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Are We Screwed?

by Nic Darling on December 2, 2008 · 19 comments

in Development,Philosophy,sales

So we are officially in a recession. The economy is wallowing around in a quagmire of our own creation. The housing market is as soft as that week old avocado on my counter, and I’m starting to think that I, personally, might have a pretty solid case for a government bail-out (everyone else is doing it). As a result of these grim economic times, I get the same question constantly . . . “So, what’s it like to build houses in this economy?”  Of course, they actually mean . . . “So, what’s it like to sell houses in this economy?” And, though it may come off a little ad-like (sorry), I’d like to answer that question here.

The question is understandable. With banks currently only making loans to people who have more money than the banks themselves and a distinct cloud of gleeful gloom settling over the talking heads of every major news outlet, doubt and concern are inevitable. Are we screwed? Can we actually hope to sell homes in this market? Who will buy them and why?

I may be crazy, overly optimistic or both, but I don’t think we are screwed. In fact, I think we are in one of the best positions possible at this time and place. The real estate market in Philly, while down, has remained fairly strong compared to the smoking craters that have replaced housing markets in many other parts of the country. It has been particularly good for houses selling under $300,000 and that is right in our wheelhouse.

In addition, we have seen an increase in consumer knowledge regarding the real costs of home ownership. Maintenance, taxes and utilities have finally (we hope) become a part of a home buyer’s consideration. Rather than simply looking at the monthly payment, people are starting to consider the total expense of home ownership, and this bodes well for homes like ours. Our houses will require less maintenance, use half of the utilities (compared to a code built home) and offer a ten year tax abatement (can you say $75 a year in taxes?). They are simply less expensive homes to own.

People also seem more and more willing to pay for green. A couple of recent articles have said that, despite the recession, many consumers are still willing to pay a premium for green gifts this year. If they are willing to do that for gifts, why not houses? We aren’t even asking them to pay more. Our homes are priced below almost every new construction project and about the same as comparable (in size and location) existing buildings. And, they are real, honest to goodness, third-party certified, green buildings.

This is also a great time for consumers to buy a house if they have the money. Prices and interest rates are down, and you could probably get a good deal from a bunch of laid off financial sector executives to move the heavy stuff into your new home. The market is hurting, and naturally, there is something to be said for caution and thrift. For instance, this may not be a good time to blow a wad of cash on a new jumbo flat screen for the guest bathroom, but buying low has its benefits as well. A responsible purchase in a down market can be a great way to take advantage of a difficult situation.

So, in short, I think we are fine, and if, for some reason, I turn out to be wrong, I have a backup plan. I read awhile ago that wine bottles with animals on the label sold twice as well as those without. I figure that if we are, for some crazy reason, struggling to sell the 120k House, I’ll just take a cue from the wine industry. Check out the concept picture. Who wouldn’t want to buy that?

Monkey

So am I crazy? Am I just a bright eyed optimist in a collapsing world, blind to the economic anvil that’s about to fall on my inflated head? Or, do the factors I laid out above have some promise for us? In short, are we screwed or not?

Comment at me.

If you enjoyed reading this post I can promise you'll love our new writing over at Postgreen Homes. Yeah, we know that's the same thing your favorite band said and their new album is nowhere near as good as their early stuff, but seriously, we are actually still getting better.

There also isn't much conversation to be had here . . . at least not with us. So come on over to the Postgreen Homes Blog and tell us what you think of our new(ish) digs and crazy ideas. We will be sure to tell you what we think of your opinion.

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615MODERN » Blog Archive » Philly-Style Affordable Modern
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{ 18 comments… read them below or add one }

1 Chris Moran December 2, 2008 at 4:29 pm

Nice writing style. Looking forward to reading more from you.

