Custom home builder sees value in green
By Nancy Sarnoff, Houston Chronicle
In 2009, Building Group started constructing all of its homes to meet the standards under the U.S. Green Building Council’s LEED for Homes program. LEED stands for Leadership in Energy and Environment Design and is a certification program that provides third-party verification of a building\’s green design, construction and operation. Kevin Frankel, vice president of the family-run custom builder, said committing to environmental efficiency was a way for the company to differentiate itself – particularly amid the real estate downturn.
Now things are starting to look up.
This year, the Houston-based company expects to sell as many as 19 homes, up from 12 last year.Frankel spoke with the Chronicle’s Nancy Sarnoff about the high-end home-building business, the green movement and the latest trends in the custom homes. Edited excerpts:
Q: Is the high-end buyer back?
A: We’re seeing very good traffic and much more interested clients, but every dollar of premium needs to be justified tenfold. If you’re selling a premium product, you need to show them why they want to spend that dollar.
Q: How do you do that?
A: It\’s a much longer education process. It’s not like selling a car. It’s more getting them inside and getting them to believe that what you’ve got is the greatest value per dollar or value per square foot.
Q: Why do you build green?
A: My brother and I came into the business when green was sort of a blown-up fad. Everybody wanted to be on the train for as little as it could possibly cost. We said: What if we standardized LEED-certified homes? That would differentiate us. And it’s the right thing to do.We think it’s a necessity for resale in the future. Green is about value. I think the LEED standards we build to now with foam insulation, dual-speed air conditioning, dual-flushing commodes, we think that’s going to be code in 10 years.Our goal is to make it cost less than 2 percent of the price of the home.
Q: What impact do you expect the recent U.S. debt downgrade and recent stock market fluctuations to have on your business?
A: With any major external factor, with each big market movement, you’re going to have an automatic two-week slowdown. People are going to wait and see. That’s been the name of the game for four years. It definitely lends itself to the scare factor. That’s going to stop you from anything as big as building a house.
Q: How are tougher lending requirements affecting your customers?
A: I haven’t had a terrible experience yet where a client has had real trouble. The lender sometimes puts off the closing. Sometimes (buyers) miss their closing dates. We haven\’t had anybody say I can’t close.
Q: How have you weathered the housing downturn?
A. We are a little bit of an anomaly. We’ve been around for 23 years. We haven’t had trouble getting lending. Our appetite for spec homes obviously went down. When we want to do a spec home, we have to be ready to put cash in that construction loan. The lender wants us to have some skin in the game.
Q: What about design trends? Are people wanting smaller or larger homes today?
A: The same client that might have once said, ‘I want 6,000 square feet,’ might now say, ‘I only need 4,500 feet.’ It’s less emotional now. They may want another 700 or 800 feet, but they’d rather have a lower price.
Q: So they\’re doing it because they want to pay less?
A: They want a lower price, and they don’t want people to come into their house and think it’s too grand. People are still shopping at Tiffany’s, but they don’t want the blue box anymore. They don’t want the biggest house on the block, and they know they’ll save some money by not having that extra 500 feet.
Q: What new design features do people want?
A: The biggest thing we’ve seen is people with young kids want a downstairs playroom. It’s flexible. You can have it as a media room. It can be a guest room. That’s the most prolific one. There are a lot of cool things people are asking for. Outdoor pizza ovens. Secret rooms.
Q: Secret rooms? A: We did one for a client in West U. We called it the bat cave. It was a room between the study and dining room. It’s not that big. Probably 6 x 6. It’s not a safe room. It’s not for sitting and enjoying. It’s really storage, so your kids aren’t in your special storage. Maybe for baseball cards or guns.