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Post-Recession Financing

2011 Housing Outlook

Connecting Arkansas Residential Builders

Arkansas Winter 2011

Bringing Out the Tool Belt Again

Home Builder Mike Wallace

Kitchens & Baths

55+ Housing Market


HBA-GLR Installs New President The Homebuilder's Association of Greater Little Rock (HBA-GLR) recently announced the installation of Bret Franks, of Bret Franks Construction, as the 2011 HBA-GLR President. Franks has been a member of the HBA since 2003 and has been actively involved on the HBA Board of Directors and the National Association of Home Builders (NAHB) Board of Directors. Franks has built homes in Central Arkansas for over eleven years and is a member of the Southern Living Custom Builder Program - which invites only the top builders in the South. Franks has also earned the Certificated Green Professional (CGP) designation from NAHB. “Having worked along side Bret on our Executive Committee and GREEN BUILT Council, I have no doubt, he will do great things for our industry,� said Keith Wingfield, 2010 HBA-GLR President. Franks is joined by Bryan Doan, of Doan Construction, as the 2011 Vice President and Brandon Tedder, of Renaissance Homes, as the 2011 Secretary/Treasurer on the HBA-GLR executive team. BuildingArkansas

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Arkansas GREEN BUILT速 Sponsors

The Fall issue of Building Arkansas Magazine highlighted the GREEN BUILT速Arkansas Model Home, and the article included a list of sponsors. In that article, a few sponsors were left out, and below is a correction for all sponsors of the GREEN BUILT速 Arkansas Model Home: A. Paige Design A&R Painting and Construction ABC Plumbing ABK - Advanced Bath and Kitchen ACE Glass Acme Brick and Tile All State Electric American Abstract and Title Company American Blinds and Shutters Antique Brick Arkansas Portable Toilets Arnold Audio Arnold Cabinets AY Magazine BancorpSouth Bemis Tree Farm Bradco Supply Brundage-Bone Concrete Pumping Bryce Taylor Kontracting Building Arkansas Magazine Burton Building Products Cambria CenterPoint Energy CertainTeed CertaPro Painters Choice Real Estate Group City of Little Rock Construction Waste Management Conway Block Company Delta/Rich Sales, Inc. Dixieland Home Designs Dupont Tyvek Elite Security Solutions Energy Master Home Falk Plumbing Supply G&S Insulating Grandhall USA Granillo Masonry HERS, Inc. (Certified Energy & Green Raters) BuildingArkansas

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Junk-it KleenWrap Kohler/ColemanRussell & Associates Lumber One Home Center Mark Pruss, Inc. Metro Portable Toilets Natural State Construction Pinnacle Roofing & Restoration Pro Builder Supply Progress Lighting ProSource of Little Rock Regions Insurance Richard Harp Construction Ridout Lumber Rinnai River City Materials River Rock Builders (Keith Wingfield) River Valley Horticulture Rocket Properties Royal Overhead Door Sherwin Williams Sherwood Marble Company Smiley Construction STOCK Building Supply Stone Works Southern Star Concrete The Bug Man TGI - Third Generation Industries Todd Valley Farms Tornado Shelter Systems Townsend Exteriors TRANE MidSouth Twin Brothers Inc. Tyne & Associates (Ron Tyne/Bradford Gaines) Whirlpool Corporation Whit Davis Lumber Plus White Daters Associates Woodchucks Custom Trim Woodhaven Homes Woodlands Edge


Bringing Out the Tool Belt Again Home Builder Mike Wallace of Mallard Contractors, LLC, is thankful the past few years have been steady, but he acknowledges he definitely made changes in how he conducted business. Page 12

Contents in this issue Cover Story: 12 Bringing Out the Tool Belt Again Home Builder Mike Wallace of Mallard Contractors, LLC, is thankful the past few years have been steady, but he acknowledges he definitely made changes in how he conducted business. Features: 8 2011 Housing Outlook Local and national experts have weighed in on the outlook for 2011, and the overall sentiment seems to be the prediction of slight to moderate improvement over 2010. 16 Trend Tracker: Kitchens and Baths Whether home builders are looking to create an ultra-modern, contemporary kitchen and bath or a more traditional look with energy-efficient details, the options are endless when it comes to trends in kitchens and bathrooms in new homes. 18 Post-Recession Financing Now that the economy is recovering and building is beginning to pick up in markets all over the state, builders are facing a new challenge – obtaining financing in a postrecession market. Columns: 5 Focus On Buyer Preferences for the 55+ Housing Market 6 Builder Feature John Turner, Turner & Sons Construction

