Business

Small Prefab Homes: ‘The Best-Kept Secret in America’?

Republished from Realtor.com®, November 29th, 2016. Written by Lisa Johnson Mandell

Marry the small-house craze with the equally hot trend of prefab homes, and what do you get? Small prefab homes, which are the housing industry’s equivalent to miniature schnauzers tied with a gift bow on Christmas day: extremely cute and increasingly in demand. Or, so argues Sheri Koones‘ latest book, “Prefabulous Small Houses,” which explores the beauty, variety, and benefits of small-scale prefab construction in all its glory.

Also the author of “Modular Mansions” and “Prefabulous World,” Koones argues that these prefab homes may be small, but they are so beautiful and well-built, you can’t tell the difference between them and the supposedly “nicer” houses constructed on-site.

Robert Redford, who wrote the foreword, is also a fan: “Building smaller, along with building houses prefabricated—in the process using less time, fewer materials, and using both more efficiently—is the sanest and wisest recipe for home construction, for now and for the future.”

We talked with Koones about what we can all take away from these modest yet amazing dwellings.

Q: What’s the biggest misconception people have about small prefab houses?

A: The important thing for people to understand is that prefab homes today are literally indistinguishable from site-built houses. Realtors® don’t even have to disclose a house [they are selling] is prefabricated. I interviewed someone who bought a prefab panelized house, and he didn’t understand why I wanted to interview him. I explained, “your house is panelized,” and he said, “no, no, my house is a very expensive luxury house.” I said, “yes, it is,” and it was panelized and that means it’s prefab.

Q: What do you consider a ‘small house’? Is it the same thing as a ‘tiny house’?

A: The smallest house I feature in the book is 352 square feet. I differentiate that from a “tiny house” in that the one I write about is connected to the grid, it has a foundation, a septic system, plumbing electricity, etc., and it meets all the local codes. The largest house I feature is 2,500 square feet, and I’m considering that small, because it’s one of the smaller homes in Santa Monica. It’s all relative to the area.

Q: What are some of the basic elements of the small prefab houses?

A: In all of these houses, space is used in an intelligent way. A lot of the rooms are multipurposes. There are no large hallways or wasted space. All were built in less time than a site-built house would take, and are sustainable and low maintenance. Those are elements everyone seems to be looking for in homes these days.

Q: Are small prefab homes less expensive than houses built on-site?

A: Well yes, if they’re smaller. But price per square foot is usually about the same. But you save in other ways. Construction costs are reduced, because small prefab homes take much less time to build. There is less wasted material. Building on-site, you pay for wood, drywall, piping, etc., and the cutoffs go into dumpsters, which you have to pay to rent. When your home is built in a factory, you only pay for what you get, and the overages are recycled.

Q: Are prefab houses really as strong as site-built homes?

A: Yes! One contractor described it this way: You could never lift a site-built home with a crane and put it on a foundation—it would fall apart. But a prefab house is built strong, so it can travel along the highway, and it can be lifted with a crane and set on a foundation.

Q: If small prefab houses are so great, why aren’t all houses built this way?

A: Prefab is the best-kept secret in America. Most people don’t even think about prefab homes. They automatically turn to site-built, because that’s the way it’s always been done. But anyone who does their research will build prefab. It’s a superior way to build.

Q: What kind of home do you live in?

A: I used to live in a large, 6,800-square-foot house that I built on-site 20 years ago when my children were young, so I know the horrors of building on-site. Just recently I was able to sell that house, and I’m living in a small house now, a portion of which is prefab. I prefer it. It’s cozy, it’s less work. I like the lack of maintenance and the savings. I was paying thousands in electric bills, and my bill last month was $170.

Q: What’s the biggest challenge of moving into a small prefab house?

A: The most difficult part is streamlining your possessions. I didn’t realize I had so much “stuff.” I had a tag sale. I gave away a lot, donated to charity, and sold furniture at an auction house. Now I have about one-eighth of the stuff that I had before. It’s really exhilarating to get rid of all that extra stuff.

Single-Family Homes Are a Buyer’s Best Friend

Republished from National Association of REALTORS® Sept. 23rd, 2016. Written by Amanda Riggs.

Overwhelmingly, home buyers have purchased detached single-family homes more than any other type of home in the last 35 years. Since 1981, the Profile of Home Buyers and Sellers has collected data on the types of homes purchased throughout the three-and-a-half decades. Consistently, 74 to 88 percent of home buyers purchased single-family homes each year. Home buyers purchased townhomes and condos each at roughly 10 percent of the time and other types of homes less frequently.

