Being Different Gets You Noticed

We started Nest so we could do things differently. We knew we wanted to challenge the status quo, and shake things up a bit. We knew that people would eventually see that we were revolutionaries of a sort. But I don’t think we recognized how ready for change Charlottesville really was. I don’t think we recognized how quickly people would value what we were doing.

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I picked up a listing agreement yesterday. Photo above of the property.

I will go more into this listing in future blog postings, but there is one thing for certain. I would not have this listing if we had not started Nest. I’d like to think I’m that good, but it is about my team and the vision that we share together. It is how that vision is playing out in our actions, our marketing, our space, and our clear and directed philosophy. That is why we as a team have this listing.

More to come, but suffice it to say, we are excited.  

What Homeowners Could Learn From Developers

I remember sitting in one of my development classes and wondering what my professor was talking about with land holding costs and development projects. The scenario was this: A family owned development firm buys a 50 acre tract for $500,000 and holds it for 25 years, at which time the next generation of leadership in the family wishes to develop the land. The management looks at the outstanding low purchase price of $500,000 and moves forward due to a great return on the investment. However, the land is now valued at $6,500,000. The management is thrilled that they only have to show $500,000 in land costs, and the project is great.

However, the problem is that the family may have only put $500,000 into the land, but they have $6,500,000 in the land no matter how you look at it. They could sell the land and pursue another project for $6,500,000 if they wanted to, and it would have the same actual return on the investment. You can’t look at the purchase price to determine the quality of a project. You have to look at the Value of the Property at the start time for the project.

So, what does this have to do with our homeowner today? Easy. There are folks out there that keep saying, “If you don’t NEED to sell this year, don’t!” Well, why not? Prices have retreated from their highs of 2006. That doesn’t mean that if you hold out until the market stabilizes that you will be sitting on 2006 prices. It means that if you hold out, that your prices, when they stabilize will do so at their current levels, whatever that level may be.

Is this an EASY time to sell? Absolutely not. But that doesn’t mean that you are going to get a better deal in a year. Last year I had a client who had moved away and received an offer that was less than she had hoped for on her house in Charlottesville. It was a good offer, but still not what she had hoped for. I asked her if should would buy her house as a rental property at the price she was offered. She said, “No. Why would I?” Well, because if you didn’t sell it for that, you just bought it back.

It is easier to see this analogy in stocks and bonds and other liquid assets. If you buy a stock for 50 and it slides to 35, you should ask yourself, is this the safest investment moving forward, not the past. If you can find a better asset, you should go sell the stock and buy the better assets. Likewise with your home, even if you are not making as much as you would have hoped, or even if you have lost some money, if you can find a better use for your assets, you should move them.

Ed Note: As I read this post this morning, 8 hours after stopping working and heading to bed, I realized that this post (which remains in it’s original form above) ends not the way I would have liked. To clarify: with stocks, you may move them from one to another because of the soundness of the investment or the potential gain. But with housing, the asset is more than just a financial producer, it is the center of family life, it provides for a safe haven, perhaps a launch pad for a specific school district. It has many uses. My point was that if the asset no longer performs the way you need or would like (no master bedroom on the first floor as your knees begin to give – not in the right school district as your child reaches school age – not close to a new job – not enough bedrooms with a new child on the way) then those asset changes need to be put into perspective and weighed. But the idea that because the market is not liquid or active this year prohibits a move, I think is a mistake.

Parallel Lives

I find photojournalism to be an amazing art. Folks who tell a story without words. A series of connected moments that move a reader (viewer?) by their force, while not even whispering a sound.

I just finished looking at 20 photos from Slate that are really powerful. These are photos from Camden, NJ and homes that are connected to others, where the owners landed in different places, at least for a moment.

The Changing Face of Builders

I had a client in my car last week as we drove through Northern Albemarle County neighborhoods. We were talking about some of the new subdivisions that were being worked on, and we drove through at least one new neighborhood that was did not have any activity at all. As we pulled into Greene County, my client asked about the Ryan Homes that were being built on the Western Side of 29 at Holly Hill. He remarked that they looked just like one of the neighborhoods in DC that he remembered being built several years ago. It got me thinking about Ryan and the landscape of Charlottesville new construction.