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Perspective Message from the Publisher Building Arkansas is owned and published monthly by Shrader Media Group, Inc. of Sherwood, Arkansas. For additional copies, to order

Bring on 2011

reprints of individual articles or to become a subscriber of Building Arkansas, contact Priscilla ShraderPeters at 501.352.1255 or email pshrader@buildingarkansas.net. Publisher Priscilla Shrader-Peters Shrader Media Group, Inc. Editor Priscilla Shrader-Peters Art Director Tahnya Palanca Color Complete, Inc. Advertising Sales pshrader@buildingarkansas.net Change in address and subscription info: pshrader@buildingarkansas.net Comments or Suggestions? pshrader@buildingarkansas.net Shrader Media Group, Inc. P.O. Box 7244 Sherwood, AR 72124-7244 www.buildingarkansas.net

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Over the past 12 months, the residential building community in Arkansas has experienced some highs and lows. The first part of 2010 looked promising as buyers began to come out of the shadows and take advantage of the first time-home buyer’s tax credit. Then, as the credit expired, unemployment rose, and questions of when and how the economy would return began to surface, the home building industry took a hit as consumers were cautious about buying a new home. Now, as we enter into 2011, home builders, economists and consumers in general seem optimistic about this year. Consumer spending has increased, unemployment has stabilized, and Arkansans who had been out of work are finding new employment opportunities. What does this mean for the residential building in Arkansas? Experts in the industry are predicting a stable year, with little movement either way in volume or new home sales. Many are forecasting a year very similar to 2010 – experts are saying to gauge your success this year on how well you did last year, unless you plan to completely change your business model. This issue of Building Arkansas

Magazine focuses on the 2011 housing outlook for Arkansas and the nation. In addition, you will meet home builders Mike Wallace and John Turner who build houses in Conway and the Central Arkansas markets. We are also covering the latest trends in kitchens and baths and postrecession financing for home builders in a volatile economic climate. I hope you enjoy this winter issue of Building Arkansas Magazine. Bring on 2011! Sincerely,

Priscilla Shrader-Peters President/Publisher Shrader Media Group, Inc. Publisher of Building Arkansas Magazine


Focus On Buyer Preferences for the 55+ Housing Market A joint study by the 50+ Housing Council of the National Association of Home Builders (NAHB) and the MetLife Mature Market Institute shows the recession has made 55+ buyers more practical when selecting a new home. Design considerations have become less important, and financial concerns have become more prominent. Previous studies from these two organizations found that most 55+ buyers depended on home sale proceeds to finance a new purchase. The most recent data shows that option diminished during the economic downturn. The study, “Housing Trends Update for the 55+ Market,” explores recently released housing data from the Census Bureau's 2009 American Housing Survey (AHS) on the 55+ demographic. The report focuses especially on households living in active adult communities, either age-qualified active adult communities where at least one resident must be age 55+, other non-age-qualified 55+ owner-occupied communities (not explicitly restricted to 55+ households but occupied primarily by people age 55+), or age-restricted rental communities. “By the year 2020, as baby boomers move into this age bracket, almost 45 percent of all U.S. households will include someone at least 55 years old," said David Crowe, NAHB's Chief Economist. "The number of those households seeking housing better suited to their changing needs will therefore rise dramatically.” Crowe noted that about 54,000 housing starts are projected in 55+ communities this year, a 30 percent rise from estimated 2010 levels, but still relatively modest production. Starts in 55+ communities are projected to increase another 46 percent to roughly 79,000 housing units in 2012. In 2009, only 55 percent of new age-qualified active adult home buyers reported that their down payment came from a previous home sale, significantly down from 100 percent of respondents in 2005 and 92 percent in 2007. In 2005 and 2007, no active adult community buyers reported having to tap cash or savings for a down payment. In 2009, 45 percent of the average buyer's down payment came from cash or savings. Further analysis reveals other interesting developments. While median prices for new 55+ homes remain lower than 2005's peak, a look at average home prices shows a big difference between buyers in age-qualified active adult communities and other 55+ community buyers. Average prices for 55+ homes dropped in 2007 and partially

