The National Association of Realtors (NAR) estimated that pending home sales “rose modestly” in July of 2015. It “conservatively expects” that luxury home sales – those that are priced above $1 million – will at least repeat last year’s growth of 9%. This growth rate is more than double any other price point in the residential real estate market.
The custom home market, generally viewed as architecturally-designed residences that start somewhere around the $2 million price point – are seen as the highest end of the market, and the most profitable. This growth is driven by clients’ desire to have an original home, one that is tailored specifically to meet their needs and that should be maintenance-free for some time.
Why then are custom built homes the fertile ground of horror stories? Shouldn’t custom home clients expect better quality homes and a less painful “purchasing” process than people buying production, semi-custom or existing homes?
Interestingly, the U.S. Census Bureau reported that in 2014, the number of 3,000 square feet and larger homes that were completed is still only half the number during the peak housing years of 2005-2007. In fact the figures have still not matched the numbers attained in the four-year period leading up to the peak. Additionally, the number of homes 3,000 square feet or larger, which were sold in 2014, matched the pattern of newly constructed homes.
While the health of the economy clearly plays a significant role in home sales and ownership rates, clients that aren’t nearly as sensitive to national economic issues generally purchase custom homes. It is likely that the economic downturn acted as a forcing mechanism for many prosperous clients to examine the return on investment they received from custom built homes. And it appears they found it lacking.
Many people have hypothesized that today’s custom home problems can be linked to the creation and success of the Levittown communities, and their followers, that were first created in 1947. That is when the architect was pushed down in the home construction value chain.
Previously, architects had the central role in how houses and neighborhoods were designed and built. For example, throughout the 1920’s and into the early 1940’s, architects had the final say over design, materials and construction methodologies. A 2005 U.S. Census Bureau report, sponsored by Bank of America, showed that one third of all U.S. housing stock was built in 1960, or earlier. In most of today’s metropolitan areas, those more thoughtfully designed bedroom communities are still greatly sought after by buyers.
The popularity of production housing created two unintended consequences. First, the best residential architects began to congregate at the high end of the market. This is where clients were willing to pay for the higher quality architectural design and craftsmanship standards which had dissipated in the “average” home market.
This led directly to the second unintended consequence, a shortage of builder capabilities. Unfortunately, there have been three whole generations where many home builders and tradesmen were trained to build compromised homes. They were given limited exposure to architectural design and advanced construction technologies. They don’t understand the intrinsic value of thoughtful design. Nor have they developed the skills to properly partner with architects and manage what can be a fluid and complex process.
Exacerbating this ”dumbing down” of design and construction in a large sector of home building is a significant dearth of highly skilled labor in the residential arena. Another byproduct of the Great Recession was the exiting of many senior, skilled tradesmen from the custom home industry. Some retired, others changed jobs and industries. In either case, the result has been the same; these highly skilled craftsmen are no longer available.
This means that the best trades, those needed in high-end custom building, are stretched very thin. They know their value. We do too. Which we will discuss later in this article.
It is this confluence of a reduced skilled tradesman, impaired new builder capabilities and resources in combination with the more rigorous requirements of a truly custom residential project that generate less than desired results in terms of home quality, budget issues, schedule delays, and communication breakdowns. This is the origin of most custom home building horror stories.
The largest differentiators between the majority of home builders and the successful, custom builders can be summed up in three areas – construction acumen, sound project management process and the ability to communicate while cultivating a seamless, harmonious relationship with both the client and the architect.
We believe that success in the high-end custom home market requires a very different business model than what is found in most high-end custom home builder organizations. We believe ours is a strong step in the right direction. It is simply this – support the creative design process early and often.
What this means to us is that the builder must be involved as early as the design team and must provide accurate and efficient feedback to the design team on all things related to cost and construction logistics as the design evolves. This kind of open communication paired with advanced project management drives results that secure project success before it even begins.
How do we know it works? We learned after decades in our luxury commercial market activities that extensive preconstruction planning and developing highly functioning communication synergies with our design and construction teams, very early in the process, is just good business.
As such, we leverage best practices developed from managing both design and construction teams in the luxury commercial market, and inject them in our custom home projects. Throughout our process, we focus on unburdening the architect from everything that isn’t architecture. We have seen first hand the benefits to the project, the neighborhood and the bottom line when architects are freed up to focus on design.
Our architect partners are able to create thorough designs that perfectly translate to the construction team and delight our clients. Seamlessly working together – architect and builder – throughout the design and construction process, we are able to ensure that the natural tensions between budget, client program and schedule are always balanced.
Superior design from our architect partners, when coupled with our more organized commercial construction management practices means that despite the scarcity in the sub markets, we are better able to attract the best skilled trades. Because we don’t carry the overhead drain of tradesmen whose industry knowledge ends and the periphery of the company – we can attract and leverage the most advanced in each field . The result is a very sophisticated, focused and reliable resource that can be harnessed as needed to meet the most exacting of architectural design standards.
The result is that our custom home projects come in on time, within budget and the experience – with no surprises along the way – always exceeds our clients’ expectations. By partnering with our architects and promoting the creative design process, we are able to build cutting-edge homes that are sustainable and constructed to last for generations.
This article is an introduction to a series of pieces where we will share our best practices – enabling architects and clients to understand what is truly possible.
Luke Gladis is the Managing Director of Ironstar Building Company (www.ironstar.net) – the design-driven, elite home developer. It works exclusively with premiere residential architects to build breathtaking homes for its clients and its own speculative real estate projects. Mr. Gladis is responsible for daily operations, execution and successful delivery of all Ironstar custom home projects. Prior to joining Ironstar, he spent the previous ten years managing construction of some of the most exquisite fine homes in the New York City metropolitan region, with project budgets averaging more than $10 million.