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So, I came home and pulled two pieces of information. First off, I grabbed all the new construction that closed between July 1 and December 31 of 2005, and then I pulled the same data for the same period of 2008. Not surprisingly, there were a lot less homes sold in 2008 than in 2005. I did not select only one county or another, I pulled the whole MLS. And what I found was not surprising, but when you look at it visually, it is pretty clear: the builder landscape is changing, and its changing fast.

In the second half of 2005 there were 99 builders that sold property in our area. Ninety Nine… That’s huge given the size of our market. As you look at the graph to the right, you will see that there were only 6 builders who held more than a 2% market share, the largest of whom was Hauser Homes. In 2005, Hauser was flying high with a new sales center on Route 29. They had brought in a new mortgage company to add to their all around sales effort. Bob Hauser was touting a new neighborhood that would be coming along in the next few years that he and Frank Stoner at Stonehaus were working on: Belvedere. Hauser was starting a custom home building division and had two custom jobs going in Old Trail. Further, he was moving into the high end condo / townhouse market with pricey Poplar Glen.

Not far down the list was Church Hill Homes who seemed to be able to do no wrong in the market. They launched the new Avon Park, and all the units flew off the market faster than the builder could put them up. The bought land in Wickham Pond, in Belvedere, in other counties. Church Hill was moving along. But how could they do wrong? It was 2005 and if you built it, they would buy it. There were so many builders in 2005, that 46% of the market was served by 89 builders.

05 to 08-1.jpg Important to note in the list of top 10 builders in 2005 is the absence of any major national home builder. There were rumors that Toll Bros. might be looking at coming into Charlottesville, but it never materialized. In 2006, Ryan Homes entered the Charlottesville game. The builder eyes watched as Ryan opened up shop at Old Trail with 27 lots. They entered into agreements with Kenridge near Farmington Country Club and Cherry Hill in Johnson Village. Everyone watched to see what would happen and whether Charlottesville natives would shun the outsider giant and their production build mentality. After several months, Ryan walked away from almost all the lots at Old Trail. After 3 years, they walked away from the remaining lots at Kenridge. Many could say that Ryan was not successful in Charlottesville.

However, they’d be sorely mistaken. Ryan sold out Cherry Hill, they moved to the Pavilions at Pantops, they built at the Hollymead Towncenter, they built at Holly Hill… and more… They may not have struck gold in their high end practice, but they certainly proved that a national homebuilder can compete with the locals. Maybe Brueggars can’t beat Bodo’s in a head to head, but Ryan is showing some serious strength in proving a strong value proposition for their homes.

When you look from 2005 to 2008 numbers, you notice that once unstoppable Hauser Homes has dropped from a 13% market share down to 4%. While 2005 may have had 99 builders closing on properties in the second half of the year, there were only 72 builders by 2008. And outside the top 10 builders, the market share dropped from a cumulative 46% to 44%. The biggest winner was Ryan Homes. Within less than three years in our area, they went from a zero market share to 24%. I have heard it said that they want a 50% market share in 2009. I can’t say if that is a real goal or simply a rumor, but if it is their goal, I think it is achievable.

In 2008, Church Hill still made the list despite their foreclosures and sale to Eagle Construction of Richmond. This would be the last quarter we will see Church Hill making sales under their own name. Sam Craig, with Craig Builders made the top 10 list. Most interesting of all in my opinion is that Southern Development has managing to hold on to their market share throughout it all, which is a testament to their flexibility.

I find all of this interesting, but what I really look forward to is seeing how the market shakes out when a rebound does occur. Will Ryan just grow faster? Over this period, on a National level, Pulte Homes lost over 60% of its market value, and Centex Homes lost over 80% of its value. Ryan (NVR) lost just under 40%, which may not sound great, but for a home builder in this era, its pretty good.

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