Chris Moran

2 anje December 2, 2008 at 6:00 pm

Love the recumbent baboon. But I’ll have to stop buying the Funky Llama wine now that I know I’m just a marketing dupe…

3 Tony December 2, 2008 at 6:01 pm

If you can float through the next year, you’ll be sweet. Obama’s going to pump a ton of money in the economy from the bottom, and there’s going to be more and more of a demand for green, affordable housing. As an alternative revenue source, maybe you can also sell some type of package online sharing you’re insights on low-impact affordable housing?

4 chad December 2, 2008 at 10:11 pm

We’re working on that Tony. Slowly but surely…

5 bryanslist December 2, 2008 at 11:17 pm

Nice post, the Philly market really does seem to be as unaffected as we could really hope for.

Glad to hear the project is still moving along well, despite the obvious barriers. It is such a cool thing that you guys are doing. Keep up the good work, I really think that you are on to something here. Reading articles like the one linked below, just confirms it!

Gladwell

6 bk December 2, 2008 at 11:19 pm

No sense in joining the recession. Find the opportunities and stay positive. If you can make money in this environment you’ll have the necessary tools for efficiency and creativity that will allow you to be incredibly successful when the overall market begins to improve.

7 lavardera December 2, 2008 at 11:55 pm

You are just about the only people I see in housing that are in the right place. Keep doing it.

8 moderns-r-us December 3, 2008 at 1:10 pm

I have held the same belief, even before you put is so eloquently Nic!

9 theirritablearchitect December 3, 2008 at 1:36 pm

“I’m starting to think that I, personally, might have a pretty solid case for a government bail-out (everyone else is doing it)”

You ARE crazy. That’s probably the poorest rationale as I’ve ever heard…for anything. Nothing but lemming mentality, there.

The rest of it… I don’t know. It’d be nice to build something affordable with style and know that the heating and cooling of your domicile isn’t going to put you in the poor house. Hell, I’d like my house to do that, and it’s but five years old.

So, do I see this, your ‘solution’, as being ‘green’? Only tangentially, and probably as a result of governmental interference, greenwashing the masses into compliance.

A better approach (sorry, but you can’t possibly do this alone, as I’m sure you are aware of the integration of design and technology) is one of a free market approach, yet that is just as problematic, as I don’t see the regular John Q. Public demanding much of what you are proposing.

One thing is for sure, using the government, the law, to cram it down everyone’s throat isn’t going to get it done.

10 moderns-r-us December 3, 2008 at 3:30 pm

Hey Irritable,

Take a paxil! Can’t you tell when some one is joking? The whole bail out comment was a joke.

What about this project is not a free market approach?

No one is forcing them to do this as a green project and if you are wishing for lighter utility bills in your 5 year old house then you should have built someting greener.

11 Tony December 3, 2008 at 4:24 pm

I’m sick of ideologs that force everything into this tiny little box of their preconcieved ideas. Mr Irritable was just looking for an excuse to bitch.

12 theirritablearchitect December 3, 2008 at 6:39 pm

moderns-r-us,

What you know about my situation could fill a thimble, so take your comment and stick it.

Seriously.

As for what someone says on their own blog, what about that piece was I not suppose to take at face value?

Seems like you need the Paxil.

Tony, you’ve obviously been forcing the argument at hand into your little preconceived box. It’s pretty apparent, if you’d care to look.

13 lavardera December 3, 2008 at 7:01 pm

…and this is why the wordpress god created the comment delete button…

14 Nic Darling December 4, 2008 at 11:28 am

Getting a little chippy in here isn’t it. I’ll briefly clarify my position and hopefully we can put the anger behind us. I would just cut off the conversation completely (and probably should) but there are a couple interesting points here. So, to be clear . . .

I have a tendency to use and at times abuse sarcasm. The idea of personally pursuing a government bailout seemed ludicrous enough that I thought I didn’t need to explain it as a joke. Perhaps I was wrong.

The 100k House is a market driven, privately funded project. We don’t get any money from the government, though I hear there are grants out there we could be getting for some of this r&d work. Anyone know about those? I could use a grant or two.

