BUILDER Magazine Top 10 National Builders for 2009

The top 10 builders in the nation sold over 89,000 homes in 2009 which is approximately a 32% decline from 2008. Although the national builders have suffered significantly during this economic disaster, their market share increased from 2008 to 2009. The top 10 builders now represent approximately 24% of the new home sales. Will their share continue to increase? As we continue to face difficult economic conditions, national builders are in multiple markets and not all markets face the same dire forecast. Thus it would be safe to assume that the national builders are better suited to weather the storm due to market diversification. This would result in a greater share of the national housing market. Will they be too big to fail?

Double Dip in Housing?

An article by Betsy Schiffman, Daily Finance outlines the opinions of Paul Dales of Capital Economics, an investment research firm. http://bit.ly/agkQBQ Mr. Dales believes the double dip in housing is here already. Each market will have its own characteristics and your own research will assist you in understanding how a broad statement may relate to your market.

Are prices continuing to slide in your market?

Are sales up due to the federal tax credit opportunity which expires this week and homes must close by the end of June?

Are sales up due to more foreclosures? It is possible that a foreclosed unit taken back by a lender may be counted as a sale since it changes ownership. The foreclosed units will bring prices down even further.

With an over-supply of homes on the market, high unemployment, and the lack of job growth will cause the housing sector to remain unsettling. In my opinion, a double dip would mean that there was another “peak” when the peak would seem to be artificial in circumstance. Interest rates are trending up to further complicate any sustained recovery anytime soon.

The Hubble Telescope’s Greatest Hits

14 incredible photo’s presented by Time.  http://bit.ly/brefDI
Also, click on the link to the brief history of the Hubble Space Telescope.

Land Development Engineering Webinar Series

The webinar series to be launched this year consist of 24 different topics on real estate development. The intent is to provide a practical and cost effective learning opportunity for those new to the industry and for seasoned professionals. The following four webinars complete the topics for land development engineers and other real estate development professionals. If there should be a topic or issue that I have overlooked, please post your comments.

Rezone for Value
All too often, land development engineers participate in rezoning projects by providing technical services and expert testimony before a local Zoning Board. Unleash your expertise for your own benefit. Consider adding a “rezone for value” profit center to your firm’s portfolio. This webinar will illustrate the potential of land with rezoning possibilities increasing its value and marketing potential.

Project Management & Communications for the Recovery
As the real estate development industry recovers, land development engineers should consider re-evaluating their project management system, client relations, and communications. This webinar will address many day-to-day issues that should be at least discussed and policies revisited as the industry changes.

LEED, LID & Green Engineering Overviews
This webinar will take a practical view of the land development trends currently being considered by developers and government officials. How do land development engineers position their services and expertise to match development trends? Join this webinar to assess current programs implemented to guide land development design trends.

Design Team Partnering
This webinar will outline alliances forged between real estate development design team members. The industry is changing and we should change our business approaches by partnering with other professionals. We will discuss traditional relationships and explore new alliances which will proactively generate projects and new business opportunities.

Land Development Engineering Webinar Series

Although the last series of webinars may target market land development engineers, the topics are of interest to anyone involved in the real estate development industry. There are also 8-webinars in this series and will be launched this year.


Client Base Diversification
Land development engineering firms were so busy during the surge in the market from 2002 to 2007 that they didn’t spend the necessary time to network and diversify their client base. This webinar session explores different services, various markets, public opportunities beyond specific projects, partnering and jurisdictional presence. Definite ideas and out-of-the-box concepts will be outlined in detail. Implementing diversification concepts are market specific but will spread the risk. Our land development business plans and operation need to change as the industry changes.

Social Networking
Communication, client base networking and developing new roles for civil engineers must ride the technological wave of social networking. This webinar highlights practical and useful tips for land development engineers using LinkedIn, Facebook, and Twitter to expand their presence in their market and generate new leads. Learn new business development practices and techniques structured for social networking sites.

