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The Table

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The Table

We’ve all heard of the new generation of millionaires, the pocket-protector set in their late 20s and 30s who have made a killing with Internet startups and other young people cashing in on the tech-happy stock market.


September 30, 2000
This article first appeared in the CB October 2000 issue of Custom Builder.

 

The Roundtable

Mark Hemming (top middle), owner of MHIC Construction in Santa Ynez, Calif., builds about five custom homes per year in Santa Barbara County.

Kathy Harwick (top right) and her husband, Rick, own Harwick Homes Construction Inc. in Bonita Bay, Fla. They build 10 to 12 homes every year in the $2 million to $4 million range.

Joe Pucci (left), president of Trademark Homes in Danville, Calif., averages 2.5 homes constructed per year in northern California, just east of the San Francisco Bay area. His homes run about $220 to $350 per square foot for an ever-younger luxury market.

Scott Stiteler (bottom) builds about 75 homes per year in Tucson, Ariz., about five to seven of them high-end custom homes starting at about $750,000.

 

We’ve all heard of the new generation of millionaires, the pocket-protector set in their late 20s and 30s who have made a killing with Internet startups and other young people cashing in on the tech-happy stock market. Well, they’re buying houses befitting their bulging portfolios, and savvy builders have to stay sharp to know how to please this new luxury home market.

Not many builders are used to working with a first-time home buyer and a custom client all in the same package, and that can cause problems. But those problems are almost always solved with communication.

"Communication is the key to everything from the right architectural details to staying within budget," says Mark Hemming, who builds for a lot of 30-somethings with decent dough. "Sometimes I don’t agree with their material or color choices, and I let them know that it may not work out the way they think, but if they tell me they really want it, I have to provide it for them."

Talking to current and prospective customers was named as a top technique by these builders as a way to keep up with fluctuating market trends. Especially those who build spec homes or models.

"We learn from each model," says Kathy Harwick, who business partner is her husband, Rick. "I’m in our models a lot, and I just talk to customers about what they like and don’t like. I also talk to the developer’s sales and marketing team."

A developer’s marketing team is about as close as any of these builders get to true market research. Custom builders rarely conduct focus groups, devise elaborate buyer surveys or commission expensive market studies. Not only is it likely to be cost-prohibitive, but the very nature of custom building -- one house for one client -- often excludes formal research. Most of the market knowledge and trend-setting techniques grow from the one-on-one relationship between contractor and client. And that’s just the way these builders like it.

Joe Pucci would like to build all spec homes and simply learn from the feedback once they are completed, but he’s doing so well that many sell before they’re even begun. So he ends up learning from his clients as he goes.

"I’d like to build entirely on spec because the jobs go so much faster when I make all the decisions," says Pucci. "In northern California, that is somewhat possible because supply can’t keep up with demand. I’ve been able to do a lot of that since ‘97, but who knows when the market will turn and I’ll no longer be able to?"

The Tucson, Ariz., market is a bit different, according to Scott Stiteler. Not only has it been largely unfazed by the influx of young money, it has only recently begun to hit its stride as a luxury market. Stiteler says the market began to take off about 18 months ago, after healthy job growth.

"Retiring baby boomers are starting to flock to Tucson, and the mayor has done everything in his power to keep University of Arizona graduates in the area," says Stiteler. "Three years ago, there were no luxury spec homes. Now we have some that are selling at over $2 million."

Stiteler came from the San Francisco Bay area just as the real estate and building boom was starting to hit there. He says he moved to Tucson to build where the huge baby boomer market would begin to retire. His market research consists of speaking with his executive vice president, Chris Hodgson, every morning before starting work.

"She’s got more than 24 years experience in real estate, and I have lunch frequently with bankers, developers and other builders," Stiteler says. "We’re all very open with each other as to what is working and what isn’t. We stay on top of things that way."

Stiteler says that coming from San Francisco to an emerging market has been a blessing for him because a lot of his competition has been burned in Tucson because the city is just now living up to long-held expectations of a building boom.

"Because I think outside the ‘Tucson box,’ I’ve been able to do a lot of new and different things that appeal to this new custom market," says Stiteler. "As long as this market keeps exceeding the typical 5% appreciation, then that’s an advantage for me. If the old Tucson comes back, then I’ll be the one getting burned."

It is that daring spirit, that edge-of-your-seat feeling, that charges these builders. They like to take design risks, tantalize customers and flex their creative muscles. In short, the lack of structured market research allows them a large measure of design freedom. This is what makes them happy, and it seems to please their buyers.

To be sure, buyers have deemed certain design trends "must-haves." Aside from the expected spectacular lot locations, all these builders quote full wine cellars, outdoor spaces (such as fireplaces, pools and built-in grilling areas), bonus rooms, home offices and home automation as necessities in their custom homes. But it is the freedom to try something new that often is the lure that hooks the buyer.

"Customization allows you the freedom to do some stuff you’d never get paid for in a simple spec home," Pucci says. "Sometimes when working with a client, something will come up that just gets us both excited, such as the two-story wine cellar/tasting room with the glass floor separating the two."

Because many of the homes these builders build are in subdivisions, their exteriors are limited a bit by design covenants. But these builders are even excited about that because they can go all out on the interiors, and the exteriors have shown a strong trend back to the traditional, which they love.

"I’m seeing a lot of Colonial Spanish, French Country, Tuscany and English Tudor," Hemming says. "Whatever the exact style, people are leaning away from contemporary and back to the traditional."

The extra attention these builders can afford on the interiors is paying off as buyers are demanding higher-quality interior finishes, fixtures and architectural details. This pleases the exacting craftsperson in all these builders.

"You can’t just take a tract plan, throw up some crown molding and call it custom," Pucci says. "If you do a home well, it’s going to sell."

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