rebounded in 2009. But prices for age-qualified communities more than bounced back; they set a record with an average price of $319,000. Buyers in that group were more affluent, with average incomes of more than $80,000 a year. Twenty-seven percent reported earning $100,000 or more compared to fewer than five percent of such buyers in 2001. Those who are able to buy are getting much more for less. In 2009, more than half of 55+ buyers said they were moving into better homes, but fewer than half reported that their new homes cost more than the old ones. “Proximity to work” was more important than in the past for those relocating to age-qualified, active adult communities - 12 percent in 2009 versus 2 percent in 2001 - underscoring the trend toward delayed retirement in this age group. There was also a reported increase in the share of 55+ single-family homeowners who say they work at home - which may be a trend noteworthy to home designers. A small, but growing share of older households is taking advantage of the ability to convert some of their home equity into a reverse mortgage or home equity conversion mortgage. They tend to be older, single-person households with lower household income and longer housing tenure. Those with reverse or home equity conversion mortgages represented more than 241,000 households in 2009, a 54 percent increase since 2007.

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Builder Feature John Turner, Turner and Sons Construction Company A Hobby Becomes A Career By: Priscilla Shrader-Peters After retiring from Southwest Airlines in 2005, John Turner decided to turn his hobby into a career. “I have always had an interest in building. It has always been a hobby for me,” said Turner. “Whether I was building homes in Honduras for those without, homes for Habitat for Humanity here in Central Arkansas, or just working on projects for myself and friends, I have always enjoyed the building process.” Today, Turner operates Turner and Sons Construction Company, building homes for buyers in the Central Arkansas area. “Turner and Sons Construction currently builds three to four homes per year and takes on a couple of large remodel projects,” said Turner. This home builder started his building career with the help of a good friend, Rick Korte, who Turner said recommended that he consider building. “He mentored me through the first year, by helping me with lot choice, sub-contractors, design, things like that and got me started down the right path,” said Turner. That mentorship paved the way for Turner to build his business on a solid foundation. Turner’s approach to home building is creating a partnership with his clients, working together to build the ideal home. “At Turner and Sons Construction, we build homes using well-planned designs, quality materials and impeccable construction practices that make for efficient, long lasting and healthy homes,” said Turner. Energy-efficient building is also important to Turner and his operation, and he has taken strides to become an expert in the field of green building. “I became a Certified Green Professional in 2009 and completed my first green built house in 2010. We built the first Certified Green Built home in Arkansas as certified by the National Association of Home Builders (NAHB) Green Building Standard,” said Turner. “Green 6

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homes just make sense to us. Who would not want a home that is more energy-efficient, longer lasting, and healthier for you?” Turner makes it a priority to visit every job site every day. “I spend the majority of my day checking on jobs that I have going,” said Turner. “Every day I visit the site to evaluate the progress. I know that I could just check the progress by phone, but I like to see it with my own eyes and interact with my subs.” Problem solving on the job is one of Turner’s favorite aspects of home building. “I enjoy finding solutions to the challenges that a builder encounters on a job site. Working together with the homeowner and sub-contractors to find an acceptable result is very rewarding,” said Turner. “I also enjoy seeing the finished product on either a remodel or a new home, realizing that you went from a wooded lot or a dilapidated kitchen to something of beauty is quite rewarding.” While Turner enjoys many aspects of the job, he admits there are challenges. “Workload balance is one of the biggest challenges,” said Turner. “This month I might have three jobs going, but next month I might be looking for work. When I was in the corporate world that pay check would come every two weeks – rain or shine, busy or bust.” Turner acknowledges that his sub-contractors are the backbone of his business, and his most important tool of the trade. “Although tools like my Blackberry and computer play a vital role in running my business and keeping me in contact with my subs and clients, my subs are the backbone of my business,” said Turner. “The relationship I enjoy with my subs is very important to me – I count many of them as friends and keep in touch with them even when they are not

