Overall, the thesis is spot on and is exactly why Classic Urban Homes builds in the neighborhoods we do. We build in infill locations in established neighborhoods. Sounds kind of like the author’s quote:

Perhaps we trade some of that excess space for durable, well-crafted houses located in complete neighborhoods.

I do have an issue with his methodology on pricing though. Using the tax assessor’s price to gauge the relative price appreciation or depreciation is hugely flawed. I fight the assessor’s office all the time on multiple properties we own, so I am intimately familiar with their tactics. Problems with the county offices are:

1. They have no uniform pricing criteria. The price a neighborhood and then essentially force the individual property owners to come in and fight it. They are not assessing the value of each particular house.
2. Sales prices are not publicly disclosed in Texas, so the appraisal district does not necessarily have correct sales prices. Although, when they do get a copy of a closing statement, they will usually use it. I have, though, seen examples of times when they say that you bought it too low, we’re going to price it higher.
3. Since it’s up to the individual property owner to fight the appraisal pricing, you have to realize that not everyone will do so. Obviously lots of factors involved as to why, but, in the end, it means that the pricing for individual property is not accurate. As an average across the neighborhood, is probably reasonably close, but not for individual homes.
4. The appraisal districts do not use standard appraisal guidelines like licensed appraisers do. Licensed appraisers use strict guidelines dictated by Fannie Mae that they have to follow. The district does not. They have their own methodology that they consistently refuse to share. I know, because I ask to see it every year!

If you want to truly gauge price changes in neighborhoods, you have to look at disclosed paired sales prices from MLS. In order to do this, you need a realtor who will pull numbers for you.

But, overall, I think his thesis is spot on. Cheaper tract homes in outlying areas will face a lot of pricing pressure for numerous reasons. 1) The next farmer’s field over will have newer homes in a matter of years, so the “older” homes will immediately be discounted. It’s like buying a new car and having it depreciate as soon as you drive off the lot. 2) Tract homes are built cheaply! In order to get to an “affordable” price point, they have to squeeze every nickel they can. 3) As energy and gas prices increase, people are going to want to be close in, not far away.

If you’re interested in a quality, infill home in an established neighborhood, look no further and give us a call!

The only thing I think the data is good for is to compare how, in general, based on caveats #1 and #2 above, your market is doing as compared to the rest of the country.

My suspicion from watching the home and lot prices as closely as we do, is that the data will show that we’ve been bouncing along a bottom for a couple of years. At least in Dallas, that is. I don’t care about anywhere else. I suspect and have read that the homebuyer tax credit also produced a bump in prices that was followed by a return to the bouncing along the bottom.

So, I quickly dusted off my Excel skills, and viola! updated the three charts I like to use. The first is an absolute return of the Dallas area vs the the two composite indexes starting in January 2000 through the latest data point of May 2011. The second is the same, but with a period from January 2008 to now. The third is just from January 2010 to now. All three charts are below.

In summary, they all fall in line with what I thought had been going on. Dallas never had a speculative bubble as compared to the rest of the county. Since the 2006/07 peak, our prices are down like everyone elses, but not by nearly as much.

Since 2008, Dallas has lost 3.5% versus the 22% of the whole index.

Since 2010, Dallas is in line with the index with a loss of 2.5%.

What is interesting - and what I don’t think most people recognize – is that if you measure from the start of 2000, with the exception of Detroit and Las Vegas, all other 18 city areas have had POSITIVE appreciate in their real estate prices. During that time, the average appreciation across all 20 cities is 2.9%. I think the lesson here is simple – home ownership is a investment where the long-term return will not be much different than inflation. If you are buying and hoping to flip – that’s not investing, that’s speculating. You can, and often will, get burned by speculating. Go look at that third first chart and see if you can spot the speculation. There are obviously other benefits to home ownership, but that’s for another post.

Short summary – new home starts in Q2 2011 is down from Q2 2010, but up from Q1 2011. The year over year drop is likely due to Q2 last year being the last quarter of the (misguided, in my opinion) home buyer tax credit.

But Ted is encouraged overall and sees the same thing that we have been seeing lately – sales and traffic has definitely been picking up.