Asset Management
Every market has experienced failed subdivisions which lenders have taken back. These projects will be in various stages of completion and each will have their own unique circumstances. Lenders will be seeking asset management teams which will concentrate on the entire project to maximize recovery and prepare a workout solution. This webinar provides a detailed business plan for the role of land development engineers. This is a proactive approach to generate new business.

Small Scale Real Estate Development for Profit
Land development engineers are best suited for: buying land, project designs, and managing construction activities. Many land development engineers which practice small scale development are providing a service to builders and developers. This webinar by case study will show how entrupenuirial outlook combined with engineering expertise with increase profits while minimizing risk. The real estate development industry is a risk reward business and engineers are best suited to maximize their return on investment.

Current Trends

Real Estate Development Investment Strategies

The following four webinars will complete the series for Real Estate Development Investment Strategies.

Residential Project Proforma
Learn a step by step single family subdivision cost analysis approach and prepare a basic project proforma. This webinar will be from a builder/developer perspective in determining the project profitability. The proforma will also change due to an additional lot been added and if the base price of the homes were increased during the construction buildout. This webinar illustrates the basics in buying and developing land for your own use.


Residential Lot Yield Analysis
For single family detached housing projects, learn industry “rules-of-thumb” used by industry professionals in assessing lot yield. This webinar will explore the methods used in determining the net buildable area of a project site. This step-by-step approach is a quick and inexpensive way to compare sites for development purposes. The process of preparing a base plan substantiating the lot yield calculation will also be discussed in this webinar session.


Sustainable Horizontal Mixed Use Projects
In the foreseeable future, real estate development patterns will be pursued as mixed use developments relying on various land uses, ownership options, and community amenities resulting in sustainable community designs. This webinar will explore horizontal mixed use land plan concepts, master developer issues, and stakeholder relationships.


Sustainable Vertical Mixed Use Projects
Small infill sites may become the development preference to absorb the land through vertical mixed use projects. Learn about the issues guiding vertical mixed use projects including environmental, social and economic considerations. This is a viable real estate development approach combining residential, retail and office uses in a building. Learn the advantages and disadvantages of this type of project.

Real Estate Development Investment Strategies

The second series of webinars will be on “how to use land” for profit and investment. There will be eight webinars launched for entrepreneurs seeking new ways to generate a significant return on their investments. The webinars will focus on approaches not in the main stream of real estate development. Each webinar will be a specific focus on an approach proven and illustrated by example.

Homes with Land
This webinar will illustrate a profitable and mostly overlooked real estate development strategy which minimizes cash investment and maximizes return on investment. The concept is basic and it uses your overall real estate knowledge beyond “just buying a house”. Learn basic surveying, engineering and marketing concepts necessary to evaluate a home with land as an investment strategy.


Highest and Best Use
In a perfect world, each parcel of land would be assessed for its highest and best use. The value of the land is directly related to the specific use which produces the greatest return on investment. Learn the factors used in determining the highest and best use for the market. There are several residential and non-residential uses which should be considered before traditional approaches.


Finished Lot Inventory Investment Strategy
The oversupply of finished lots in most metro markets will be burden on the housing industry for years to come. In some markets, the available finished lot inventory is sufficient to satisfy the new construction demand for over 10-years. This webinar will outline a strategy to invest in finished lots now for resale in the future. This webinar will provide an overview and steps to take in implementing this investment strategy.


Rezone for Value
This popular webinar topic is designed for all real estate development expertise levels. The concept is basic. Simply, buy land under the market with a specific zoning. Rezone that property into a higher and best use to increase the value of the land. This is achieved by having government approve the rezoning application. This webinar will illustrate three examples: residential, non-residential land and an existing building. Learn the advantages and disadvantages of pursuing this investment strategy.