doing a job for me.” When asked what advice he has for builders just starting out, Turner admits he feels like he’s still just starting out. “I would advise to go slow. Build in neighborhoods and price ranges that seem to be moving quickly, so you can maintain your cash flow,” said Turner. “Don’t compare yourself to others – build your business doing the things you know will work.” Turner also acknowledges that his membership in the local Home Builders Association has been a help to him in staying up-to-date on changes in the industry and providing a sense of belonging, and he encourages builders to become a part of their local HBA. Turner enjoys spending time with his family, hunting and watching a good action movie with his two sons, Caleb and Gabe. His wife, Mary Ann, is an integral part of his support system, and he lists his faith and his family as his top priority. “The most important thing in my life is my faith. It is my moral compass – it determines the way I do business and interact with my clients,” said Turner. “I could not do this without the support of my wife and family,” said Turner. “She has been a great supporter, and she also adds a designer’s eye to the building process by selecting colors, finishes and fixtures.” Turner is optimistic about the future of home building in Arkansas, and he plans to continue to build for many years to come on the foundation of his faith and hard work. “I think that the home market will remain steady,” said Turner. “I also feel that there is a movement toward more energyefficient homes, and the builders that pay attention to those small details that help make a home more efficient will come out ahead.” BuildingArkansas

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2011 HOUSING OUTLOOK By: Priscilla Shrader-Peters For many in the residential community in Arkansas 2010 was a tough year. Home builders found themselves taking on more remodeling projects and finding ways to cut spending and trim overall budgets where possible. What does 2011 hold? Local and national experts have weighed in on the outlook for 2011, and the overall sentiment seems to be the prediction of slight to moderate improvement over 2010. “While the supply of currently marketed homes isn’t quite as impacted by the foreclosure mess as it is in other states, we don’t know what the shadow market has with homes that are waiting to be listed,” said Richard Harp, Little Rock Home Builder and Past President of the Arkansas Home Builders Association (AHBA). “To sell houses, we need more folks employed, and those who are employed not wondering if they will lose their job soon. Once the employment issue is solved, and if rates stay anywhere near what they are, I believe you will see a decent rise in home construction to accommodate all the families who need a home.” The last quarter of 2010 showed some positive signs of

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growth and the home building industry is banking on that growth continuing in 2011. “I think our market will continue seeing slight improvement through 2011,” said Joe Burak, Executive Director of the Home Builders Association of Greater Little Rock (HBA-GLR). “We noted small improvements in building permits in some municipalities between 2009 and 2010, and I think that trend will continue.” Builders have adjusted to the economic conditions of the day, and 2011 will be no different. “One of the biggest changes I’ve noted from 2006 through today is the change in speculative versus custom construction,” said Burak. “In 2006, they [speculative homes] comprised a significant portion of home construction and sales; however, today presold, custom homes seem to make up the majority of our local markets. Banks have pulled back on speculative construction lending, and builders simply don’t want the risk. I think we’ll start seeing this trend reverse slightly in 2011 as financial markets improve, jobs are created, and the industry grows more confident moving forward.” The unemployment situation our economy faces has had a direct impact on the housing industry, and many experts believe that until unemployment is lowered, the residential


building industry will stay status quo. “College graduates are continuing to graduate and form families, while the average life expectancy is still climbing – so that creates a need for more housing,” said Harp. “Once the shadow inventory dries up, foreclosures settle to a more normal range, and folks have secure employment, builders will have much more to do.” The outlook is optimistic that Arkansans and Americans in general will be back to work very soon. “All the employment data that I’m reading is positive,” said Burak. “Although we leveled off at 9.5% [unemployment], I don’t anticipate that this goes higher. Worker productivity has been dropping throughout the year, which usually signals that companies need to add employees. With more people earning paychecks, I think foreclosure rates will continue to decline, and values will rise, if only modestly.” The national picture looks very similar to the local markets here in Arkansas, although Arkansas has fared better than most markets across the nation throughout the economic downturn. According to McGraw-Hill Construction, a provider of industry news and market research, the residential building industry will start a slow recovery in 2011. According to their forecasts, the estimated value of new construction starts is predicted to rise to $445.5 billion – an eight percent increase from the 2010 numbers, which