So, what’s the new dynamic this year? Most builders are on plan, reporting steady traffic and sales for the spring and early summer months. With no artificial stimulus out there in the market today, the general expectation as we head into the rest of 2011 is that we’ll see more of a balance, with year-over-year numbers gradually improving and annual rates starting to pick back up a bit.

We’ve also seen a dramatic increase in the number of calls we’ve been fielding. In addition to our finished Lakemont house, we’ve currently got two major remodels going on and three custom jobs about to start any day. On top of those, we’ve got three or four more that are in plan stage and about ready to go!

It’s going to be a busy rest of the year for us and we look forward to it!

SATURDAY 10AM-6PM, SUNDAY NOON-6PM
MOTHER’S DAY BRUNCH, SUNDAY 11AM-2PM

One of our city’s favorite annual events is just around the corner. Join us on Mother’s Day weekend, Saturday and Sunday, May 7th and 8th, for the 38th Annual Swiss Avenue Mother’s Day Home Tour. During this weekend-long celebration of Dallas’ historic past, you’ll explore some of the city’s most fabulous Early 20th Century homes.

Travel between the homes on air-conditioned mini coaches, or amble down the avenue in horse-drawn carriages, both provided at no charge. Between tours, relax and refresh in Savage Park. Enjoy great food and beverages provided by Penne Pomodoro and other local eateries. Listen to fabulous live music performed by area talent. And browse the displays of local artisans who will be showcasing their wares on the median in front of Savage Park.

A Mother’s Day Champagne Brunch in Savage Park on Sunday from 11AM to 2PM will feature entertainment by Matt Tolentino & The Singapore Slingers, a big-band-era orchestra specializing in music written between 1900 and 1935. Brunch tickets are $20 per person and can be reserved by calling 214.701.3396.

Home Tour tickets are $20 in advance and $25 the weekend of the event and can be purchased at any area Whole Foods Market, Forestwood Antique Mall, Lakewood Orthodontics, and at Uptown Yoga and Talulah Belle in Lakewood. During the weekend of the Home Tour, tickets can be purchased at Savage Park, Munger Place Church, or at any of the tour homes.

Their website is here: Swiss Avenus Historic District

“While Texas has not been untouched by the recent economic downturn as indicated by the decrease in sales, it is encouraging to see home prices hold their value in the first quarter,” said TAR Chairman Dwight Hale.

In the first quarter, the median price of existing single-family homes increased 1.3 percent to $143,300 compared with first quarter 2010. During the same period, the volume of home sales was 40,192, 7.3 percent less than the previous year.

“In evaluating the first quarter of 2011, we must remember we’re comparing it to the first quarter of 2010,” said Dr. Jim Gaines, research economist with the Real Estate Center at Texas A&M University. “That time period included March, which was one of the most heavily government-stimulated months of the year by the homebuyer tax credit. While we expected sales to be down given this anomaly, we expected the decrease in the sales volume to be much greater, suggesting that the market is performing well despite the absence of tax credits.”

Texas had 7.5 months of inventory in the first quarter, compared with 6.8 months a year ago.

“Texas is still performing considerably better than other states in terms of maintaining balance between home inventory and demand,” Gaines said. “Combined with the fact that Texas has maintained strong property values, this indicates that the market is absorbing foreclosed and other distressed properties without experiencing harmful excess supply.”

Mr. Brown predicts a good summer and fall selling season.
This  is a large part of  the reason we decided to start a spec home about a month back. It should be completed at the end of June and I think the timing will be right. I know my phone has been ringing a bit more lately which is a positive sign.

Will keep you posted.

It seems that the appraisers have finally decided to get on board with new building protocols. According to the link below, the appraisal industry is making efforts to educate its members on the value of “green” and the building of high performance homes. This is not unlike the new “green” fields available now in most Multiple Listing Service listings (see: The Green MLS Tool Kit).

One of the main issues the appraisers have had is that there has been insufficienct sales data to support (or quantify) the value of high performance home building. The appraisal industry, as a whole, is built on a business model that is high-volume and low margin. There are no incentives for them to take any risk and push the envelope on a home appraisal. So, in some respects, I can understand why they haven’t given any value to the new types of building technologies. “Show me the money” ala Jerry Maguire, right?