Real Estate Development Basics Webinar Series

Land Values
Over the past three years, the housing market has seen dramatic drop in prices in every metro area. More commercial vacancies are becoming a realization. Have land values decrease during this period? This webinar outlines the approach necessary to evaluate land values for residential and non-residential uses. It is reasonable to suggest that land values have also declined but do land prices mirror home prices? Also, learn how land prices are quickly assessed by land acquisition professionals.


Stakeholder Relationship Building
The real estate development industry consists of various public and private interests all having a role in the design, entitlement, and construction of every project. This webinar outlines a comprehensive list of industry stakeholders and explains their role in the development process. A brief description of their responsibilities and what makes each “tick” is important in maintaining a schedule and budget for each project. Learn “do’s” and “don’ts” in networking with real estate development stakeholders.



Definition of Sustainable Projects
The emphasis on sustainability reaches into every sector of our lives, none, being more important than building a sustainable community in the future. This webinar defines the three key elements of a sustainable project. Examples will be used to illustrate the economic, environmental and social considerations in building a sustainable community.


Market
Without the need of an expensive marketing study, this webinar explores methods in which to ascertain the market potential for a specific use. If you build it, will they come? This is historically a problematic attitude and is a serious flaw as the economy recovers. Understanding the market characteristics and researching public information sources will provide sufficient basis in which projects should be pursued. This webinar provides a list of needed data, its source, and the analysis required to better understand the market potential of a project.

Real Estate Development Basics Webinar Series

Zoning and Land Use Basics
Every community has ordinances describing how property may be used. As an example the land use plan indicates an area to be a residential use and the zoning map indicates it as an R-3 zone which may indicate 3 dwelling units per acre. Understanding and researching the approved municipal land use and zoning maps may result in finding unique real estate development opportunities. These important regulatory instruments are infrequently updated and may not reflect recent development trends.

This webinar outlines the terms and key aspects of zoning and land use maps which will assist you in assessing the development potential of land. Learn what to look for and how you may use the regulatory maps to your advantage on overlooked opportunities.


Public Information Research
This webinar outlines all of the public information available on the internet in most local markets. Analyzing this information is the first stage of property investigation. Arm yourself with information prior to spending soft costs or to meeting with staff at Town Hall. Learn what you should be researching online so you can base a “GO” or “NO GO” decision on regulatory facts.


Site Characteristics
Based on the public information compiled online and supplemented with meetings at Town Hall, each parcel of land must be evaluated on its physical site characteristics. These site characteristics may adversely impact the development potential. Learn the constraints and benefits of specific site conditions and characteristics. Categorize each site constraint by its positive or negative impact on a cost effective development approach. This webinar highlights important site characteristics used in a “GO” or “NO GO” decision.

Due Diligence Report
All developers prepare a due diligence report on property considered for purchase. Learn the structured approach used by successful real estate developers to compile information about a specific site. Learn the essential elements of the report. This document records your findings in a format answering questions a buyer would ask. This webinar outlines how the due diligence report is a powerful marketing tool. The buyer does not have to complete an in-depth analysis but only has to verify the information for accuracy. The due diligence report will also outline and substantiate the development potential of a site.

REAL ESTATE DEVELOPMENT WEBINARS COMING SOON

Anyone can enter the real estate development industry. There are no pre-requisites, no special education, nor a specific background for someone to enter and become successful in real estate development. As the real estate market thrives in some communities and is depressed in others, those with an entrepreneurial spirit, risk takers, and “outside the box” thinkers will thrive in any market environment.