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hit post-recession lows. These forecasts are simply that – a prediction of what the market will do. In 2010, McGraw-Hill forecasted a gain of around eleven percent, but construction starts in both the residential and commercial sectors fell two percent from 2009. “We are seeing market conditions returning to normal in many parts of the country after a long, hard downturn, and these companies have the agility to move quickly and start leading the economy forward,” said Bob Jones, 2010 National Association of Home Builders (NAHB) Chairman and builder from Bloomfield Hills, Michigan. “But first they need access to financing to build, which remains scarce during this critical phase of the recovery.” A recent report by economists at the NAHB, “Extent of Under-Building in the Single-Family Housing Market,” finds that there was an excessive amount of single-family building from 2003 through 2005, but overbuilding largely ended by 2006, and the subsequent downturn was severe enough to more than offset those annual surpluses. “The single-family housing market in the U.S. currently finds itself in a significantly under-built state” said Jones. “Pent-up demand for housing will at some point need to be worked off, pushing single-family production in a positive direction. In the meantime, the deficit continues to grow as builders remain cut off from the credit they need to begin developing and building new housing.” The study used permits as an indicator, and showed that single-family permits plunged to 441,000 in 2009, according to the study. This is the lowest level since World War II. Over the 1988-2003 period, which goes up to the housing boom of 2004-2005, the number of single-family permits issued was increasing at an average of about 36,000 per year, consistent with a growing population that needs housing and an expanding inventory of older homes that need to be replaced. With that trend in mind, single-family permits should have hit 1.4 million by 2005, 1.5 million by 2008, and around 1.56 million in 2009, according to the NAHB report. Instead, permits were well over 1.4 million in 2003 and pushed past 1.6 million in both 2004 and 2005. Deficits in permits began to materialize in 2005, and reached about half a 10

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million in 2007 and one million every year since then as single-family permits dropped below 500,000. The study also found that there are now single-family housing deficits in most states. These states include the sates that had the hottest markets during the boom: Arizona, with a deficit of 144,500; California, 49,500, Florida, 112,600; and Nevada, 75,600. The national picture is a reflection of what the industry looks like in Arkansas. As building permits have declined in recent years, eventually, the deficit will need to be filled and housing will need to catch up with supply/demand, according to the experts. Does that mean 2011 will see the boom home builders enjoyed in 2004 and 2005? Not a chance. But it does mean the market should be making up for any overbuilding that occurred in past years. With the market showing signs of improvement, unemployment seeming to stand still with predictions of declining, and an overall more optimistic consumer outlook, 2011 has the potential to be better than 2010 for many in the residential building industry in Arkansas. For now the industry continues to work hard and make the most of it. “Builders wish there were more to do and are staying on top of their remodels. Realtors wish they could move more property, but lament that availability of money, and buyers, and unemployment make that sale very hard earned,” said Harp. “We will get to a point where employment stabilizes, new families need new homes, money is available, and builders and realtors are adequately employed.”

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Bringing Out the Tool Belt Again

Mike Wallace, Mallard Contractors, LLC

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By: Priscilla Shrader-Peters For Home Builder Mike Wallace of Mallard Contractors, LLC, the past few years have been steady, but he acknowledges he definitely made changes in how he conducted business. “Thank God we never missed a day of work during the slowdown, but we sure made some changes,” said Wallace. “I had to put the ole tool belt back on and really watch the budget and expenses. We cut back to a few specs and adopted a ‘sell one, build one’ mindset.” Like many home builders in Arkansas, Wallace survived the slowdown of the past 24 months and he is looking forward to 2011 and what the new year has in store for his building business. Making dreams come true for home buyers primarily in Central Arkansas and more specifically in the Conway area, Wallace has been building homes for 15 years. He started building spec homes in 1997, which gradually lead to him building primarily custom homes and just a handful of specs each year. Over the last five years, Wallace has added his commercial license to the business, as well as began developing land and building multi-family investment properties. “I became a builder because I wanted a job that would have an end product to be proud of,” said Wallace. “Building was one where all my efforts and vision become reality.” Wallace acknowledges that he was influenced by many Conway builders, particularly Greek Miller. “He always appeared to enjoy building, displayed real character, and his customers seemed to really enjoy their building process with him.” Before becoming a home builder, Wallace worked for Ridout Lumber for several years. “That opened a lot of doors that allowed me to meet many people that are still in business today,” said Wallace. “I still go into Ridout regularly, and they are the supplier for all of our building needs.”


