Colorado Springs-area homebuilders are doing better in 2012 than at any time in the last five years.
The pace of home construction so far this year is up 57.5 percent from the same period in 2011, and single-family building permits are on track to finish with their highest annual total since 2007. Barring sudden jolts to the economy or consumer confidence, some industry experts expect the market to continue its recovery in 2013 and beyond.
John Bissett takes over this week as board president of the Housing and Building Association of Colorado Springs. Bissett is the founder of JM Weston Homes in Colorado Springs and formerly served as senior vice president of John Laing Homes in Colorado.
Bissett, 50, talked with The Gazette about the homebuilding industry and other topics:
Question: The new home market has shown signs of life this year. Is this a real recovery or just buyers who are responding to extremely low mortgage rates?
Answer: Homebuilders began seeing a significant reduction in sales in 2006 as the economic downturn picked up steam. Buyers have become much savvier over the last six years. I believe the increase in sales activity is a result of the homebuying public seeing prices stabilize and in some cases begin to rise again. With interest rates at historic lows, buyers that have been sitting on the sidelines waiting for signs of improvement are now seeing those signs and are beginning to act.
Q: The pace of local single-family home construction this year already has exceeded that of last year. Will we ever return to the pace we saw six to eight years ago, when 4,000 to 5,000 single-family detached building permits were being issued each year?
A: I wouldn’t expect that we’ll reach that level of permit activity for quite a while. There are a number of factors that will slow the rate of increase in which permit activities rise. Homebuilders are continuing to struggle in obtaining financing to acquire and/or develop land.
As existing finished lot supplies dwindle, new developments and parcels will need to come on line in order to meet the needs of the public. Without an easing up in acquisition and development financing restrictions, the inability to bring new developments and new phases of existing developments to market will slow our return to those kinds of numbers.
Q: There are approximately 3,000 single-family homes for sale each month on the re-sale side of the market. Why should I bother to buy a new home if there’s plenty of selection at affordable prices in the re-sale market?
A: Our customers enjoy being able to pick all of the interior finishes and design elements such as flooring, appliances and room configurations, which makes it easier for them to have a more personalized home. Also, with new home construction, customers are typically provided with a home warranty (which varies among builders). During construction, our customers develop relationships with our construction staff as well as our sales staff. This gives our customers piece of mind in knowing who to go to if they have a problem with their residence. Home construction techniques also have evolved quite a bit over the years and homes constructed now are more energy efficient, which translates into lower energy and utility bills.
Q: You founded JM Weston Homes as a new homebuilding company in 2009, at the height of the economic downturn. Wasn’t that risky, given the state of the industry at that time?
A: There were some advantages to starting at the height of the downturn, but, yes there was an element of risk — and a minor amount of terror from time to time. As a new company, I wasn’t burdened with having land positions that were purchased during the time when land prices were escalating. During the downturn, builders were faced with having to lay off many employees in order to survive. I was able to right-size my staffing and overhead from the beginning. My company was also able to take advantage of opportunities in the industry that opened up when a number of builders exited the market or went out of business, including John Laing Homes.
Q: Are there lessons you learned from the collapse of John Laing that you’re using in running JM Weston?
A: John Laing Homes had one of the best employee cultures in the industry and I believe their focus on customer service and attention to excellent architecture set the standard.
Unfortunately, their financing structure and land positions in California and Arizona led to their demise. My team and I continue to believe in a commitment to excellent architecture and homes that “live right” for the market as well as striving to provide the best customer service in the industry. However, we also are keeping an increased priority on being fiscally responsible in our business and paying attention to how we structure our finances.
Q: You have an accounting background and graduated from college with an accounting degree. How important is it to have such a background in the homebuilding industry, and what benefits does it bring to the table as head of a homebuilding company?
A: Having an accounting background has certainly been helpful in setting up the processes and information and reporting systems at JM Weston Homes, as well as understanding the financial impacts of various strategic alternatives. However, it’s just one component of many that make a successful homebuilding company. I was fortunate in being able to participate in the product research and design process at John Laing Homes, which gave me valuable insight into the new home design process. JM Weston Homes would not succeed without the expertise of my colleagues who manage the purchasing and construction and sales and model design processes. .
Q: What kind of trends are you seeing in the local homebuilding industry when it comes to the styles of homes being constructed and the demands of homebuyers?
A: Since the downturn, I’ve seen customers become more focused on getting a good value for their money. It seems customers are doing more research between competing builders and making sure they are comfortable in their buying decision. With respect to architecture, customers seem to be favoring floor plans that are more efficiently laid out, usually resulting in smaller square footage plans. In the past, I believe the trend was to buy as much square footage as one could afford. Today, buyers are asking, “How much square footage do I really need?”
Q: JM Weston is about to launch its first line of single-family detached homes, after constructing townhomes for the past few years. What’s the difference as a builder in planning for townhomes vs. single-family homes?
A: Townhome construction is generally more complicated than single-family detached home construction due to fire rating and sound considerations. Getting enough ambient light into the interior residences of a building is also tricky.
However, single-family detached homes are not without challenges. Designing for a specific lot size that provides usable outdoor space, while not compromising the layout of the interior, is always a consideration; how the interior living space integrates and transitions with thoughtful outdoor living areas is becoming more important.
To me, the process of designing new homes is one of the most challenging and risky activities we do as builders. The financial penalties of “missing the market” with a home that isn’t accepted by the buying public are high. Consequently, we spend a lot of time doing market and buyer research before putting pencil to paper — whether it’s a townhome or single-family detached home.
Questions and answers are edited for brevity and clarity.
Contact Rich Laden: 636-0228 Twitter @richladen
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