I agree that the solution to the environmental situation is not going to be legislated. It is going to come from entrepreneurs responding to a demand in the market. That said, government regulation and “interference” can be educational. John Q. Public often needs to be hit on the head with a very large and uncomfortable hammer (metaphorically) before he realizes what’s best for him.

Lastly, for those interested in retrofitting an existing house and avoiding pain that will come as the era of cheap energy ends, check out http://www.builditsolar.com/References/Half/Half.htm

Now, say what you think, but let’s steer clear of the personal jabs. They are tempting but not particularly constructive.

15 Morgan December 4, 2008 at 3:26 pm

Nic:
You are the best kind of crazy. and you handled all the deconstructive noise well. Let us hope your optimism is well founded for more then monetary sake. And if you do go the route of the animal on the facade might I suggest that it created in some form of a scultpural relief, as architecture is a much more engaging and 3-dimensional object then a bottle of wine. Oh and did i mention my bachelors degree was a BFA in Scultpure, I could weld up a monkey for you. Plus I would suggest that the monkey should be much more engaged with his surroundings and take an active stance in his community (laying around just won’t cut it)

16 tlynch December 4, 2008 at 8:07 pm

Although, I understand the mission statement of your project, I am not exactly sure I understand exactly what your business model is.

Your complete transparency allows the buyer to see exactly what the construction cost of the home is and it also gives all of your competitors free access to your valuable knowledge and experience.

Do you hope to become a design / build shop where the design aspect is systematic and integrates your marketing / branding and where the majority of your profit comes from the build side of the equation?

Maybe you could sell postgreen builder franchises where a builder is trained on your system and you provide the marketing and design. You might even be able to get into the financing side.

Or do you plan on being a developer, in which case you might want to stop telling people exactly how much it costs to build your product!?

17 chad December 4, 2008 at 11:15 pm

tlynch – One of the biggest aspects of our mission statements is to educate and openly share what we have learned.

The environmental building industry is notoriously bad at clearly marketing and educating. Architects don’t tell you what products they are using. Consultants don’t share the details of how they achieved their results. Builders don’t take the time to get on the web and share their knowledge. I am speaking in general terms of course as there are firms in all of these fields that do a good job, but they are far from the norm.

The naming of the 120K house is unfortunate from a development standpoint, but is nothing we loose sleep over. The bottom line is that our homes are and will always be sold at or slightly below market value which will allow us to prosper. We may never be as financially successful as developers who only care about the single bottom line, but that was never the intention.

The smart buyer knows they are getting much more bang for the buck with our homes. Whether they are comparing our $265K LEED Platinum House with the $550K LEED Gold homes down the street or they are comparing us to the $295K energy hogs with lousy architectural design across the street. The value is clear.

Are people really so naive that they think we are making a $145K profit because we sell it for $265K and build it for $120K? I really need to post on the business of development I guess. There are land costs, countless soft costs, loan costs and sales costs in development that eat up the profit margins that might seem ludicrous at first glance.

Having said all this, you make a valid point. I appreciate your business ideas as well. Future homes will not have a dollar amount to their construction costs. That will not change the fact that our top priority will continue to be figuring out the most economical way to bring energy efficient, healthy and low-impact homes to average working people at an affordable price. In order to succeed at this goal, we must continue to make all of our successes as well as failures public for others to learn from. Even if we (or others like us) develop the best way to build a house, we can’t build every house in the US.

One last point. These two homes have taken countless hours to design and market. The “competition” would not be able to copy what we are doing with the same results in my opinion as I don’t think there is anyone else out there dumb enough to put the stupid amount of effort we have into just two homes. One person might be able to build it. Another might be able to market it. Those will not be the same people. Everyone in between will make a compromise on one of those two aspects. Crazy… [pause for effect]… is our business model.

18 lavardera December 5, 2008 at 12:06 am

ha! Well said Chad!

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