Wallace and his team build primarily custom homes in the Conway area, and he considers himself a hands-on builder – no doubt. “We still do most of our foundation work and trim, as well as being on site every day,” said Wallace. Making dreams come true for home buyers is what Wallace enjoys most about being a home builder. That, and working with the best subs in the area. “Our subcontractors are one of our greatest assets,” said Wallace. Mallard Contractors, LLC believes strongly in the philosophy of budgets and scheduling. “Budgeting is an important part of any business, and schedules just make everything run smoother,” said Wallace. This is advice he would give to home builders just starting out in the industry. “Make a schedule and a budget for each individual job – for you, your clients and your subs,” he added. Wallace also believes in building smart with energy-efficiency in mind. “We build using Conway’s Energy Smart System,” said Wallace. “Some of those requirements include vinyl low-e windows with argon gas, R-38 insulation in the attic, solar board decking and Energy Smart appliances.” Conway Corporation created the Energy Smart Builder Program to establish an energy efficiency program designed to recognize builders and homes that

At A Glance M i k e W a l l a c e, M a l l a r d C on t r a c t or s , L L C Location: Central Arkansas - Conway Area Advice for New Builders: Develop a budget and schedule for each individual job Approach to Home Building: Very hands on - complete foundation and trim work personally when possible Hobbies: Serving at New Life Church Conway Campus BuildingArkansas

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implement high efficiency “behind the walls” construction and equipment measures. According to Conway Corporation, the city wants to help customers cope with the rising cost of energy, and they acknowledge that encouraging builders to take greater efficiency steps during construction of new homes can greatly reduce the homes utility bills and increase comfort. Builders must adhere to stringent construction and equipment guidelines to be recognized as an Energy Smart Builder, according to the Conway Corporation web site. Following these guidelines has been proven by the US Department of Energy to be 20-30% more efficient than a standard built home. Some of the Energy Smart Home features that Conway Corporation encourages include effective insulation. This references properly installed and inspected insulation in floors, walls, and attics to ensure even temperatures throughout the house, reduced energy use, and increased comfort. Another feature is high Performance (Low-E) windows. Energy-efficient windows employ advanced technologies, such as protective coatings and improved frames, to help keep heat in during winter and out during summer. These windows also block damaging ultraviolet sunlight that can discolor carpets and furnishings. Tightly sealed construction and ductwork are also included in the guidelines. Sealing holes and cracks in the home's "envelope" and in heating and cooling duct systems helps reduce drafts, moisture, dust, pollen, and noise. A tightly sealed home improves comfort and indoor air quality while reducing utility and maintenance. High-efficiency heating and cooling equipment are also an important component of the Conway Energy Smart Builder Program. In addition to using less energy to operate, energy-efficient heating and cooling systems can be quieter, reduce indoor humidity, and improve the overall comfort of the home. When properly installed into a tightly sealed home, this equipment won't have to work so hard to heat and cool the home, according to Conway Corporation. High-efficiency lighting and appliances are also recommendations for Energy Smart homes. These homes are equipped with ENERGY STAR qualified products – lighting fixtures, compact fluorescent bulbs, ventilation fans, and appliances, such as refrigerators, dishwashers, and washing machines. Low-flow water products are also recommended. Products such as low-flow shower heads and toilets can reduce utility costs and conserve water. While Wallace holds energy efficiency a high priority in his new homes, he also feels strongly about serving his industry and community. “I have served on the Faulkner County Home Builders Association Board for several 14