In 1981, 76 percent of home buyers bought detached single-family homes, eight percent bought townhomes, and 16 percent bought condos. By comparison in 2015, 83 percent bought detached single-family homes, seven percent bought townhomes, and three percent bought condos.

Single-family homes were the top home choice in 1985 at 88 percent, and again at 87 percent in 2002 and 2004. From 1985 to 2002, four in five buyers steadily purchased single-family homes. From 2005 to 2012, three in four buyers bought single-family homes. Townhome purchases hovered around nine percent for the majority of the 1990s and early 2000s and then dropped one to two points since 2008. Condo purchases were most popular from 1997 to 2007 at 11 percent for several years, but also dropped a few percentage points starting in 2008. By 2015, only three percent of homes purchased were condos. Other home types started gaining popularity in 2003 at two percent and have grown in market share to seven percent by 2015.

To follow this series as we discuss the findings of 35 years of profile data, check out the hashtag #NARHBSat35 on your social channels. NAR Research will be releasing trend line data since 1981 to celebrate 35 years of home buyer and seller demographic research.

 

U.S. New-Home Sales Down In August, But Broader Trend Still Positive

Republished from the Wall Street Journal Sept. 26th, 2016. Written by Ben Leubsdorf

WASHINGTON—Sales of newly built homes pulled back in August after surging the prior month, though the broader trend showed solid momentum in the market for single-family houses.

Purchases of new, single-family homes declined 7.6% in August from the prior month to a seasonally adjusted annual rate of 609,000, the Commerce Department said Monday. It was the largest one-month drop since September 2015. Economists surveyed by The Wall Street Journal had expected sales would fall 8.0% to a 602,000 pace in August.

July sales were revised up to a 659,000 rate from an earlier estimate of 654,000, a jump of 13.8% from June to the strongest monthly sales pace since October 2007.

More broadly, through the first eight months of 2016, new-home sales were up 13.3% compared with the same period in 2015.

“The data are highly volatile, and, through the volatility, the trend still looks upward,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in a note to clients. New-home sales account for a fairly small slice of U.S. homebuying activity, and short-term fluctuations can obscure the underlying trends. August’s 7.6% fall in sales from the prior month came with a margin of error of 10.7 percentage points, and July’s 13.8% gain had an error margin of 12.7 percentage points.

The U.S. housing market has appeared to slow in recent months, despite continued low borrowing costs. The average interest rate on a 30-year fixed-rate mortgage in August was 3.44%, unchanged from July and down from 3.57% in June, according to Freddie Mac.

Sales of previously owned homes slipped in August for the second straight month, squeezed by tight inventory and high prices. Existing-home sales were up just 0.8% last month compared with a year earlier, according to the National Association of Realtors.

Also, residential building permits and housing starts both fell in August from the prior month, according to Commerce Department data. Weakness in the multifamily sector has disguised strength this year in single-family home construction.

“The bottom line is that demand for new homes is robust and the supply is not adequately keeping up, which has been a primary theme in the housing sector for quite a while now,” Amherst Pierpont Securities chief economist Stephen Stanley said in a note to clients. News Corp , owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.

Monday’s report showed there was a 4.6-month supply of newly built homes available at the end of August, given the current sales pace. The median price of new homes sold in August was $284,000, down 5.4% compared with a year earlier.

Who’s Gonna Take The Blame?

I’m going out on a limb here! There are lots of people pointing fingers at each other looking to place blame regarding lackluster home sales. No matter which department you ask, you’re bound to get a different answer.

Ask your sales manager and he or she will tell you the main problem is the sales team simply refuses to sell up to their abilities, no matter how much training they’ve been given. When you go and speak with the sales team they sing the blues, claiming they just don’t have enough “good” leads. Off you march down to the Marketing Department and they tell you, with complete confidence, that there’s plenty of leads, but no one is closing them. The Construction Supervisor pops his head in and tells you he has the answer; your competition is beating the pants off you because they’re undercutting you on price while offering way more options. And on and on it goes….but do you really need me to tell you that sooner or later, the buck has to stop somewhere.

I will be the first to admit every answer above may have an element of truth. No sales person can close enough deals to make everyone happy, and can there ever be enough leads? You should be able to easily identify if your marketing team is doing their job, and regarding your competitors, well, not to get too cliché, but the proof is in the pudding and cream will always rise to the top. To find the right answers you have to identify the real problem, and that, Dear Builder, involves accountability.