It appears that the appraisers are starting to wake up to the fact that more houses are being built in this style. Whether being driven by market forces or the changing municipal codes, “green” and high performance homes continue to make up a large(r) portion of the new home market. I applaud them for learning more about what constitutes a high performance “green” home. It’s an educational process that needs to also include realtors, and, most importantly, the general public.

Source: Appraisal Institute Launces “Green” Valuation Program

1) We’re going to introduce two new recurring topics – “From the builder’s corner” and “From the designer’s corner.”

The builder’s corner will be covered by Michael and will cover a range of topics from current activities (Rally Day) to tips and tricks Michael has learned from his multi-decade experience as a builder.

The designer’s corner will be covered by Michael’s lovely wife, Jane, who works closely with all our clients to provide design ideas during the architectural drawing phase as well as assisting clients with their product selection. Jane will be writing about things that provide a little inspiration to her that she’d like to share.

On an on-going basis, we will also be posting what we’ve always written about – whatever strikes our fancy! I enjoy critically examining the finance/economic side of our business like the Case-Shiller reports and banking and appraisal issues and will turn that same eye to developments in the “green” side of building as well. We are committed to building in a way that makes sense for the way we all live. That means both the “green” in your pocketbook as well as being “green” and building and designing high performance homes. Being “green” means different things to different people, and we enjoy discussing and refining what it means to us and to our lucky homeowners.

2) Gather data on the energy use of our existing homes. We have gotten several non-solicited comments from our current homeowners that they can’t believe how low their electric and gas utility bills are. This is great feedback for us. In some ways, the science of high-performance home building is tough to prove. It’s easy for us to tell potential clients that a house will save them money because we built it a particular way, but, unless we have documented proof of that, most people just nod their heads politely and ignore it. The facts are clear – there are simple things we can do to the design of your home to save you money operating that home. Well, sort of. If you keep your house like an igloo in the summer and a sauna in the winter, we can’t help you with that.  We can only design the house to perform well, it’s up to you to operate it in a responsible manner.

3) We’re also going to be updating our Facebook page more often. What do you mean you haven’t “liked” Classic Urban Homes on Facebook? Get on it! And share it with your friends as well! We’ll be posting picture updates and things of that sort more often over there.

4) Finish updating our main website! We’ve been working on making behind-the-scenes changes for a while. We’ll have a better platform to showcase our homes. Time to knuckle down and get it done.

5) Find some undiscovered parts of town! There are so many fun little niches in this city like Forest Hills and Lakewood. We want to build your house in all of them!

6) Continue our education! One of the most overlooked parts of being a successful building company is continuing education. We have made it a high priority to continue learning and, most importantly, practicing what we learn. Building science changes all the time – there are always new and better ways to do things. Sometimes they’re more money, sometimes they’re less. Sometimes the benefit from doing something is huge. Those are the things we want to know about!

7) Continue your education! One of the reasons we have this blog is so that our potential customers can really see what we’re about and what we stand for. The simple fact is that there are plenty of good home builders in Dallas. It’s up to us to tell you why we think you should use Classic Urban Homes to build your next home. Once you’ve got an idea about what you think we’re all about – we’d love for you to call our other homeowners so they can tell you what they think. There’s no better research that you can do than to call references. We’ll gladly given them all to you – homeowners, bankers, and vendors. You should know that we build good houses, are financially strong, and pay our bills on time. We will be here to support the warranty on your house – something we seriously doubt all builders will be able to do.

So there it is – our plans for the year. Along the way, we’d like to build a couple of homes for some new clients. We’re deep in conversation with multiple people now, so so far, so good!

Mike, Thought you might be interested in this. Our heating bill is less this year at 3000sf than it was last year at 1472 sf and this year was a lot colder. Speaks highly of the windows, siding and insulation.

We’ve made great strides over the past several years in learning new and improved techniques in the area of “building science” and I think the above comments just proves that out.

So, my idea! Taking the idea from some of the leading “green” builders in our industry, I am going to put together a review and analysis of all our previous homes energy usage. Not cost, but usage. My focus will be on comparing how much gas and electricity the houses uses versus what we put in it. All our homes have been meausured by an energy rater and receive a HERS score, but that will only be one data point.  I want to see empirical data on how all this interacts.

Now, of course, some numbers might be way off if you cool your house to igloo temperatures in the summer and sauna temps in the winter, but I still want to see it. So, be on the lookout. I hope to find some interesting information to share!