It is abundantly clear that there are limited educational resources available for real estate development entrepreneurs. You will discover there are significant investment opportunities in real estate. Most real estate webinars teach about foreclosures and short sales. My webinars will not address these issues at all. I rather provide proven ideas and concepts for evaluation and consideration utilizing land as the basic investment resource. Thus, I will be launching a series of webinars available for any and all of the following stakeholders:

Realtors®, Government Regulators,Urban Planners, Land Planners, Land Use Attorneys, Real Estate Attorneys, Surveyors, Land Development Engineers, Soils Engineers, Architects, Water and Wastewater Engineers, Traffic Engineers, Builders, Developers, Land Owners, Economists, Marketing Professionals, Environmental Specialists, General Public, Community Associations, Academia, Vendors, Contractors,  Software Providers, Recruiters, Investors, and Lenders

There are three main categories of sessions with eight (8) different webinars in each category. Each webinar will be applicable for residential and non-residential uses. This week, I will post the titles of each webinar and a short overview of each session. The main categories will consist of:

Real Estate Development Basics

Real Estate Development Investment Strategies

Land Development Engineering Practices

These webinars are structured for individuals rather than for firms. I am a strong advocate of arming yourself with information, selectively select “winners”, strive to hit singles rather than home runs, and remember to allow the end user the opportunity to make a profit.

My marketing campaign will be launched primarily on LinkedIn. The webinar offered without a registration fee will be the “Four Uses of Land”. There are only four ways to use land for real estate development purposes and will be discuss in detail.

1. Buy and own vacant land for future use.

2. Partnering with other stakeholders to buy land and sell entitled, approved, and permitted land.

3. Buy land, complete designs, obtain approvals, and construct infrastructure for end users.

4. Buy improved land for vertical construction purposes.

Each webinar will be approximately 1-hour in length with a Q & A to follow. Course notes are made available to each registrant and follow-up inquiries are included. My intent is to offer an affordable information exchange of ideas and concepts to lessen the learning curve upon entering the real estate development industry.

Charlotte, NC Job Trends

As you know, we must seek information to assist us in our efforts to rebrand and reinvent in 2010. We should also not concentrate on national data but focus on local markets or metro areas. In this economy, it is rare to see a metro area mirror the national averages. Remember not to compare data on month to month or year to year. This analysis and subsequent reporting provides a false sense of reality.

It is troublesome to me that experts are given a national forum to espouse their opinions on what may happen with the economy. The experts are typically wrong in their forecasting. Thus it is important to analyze local conditions and evaluate trends. Based on the analysis, your rebranding and reinventing should dynamically change and be proactive rather than reactive. As an example, the unemployment rate in Charlotte, NC over the past 6-months has been:

September ’09             11.8%
October                       12.0%
November                    11.9%
December                    12.1%
January ’10                  12.8%
February                      12.8%

This is a trend. And this percentage is low. I also believe the first time home buyer federal credit initiative has run its course. In my opinion, the local market is going to drop off the table due to an increase in foreclosures, higher unemployment, and mortgage rates on the increase. It is time to rebrand and reinvent based on these trends – at least in Charlotte. If you are in California, it has been reported that 50% of all existing homes sold last year were short sales. What about your market? I heard today, if you can't flee it, can't fight it, then go with the flow. Your business plan should be dynamic matching trends.

Is a Double Dip in Housing Ahead?

This is the title of the article by Charlie Rose for Business week, April 12th issue. He interviewed economist Robert Shiller, The Arthur Okun Professor of Economics at Yale and co–founder of the Case-Shiller Home Price Index. I have provided excerpts from the article:

• He believes there is a 50-50 chance of a double dip recession
• We experienced price declines from 2006-2009
• 80-90% of the housing market is supported by government
• He thinks there should be another stimulus package
• Slight improvement in housing prices in January – he thinks this will be a trend up
• Housing starts are sluggish
• Delinquencies are up
• Foreclosures remain troubling
• Drop in existing home sales

Our economy is reported by “experts” and they are given a national forum to express their guess! They are generally wrong and the spin changes daily. Can anyone be wrong if they think something has a 50-50 chance of happening? The article did not make a case for or against a double dip housing recession. Unemployment and the lack of job creation were not mentioned at all. The upward trend of mortgage interest rates and its impact were not discussed in the article. So…… to have a double dip housing recession, the housing market has to have a sustainable upward trend before a second decline can occur. I have not seen any improvement in the housing market. Will we continue to bounce along the bottom and stay in this cycle for how long?……..ask an expert!!