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years,” said Wallace. He served as president in 2000 and 2001, and was named Builder of the Year in 2000. Wallace is also very involved in his church – New Life Church in Conway where he volunteers at the services and the church’s Dream Center. He also brings his trade to his volunteer work through converting unused areas in homes to apartments that house New Life Church’s Cadre Academy students. With the hard work, charity work and focus on energy-efficient building, Wallace still contends there are challenges he faces as a home builder. “Since the economy has slowed down, the changes that banks, finance and mortgage companies have made definitely make it harder for buyers to get loans – from construction loans to permanent financing,” said Wallace. “We are building a lot of USDA and FHA homes, which definitely require much more time and paperwork before you can even break ground.” Wallace is confident about the future and believes the slowdown is in the past. “I believe that we have seen the worst of the downturn, and things will slowly get better,” said Wallace. “Interest rates will be the thing to watch as the economy bounces back.” According to the National Home Builders Association (NAHB), consumers who are thinking about buying a home should not count on interest rates or prices staying at current levels. Mortgage rates are sensitive to market conditions, and even a slight increase can push monthly payments beyond a family’s budget. As the country recovers from the recession and people stabilize their financial situations, NAHB economists expect that home prices will begin to increase by 2011. “With interest rates remaining at historically low levels, and house prices starting to stabilize, homeownership is within reach of more households than it has been for almost 20 years,” said 2010 NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Michigan. “While these favorable conditions are beginning to draw home buyers back into the market, builders continue to have major problems in obtaining credit for new-home construction, and this obstacle must be overcome if builders are to respond to improving demand moving forward.” Despite any concerns the residential building community faces, for Mallard Contractors, LLC, the future looks bright. “We plan to keep building custom homes and watch the market for future spec opportunities,” said Wallace. “Our faith is what brought us this far, and we plan to continue to give God the glory for the past and the future.”

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trend tracker: Kitchens & Baths

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By: Anne Redarhs Kitchens and bathrooms have traditionally been the beneficiary of careful planning and budgeting for new homeowners. While the economic slowdown has certainly affected the overall scope and spending for homeowners when it comes to kitchens and baths, they still take center stage in new home construction. Traditional and contemporary remain consistent trends in kitchens and baths. The incorporation of sleek, European style and contemporary elements like glass, stainless steel and concrete are being coupled with warmer elements like wood cabinets. “The trends are still toward solid wood cabinets and inexpensive imported granite countertops,” said Ross Ridout, VicePresident for Ridout Lumber. “The cleaner, more modern cabinet looks are making their way into some of Arkansas’ upscale markets.” Each element of the kitchen and bath has trends that recently emerged or stayed consistent over the past year. For faucets, pull-downs remain the faucet of choice for kitchens, with many customers choosing


those that require only a one-hole cut-out for a streamlined look and easier cleaning. Brushed nickel and oil-rubbed bronze are still popular finishes, but polished chrome and all white faucets in the bathroom are gaining popularity also. Granite still dominates the countertop landscape, but engineered stone surfaces are popular in a variety of price points. Some home buyers are splurging on natural stone countertops, and ceramic and glass tile for backsplashes, and accent areas are becoming popular to add more detail to common areas. Wood cabinets remain popular with cherry, maple and alder as popular cabinet materials. White and other neutral color paints and finishes are becoming more common. “At Ridout we have a private label, solid wood, cabinet line that is simply the best thing available at the price point,” said Ridout. “The cabinets are beautiful, raised panel in two colors, a dark mocha and a slightly lighter saddle, with a wash. We can’t keep them in stock, and we are putting a lot of granite on them.” Task-oriented cabinetry and work stations are on the rise in popularity of stations with tray drawers and other cabinet spaces to house specialty appliances. Whatever cabinets that are chosen, clean straight lines and simple molding and trim are in demand, according to the experts. Hardwood flooring dominates the choice for kitchen flooring, while ceramic tile is typically the flooring choice for bathrooms. Lighting trends include under cabinet and task lighting installations, along with more and bigger windows in kitchens and baths to incorporate natural light. Energy-efficiency trends also play a big role in kitchens and baths, including high efficiency faucets and fixtures, tankless water heaters, and Energy Star appliances. Builders have been using water-saving dishwashers and energy-efficient refrigerators for years, but now the stove has options that builders have when it comes to saving energy. Induction cooking stoves offer heating speed, responsiveness, and control with more efficiency than electric stoves, according to experts. Some induction stoves automatically detect the presence of magnetic cookware, activate the induction field, and adjust to the exact size of the pan. Whether home builders are looking to create an ultramodern, contemporary kitchen and bath or a more traditional look with energy-efficient details, the options are endless when it comes to trends in kitchens and bathrooms in new homes. “Homebuilders can really put together some very nice kitchens and baths right now for very reasonable prices if they find the right products,” said Ridout. BuildingArkansas

