for development and new-home construction.


<strong xmlns="http://www.w3.org/1999/xhtml">Landmark Setting</strong> Cranes place the modules on a jobsite in Axton, Va., for the 35,000th house that modular manufacturer Nationwide Homes has produced in its 52 years.” width=”300″ /></p>
<p><strong>Landmark Setting</strong> Cranes place the modules on a jobsite in Axton, Va., for the 35,000th house that modular manufacturer Nationwide Homes has produced in its 52 years.</p>
<p>Could 2012 be the year when modular construction makes its presence felt in the housing sector? More contractors and developers looking for ways to rein in construction costs seem willing to at least give modular a second look. And several of the industry’s leading module manufacturers believe their time has come, including Massachusetts-based Blu Homes, which expects to have its second factory—a 250,000-square-foot facility in northern California—operational by the end of this year. Excel Homes hopefully introduced what it calls its “national” series of house designs. The startup Zeta Communities last June began supplying a 22-unit net-zero-energy community in Stockton, Calif., and forecasted it would produce modules for between 100 and 150 homes over the proceeding 12 months. Virginia-based Nationwide Homes—which started its 35,000th house last summer—is targeting urban infill projects for growth.</p>
<h3>8. RENTAL REBIRTH</h3>
<p>Rentals are emerging as a panacea of sorts for what ails America’s housing sector. In August the Obama administration reportedly began seeking investors that are willing to convert and manage as rental properties 92,000 foreclosed housing units now owned by Fannie Mae, Freddie Mac, and FHA. Lennar, the industry’s third-largest builder, indicated that it was open to getting involved in the government’s rental program.</p>
<h3>7. STARTING UP</h3>
<div><img src=STARTING OVER

America’s housing industry continues to be an arena for second acts. Irvine, Calif.-based Fieldstone Group of Companies took a two-year hiatus to clean up its balance sheet and land problems before it resumed building homes and developing land in 2011. Hearthside Homes spent 16 months in Chapter 11 before emerging with new private-equity financing that allowed Hearthside to buy land for the first time in six years and to start a new 356-unit community, Brightwater in Huntington Beach, Calif. (The emergence was short lived, because Hearthside’s financial backer pulled the plug in early November, firing Hearthside’s staff and shutting it down.) Name changes remain popular for old builders reinventing themselves: Americap Development Partners now goes by True Life Communities. The ownership of New Mexico’s Artistic Homes passed from father to son and, in the process, the company was renamed Palo Duro Homes.


When it agreed last spring to be acquired by M/I Homes, San Antonio-based TriStone Homes, a three-year-old builder, determined it could expand faster by being part of a larger company. At a time when bank financing is still tough to come by, expansion-minded builders continue to cast wider nets to find partners willing to help them fund their growth. So California’s The New Home Company, only 18 months old at the time, last January sold part of itself to Canada’s Tricon Capital Group in Canada. Other builders are entering into joint-venture financing agreements with private-equity firms, such as Houston-based McGuyer Homebuilders’ agreement with Wheelock Street Capital, and Los Angeles-based Williams Homes’ “strategic affiliation” with the giant IHP Capital, which is providing Williams with “substantial additional capacity” to expand its home building and development operations.


<strong xmlns="http://www.w3.org/1999/xhtml">Spreading What Works </strong> The fast-growing green builder MyGreenBuildings is licensing its business model to smaller builders.” width=”300″ /></p>
<p><strong>Spreading What Works </strong> The fast-growing green builder MyGreenBuildings is licensing its business model to smaller builders.</p>
<p>Some people may have been surprised when McBride & Son in Missouri entered into a buyer incentive promotion with nine St. Louis-area trade unions that put up $1 million to support the campaign. But that kind of outreach is becoming more common as companies embrace whatever alliances click in a soft market. Boise Hunter Homes in Idaho is among the many builders that now realize that generating sales hinges on how successfully they cozy up to their markets’ Realtors. (Boise projected that its unit sales in 2011 would rise by more than 50%.) And after proving itself to be one of the country’s fastest-growing companies over the past five years, Florida-based green builder MyGreenBuildings is now trying to extend its business model nationally through a licensing program for smaller builders.</p>
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On Nov. 1, Pennsylvania-based S&A Homeslaunched an interactive website whose features allow customers to share a specific community with their friends via Twitter, Facebook, or email; design elements of their home; tour the builder’s houses and communities; and chat with consultants seven days a week. The web is where more buyers begin their searches, and the online connection that builders make with prospects and homeowners has never been more critical to selling and referrals. That fact was reinforced when Zillow.com, the real-estate search engine with 22 million visitors per month, in June introduced a new function on its site that gives greater visibility to new homes that are available in markets around the country.


One of Builder’s online stories that elicited unusually heated reader response was the news last January that builders in Ohio were resisting new energy codes that they said could raise home prices by up to $2,500. One reader accused those builders of showing “the same institutional feudalism demonstrated by US auto makers [that] put them into bankruptcy.” But that same month, the California Building Industry Association raised fears that code revisions mandating zero-energy performance in new homes could kill affordable housing in the state. Builders are by nature regulation-averse: The NAHB has attempted to be its members’ bulwark in recent controversies over mandatory sprinkler installation, stormwater management, lead-paint removal, and fall protection.


<strong xmlns="http://www.w3.org/1999/xhtml">High-Performance Hacienda </strong>Meritage Homes is building net-zero-energy houses in Gilbert, Ariz.” width=”300″ /></p>
<p><strong>High-Performance Hacienda </strong>Meritage Homes is building net-zero-energy houses in Gilbert, Ariz.</p>
<p>A high-performance house is no longer an anomaly; it’s become a requirement for selling products to customers who may not know much about HERS regulations, but can read their monthly electricity and water bills. Many of the industry’s largest production builders market their homes as energy efficient. But they are also competing against smaller builders that hopped on the high-performance bandwagon years ago and have been able to tout the quality of their houses for a while. For example, in May 2007 Walters Homes broke ground on a mixed-use project in Manahawkin, N.J., that required LEED certification. “</p>
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