 

Charlotte-area Apartment Vacancy Rises to Record High

Charlotte Business Journal - an excerpt by Will Boye Staff writer
The boom in apartment construction appears to have come to an end in Charlotte. And for developers who are bringing their rental projects to market, that’s just fine.

Since early 2008, nearly 9,400 units have been completed in the Charlotte metro area, according to Real Data, which publishes a report on the Charlotte apartment market biannually. That’s the most activity the region has seen since the start of the decade, when nearly 13,000 units were delivered over a two-year span beginning in late 2000.

The number of units under construction is down dramatically, and many projects that were proposed a year ago have been dropped. The surplus of apartments and a painful recession have combined for a 13.6% vacancy rate — an all-time high in the region.

Todd Pfalzgraf, an apartment investor who owns about 1,000 units in Charlotte, uses the analogy of a leaky bucket when talking about the current market.

My summation of the current state of affairs in the Charlotte, NC housing industry:

• 13.6% vacancy rate in multifamily – an all time high
• 2,800 foreclosures expected to reach the market this month
• 40,000 finished lots available on the market
• 10,600 construction jobs lost
• Over 25,000 homes listed on the MLS
• Less than 5,000 new home building permits issued in 2009
• 12.6% unemployment
• Mortgage rates are trending up
• $8,000 Federal Tax Credit Program will expire at the end of April
• USDA housing program is out of money
• Several “affordable” housing projects delayed due to citizen objections

As housing goes; so goes the economy. Tomorrow, I will post a summary of an article in Business Week by Charlie Rose interviewing Robert Shiller. He is an economist and publishes the Case-Shiller Home Price Index on housing prices. The question to Robert Shiller: "Is a Double Dip in Housing Ahead?"

Cars vs. Bikes vs. Walking – A Transformation

Secretary Lahood, Department of Transportation on walking and bicycle trails in livable communities. The following is from the USDOT website.

• Treat walking and bicycling as equals with other transportation modes.

• Ensure convenient access for people of all ages and abilities.

• Go beyond minimum design standards.

• Collect data on walking and biking trips.

• Set a mode share target for walking and bicycling.

• Protect sidewalks and shared-use paths the same way roadways are protected (for example, snow removal)

• Improve non-motorized facilities during maintenance projects.

Watch the Audi 2010 Green Car Super Bowl Commercial – should we buy an Audi, root for the Celtics or arm ourselves with information.

http://bit.ly/b3A0UT

Cities of Aspiration??

An interesting article about where the next 100 million Americans will live in 2050. I am not sure there is anything new but in the article, they predict that about 14% of the population increase will gravitate to urban centers. The rest will be in suburbs close to the city core (33%), rural communities (35%) and suburbs farther away from the city core (18%). Not a significant transformation except the communities will be different – sustainable areas meeting social, economic, and environmental goals.

In my opinion, this will be achieved by horizontal and vertical mixed use projects generating localized jobs and economic base. The interesting aspect of this article http://bitly/aM7Hix  is the list of “cities of aspiration”. The author, Joel Kotkin, identifies:

Phoenix
Houston
Dallas
Atlanta
Charlotte

New upward mobile cities once were associated with NYC and LA. The above five listed cities are expected to have significant population growth and a cultural change in the process. These cities are spread out and Charlotte seems to be the one city that could sustain a significant population increase. What do you do with this from now until 2050? Fill out the census questionnaire so the experts can be validated or buy land? Comparison information and picture from City.Data.com

CHARLOTTE:
Population in July 2008: 687,456. Population change since 2000: +27.1%
Males: 336,818 (49.0%)
Females: 350,638 (51.0%)
Median resident age: 32.7 years
North Carolina median age: 35.3 years

DALLAS:
Population in July 2008: 1,279,910. Population change since 2000: +7.7%
Males: 645,017 (50.4%)
Females: 634,893 (49.6%)
Median resident age: 30.5 years
Texas median age: 32.3 years

CHARLOTTE, NC

Eminent Domain Conclusions

In my series on eminent domain, I wanted to provide the background and progression of changes in the application of the eminent domain process by government. This past week, there was national attention on eminent domain abuses as this photo played on news stations.