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Post-Recession Financing

By: Priscilla Shrader-Peters For home builders in Arkansas and across the nation, surviving the recession was challenging. Now that the economy is recovering and building is beginning to pick up in markets all over the state, builders are facing a new challenge – obtaining financing in a post-recession market. “In normal times, housing accounts for about 17 percent of GDP,” said 2010 National Association of Home Builders (NAHB) Chairman Bob Jones, a home builder from Bloomfield Hills, Michigan. “However, in the current economic climate, lenders have basically stopped making acquisition, development and construction (AD&C) loans and are calling in existing loans, even when the borrower’s payments are current.” 18

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In late May, 2010, legislation was introduced to help alleviate the severe lack of credit for AD&C financing through H.R. 5409, a bill that would create a new residential construction loan guarantee program within the Department of Treasury to provide loans to builders with viable construction projects. Designed to unfreeze credit for small home building firms, the measure would have expanded the flow of credit to residential builders on competitive terms. However, this bill never passed. The White House and Congress have, at times, shined a light on the issue of financing for the housing industry in recent months. In July, 2010, the Obama Administration and the Federal Reserve sponsored events that focused on how to ease regulatory burdens on the small business community that are constricting job growth. The object of


the conference in July, according to Federal Reserve Chairman Ben Bernanke, was to develop policies that will support the flow of loans to creditworthy small businesses. While the issue has become under the spotlight, a few notable strides have occurred to support the residential building community. On October 18, 2010, the Federal Reserve unveiled an interim rule regarding appraisals that helps clarify the home valuation process. “The interim rule makes it clear that home builders and others can ask an appraiser to consider additional information about a property, including information about additional comparable properties,” said Joe Robson, Past NAHB Chairman and home builder from Tulsa, Oklahoma. “That’s critical to our members because in far too many cases we’re seeing appraisals based on inappropriate comparables.” With the emergence of green building and new building codes and regulations, home builders find it challenging to get appraisers to understand the value in many of their new homes. “Many appraisers do not understand the impact of new code requirements, new green building practices and other aspects of new construction that add value to a home,” said Robson. “It is particularly important that home builders be allowed to provide appraisers with information to assist in appraising new construction.” The Federal Reserve’s interim rule includes conflict-ofinterest guidance, which prohibits loan officers and mortgage brokers from selecting appraisers. It also mandates the

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reporting of negligent appraisals and appraiser misconduct to the appropriate state appraiser licensing authorities and requires those seeking an appraisal to pay appraisers at a rate that is reasonable and customary in the geographic market where the property is located and that reflects the difficulty of the assignment. The Fed is currently accepting comments on the interim rule, and compliance is voluntary until April 1, 2011. The Fed’s action was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law on July 21, 2010. “Accurate appraisals are critical to the residential construction industry, because flawed appraisals can jeopardize sound projects,” said Robson. “In the current economic climate, it is already difficult to find financing for AD&C. One appraisal that doesn’t represent the true value of a property can start a chain of events that can put a builder out of business.” Home builders are not only seeing challenges regarding financing on new construction jobs, but also on remodeling jobs – when remodeling has resurfaced as a major part of many home builders’ business. According to the latest Professional Remodeler research, nearly every remodeler surveyed was feeling an impact from tightened lending standards. Around 47 percent of the remodelers surveyed said they are having trouble getting the financing they need to run their companies. “Even though we are profitable, banks shy away because we are in the construction business,” said one remodeler included in the research. “How will the industry ever recover if the banks are unwilling to lend?” Forty-six percent of remodelers said the tightening in lending has affected their ability to market effectively, while 45 percent said they have delayed purchasing equipment and 38 percent said they have put off acquiring property. Whether home builders are obtaining financing for remodeling projects or new construction projects, there is no doubt the overall picture for lending looks vastly different than it did just 36 months ago. “We have received scores of reports from builders across the nation who have been unable to obtain AD&C financing for viable projects or have experienced adverse treatment regarding an outstanding loan,” said Jones. “With the housing market struggling to regain its footing, regulators need to be issuing more flexible guidelines that will encourage banks to maintain funding for residential AD&C loans in good standing that fall below their underlying value. Tightening the screws further could have a devastating impact on the housing market and jeopardize the budding economic recovery.”

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Coming up in the Spring 2011 issue of Building Arkansas

Arkansas Developments A showcase of residential developments in Arkansas.

Energy-Efficient Building What does “building green� in 2011 look like?

Lighting & Hardware The latest trends in lighting and hardware for new homes.


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BAR winter 2010