No matter how you slice it, your business plan needs X number of sales for you to prosper in 2016. Let’s assume for argument’s sake your sales plan is meticulously thought out. Let’s say your goal is to sell 15 homes this year. Assuming 5% of prospects that visit your website will visit you in person at your sales center, you’re going to need about 120 new website visitors per week. This means you should have, on average, 6 potential buyers showing up to meet your sales team in the flesh—every week. Still with me? Great, let’s move on to what needs to happen next.

Your salesperson needs to account for 100% of those 6 leads and close about 4-7% of them every month. That may sound like a lot, but it equates to 1-2 sales per month.

Leads are the currency of sales! Without leads you simply aren’t going to get any sales. So let’s talk about the two “flavors” of your leads: first-timers and be-backs. Granted there will be different types of visitors, but all fall into these two categories.

First-time leads—be they visitors to your model or visitors to your website—are mainly the responsibility of the marketing department. Be-backs have been there, talked with a sales person or hostess, and made a decision to return for additional information or to purchase. Today, more than ever, each of your leads can easily be tracked. Whether you are actually tracking these all-important prospects is an altogether different can of worms.

Here’s a bold statement: If your sales person sells a house and that lead isn’t in your tracking system – be it Infusionsoft, Lasso or a scribbled on a notebook pad – that sales person should not be paid in full or at all. Why? Accountability my friend.

I wrote a blog last year titled “Your Sales Team Sucks”. In that blog, I stirred up quite the hornet’s nest when I mentioned sales people, on occasion stonewall their superiors or, even worse, tend to downplay how many visitors have come to the sales center. You’re under the impression that you had 4 prospects show up last week when in reality you really had 10. That means 6 potential homebuyers went unreported! Even though your sales person continued to try to close those 6 unreported visitors, they mislead you in an effort to pad the numbers to their benefit. This is a problem in more ways than one.

Taken further, the marketing department is firing on all cylinders, battling to bring in more leads. Their analytics (your marketing arm is performing analytics, right?) suggests there are more leads than are being reported. Something just doesn’t add up…

Ok, let’s not throw the sales team totally under the bus. I realize some leads aren’t ‘great’, but, nonetheless, they are leads. You’ve invested money in getting as many leads as possible, regardless of how viable those prospects are, you still deserve to have them reported.

Website leads are easier to validate, but the marketing team is no less accountable. Google analytics always presents the facts and easily monitors the who, what, when and where of your online lead activity. If the bounce rate on your home page is over 40%, the marketing department is responsible and has some work to do. That’s not the sales person’s fault, but it does become their problem as 90% of all sales begin online, usually from your website. A lack of traffic affects the sales person’s ability to close deals. If the number of web visitors is too low, the marketing team is accountable. Web leads drive face-to-face sales!

What about onsite traffic? Who’s responsible for that bad boy? Marketing! Your website is where homebuyers either choose or eliminate your company. A scruffy looking website equals an out-of-date builder in the eyes of a website visitor. Bad photography represents a poor quality builder. A poorly designed website equals immediate negative judgment from the visitor. Psychology has taught us that in the absence of adequate information, we tend to form negative opinions.

So what’s the bottom line? As a Homebuilder, you are judged by the way your website looks and performs! End of discussion. No one looks at a weak website and then jumps in their car to go visit that great builder: “Come on honey, I can’t wait to see that ugly house.” Your website is the key to legitimate face-to-face traffic results. Period. Sure Search Engine Optimization is important. Yes, retargeting, Facebook ads, Pay-Per-Click and email marketing will produce results, but inevitably, if the website is a disappointment, you lost that buyer.

Your marketing person/team should be held ultimately accountable for the number of onsite visits and the quality of your website. Are you holding their feet to the fire?

You, or your sales manager, or marketing manager—or whatever you call that person—needs to understand the metrics and hold people accountable. No more allowing sales to stack the lead deck in order to falsely increase their closing ratios. No more receiving contracts for people you’ve never even seen in the lead deck (ok, we’ll allow that on occasion). No more investing marketing dollars when the marketing team can’t prove a ROI. No more excuses why 150 web visits a week equals only 3 site visits and 2 phone calls a week. No more allowing leads to visit your website and vanish into the night like a panther in the darkness. All of the above is simply unacceptable! The tools to ensure you’re not falling prey to these tactics are readily available. Remember this: Every lead costs a builder hundreds of dollars, sometimes thousands. Holding every person accountable for their respective results, role and responsibility in the sales and marketing system is crucial.

Here’s a quick review:

  • Review and track every lead as though that person(s) is the only lead you have.
  • Understand the metrics necessary so you can hold your marketing team accountable for the right things regularly.

Stop the excuses. Ask the hard questions. Measure. You can only expect what you inspect. It’s time you know where every lead comes from and, more importantly, where they’re going!