I did not outline my thoughts but in my opinion, eminent domain will become a more powerful tool by local and state government for several reasons.

1. Competition for companies to relocate or start up operations in a new community will become intense as politicians seek ways to generate jobs. Government will not follow their own master plans, zoning ordinances and will exercise eminent domain to make well located property available for business. This will not only be critical for jobs but to generate taxes from the employees. I know of a company that relocated to South Carolina because of the tax breaks provided in their negotiated move. One stipulation was the company had to maintain a minimum number of employees.

2. In the ‘70’s, we experienced oil shortages which led to the strategic national oil reserve, energy conservation, and alternative energy sources. Not much has changed since, except government is again emphasizing the need for a comprehensive energy policy.

 

How will this re-emphasis on energy change our real estate development approach?
Will government restrict development patterns and approve only in-fill or redevelopment projects?
Will government become more active in guiding development through the eminent domain process?
Will municipalities restrict the number of homes to be built each year or initiate the zoning change outlined in my whitepaper on the future of land development Part II?

 

This paper is available on LinkedIn http://www.LinkedIn.com/in/djohnsonpe

It is clear energy will be an important element in guiding our housing and non-residential choices and those sensitive to this issue will thrive.

  

3. Sustainable Communities will be the future whether horizontal mixed use or vertical mixed use. Integrating a transportation element into the project will only strengthen the concept. Local government can make positive strides toward achieving sustainable communities by revisiting their zoning ordinances and land use now. Rethink, reinvent and re-establish community development patterns to encourage sustainable growth. Many municipalities have not changed their master plan and zoning ordinances for many years – now is the time! As an example, is working out of your home as a business in violation of your residential zoning ordinance? I will go out on a limb and state that over 95% of the 40,000 local municipalities have not changed their ordinances to allow home business use. It is not inconceivable that local governments will use eminent domain to consolidate land area and negotiate deals with large mixed use developers.

  

4. Infrastructure – in most locations, government doesn’t build any infrastructure and requires developers to either construct or pay for improvements. Government doesn’t have the money nor can they take care of the water, sewer, roads, buildings, drainage systems, etc. now. How will they be able to manage this in the future; by government consolidating growth patterns through design and the eminent domain process?

 

 

Forecasted Market Recovery?

http://www.cnnmoney.com/realestate2010

The above link is to another expert opinion and a 1-year forecast for home prices in over 380 metro areas across the country. Select your city and consider the projected trend – remember you will have to do your own research for your market. Let’s take Charlotte, NC and Las Vegas as an example and comparison. As outlined in the article and reviewing the various statistics, the conclusion is that 2010 is going to be another difficult year in real estate. However, all markets are different and national overviews are just that and do not illustrate local trends.

Charlotte, NC
Median Home Price: $178,000
Price Climb during the Boom: 32.2%
Price Drop so Far: -10.4%
Projected Add’l Decline: -2.7%
Projected when Prices will hit Bottom: 2011: Q1

Las Vegas, NV
Median Home Price: $157,000
Price Climb during the Boom: 130.8%
Price Drop so Far: -57.0%
Projected Add’l Decline: -18.1%
Projected when Prices will hit Bottom: 2011: Q3

So…. do your own research and hopefully what happens in Vegas stays in Vegas!

Track Trends

At the end of March, the fed action may cause interest rates to trend up. I am still a strong supporter that with housing so goes our economy. In April, compare the results to the above information to conclude trends.