According to Haber, the decision to pull out was not chiefly economic. “We strategized the following scenario. Let’s say that we build two model homes and open up for sale. After an initial spurt of interest, sales slow down considerably; it turns out to be hard to sell houses on tiny lots in the middle of wide-open countryside. After a year and sixteen very slow sales, we decide to walk away, which our contract allows us to do. The economic cost is not large. We spend about a billion dollars a year on land acquisition in the Northeast, so in that context the loss is actually insignificant. But walking away at that late stage will seriously damage the project and hence our relationship with Arcadia, which is something we don’t want to do. I’ve known Joe for twenty years. He’s a visionary, plus he’s very entrepreneurial, so he’s someone I want to do business with in the future. Jeopardizing that relationship isn’t worth the risk, so we’re bowing out now. I’d like to say gracefully, but it’s never graceful.”
Joe Duckworth is unruffled. “I think Brad just couldn’t convince his bosses that this was a worthwhile project. These things happen. We’re not worried about the extra lots. We’ll keep five ourselves, which we’ll sell later, and divide the rest between NVand Ryan. We are slightly concerned about having sufficient variety with only two builders, but LRK should be able to take care of that.”
But perhaps he should be worried. The departure of Hovnanian has radically altered the dynamics of New Daleville. Although NV Homes and Ryan market houses under independent brands, they are divisions of the same company. For all practical purposes, the development now has a single builder, a single very large builder. In 2004 NVR, with 4,500 employees, had combined revenues of $4.3 billion and was ranked among the five largest builders in the United States by market value. Like all large corporations, NVR has its own way of doing things and may not be open to change. In the successful neotraditional projects I’ve seen, such as Seaside and Newpoint, the developers dealt with small local builders from a position of strength. In Lakelands, where a national builder — Ryan — was involved, the developer laid down very strict guidelines ahead of time. But that is exactly what Jason has not done. Arcadia may have hit the financial jackpot, but at what cost?
21
Mike and Mike
During the early 1900s, Americans could buy so-called mail-order houses from catalogs. The most famous were Sears, Roebuck and Montgomery Ward, but there were dozens of competing companies, and it has been estimated that between 1900 and 1940 more than a quarter of a million houses were built this way.
Rick King, a twenty-five-year NVR veteran, in charge of land acquisition at the regional office, negotiated the New Daleville deal with Arcadia. “We’re familiar with southern Chester County, and we think it’s a good location,” he says. “We also like the neotraditional concept, which allows us to differentiate our product from others. We’ve had good experiences over the last five years in several neotraditional projects in Maryland and Delaware.” King explains that there is another reason his company is interested in neotraditional development. “In most places restrictive zoning is pushing development farther and farther out into distant rural areas, which is less efficient for us in terms of construction. We see neotraditional communities as a useful option for projects in small towns and existing suburbs that are closer to population centers.”
NVR is always on the lookout for permitted lots. “We’re not in the development business,” says King emphatically. “We know how to build, that’s our specialty. We’re very efficient, and we turn our assets five or six times a year, so we don’t want to have money tied up in land.” The publicly held NVR builds in eleven states along the Atlantic seaboard, from South Carolina to upstate New York. In 2004 it had orders for thirteen thousand homes — single-family, town homes, and condominiums — ranging in price from $90,000 to $1.7 million. The company doesn’t necessarily build only large projects. “An ideal size for us would be about seventy houses, selling thirty houses a year,” King tells me. “This justifies the cost of the model homes, and the supervisory and sales staff. But we can do smaller projects if we are already working in an area.”
King has one reservation about New Daleville. “It’s much more rural than I expected.” Arcadia has taken it for granted that the village layout will attract buyers, but both King and Haber single out the exurban location as a potential liability. After all, when people move far out into the country, they expect to live on large lots. Buyers will accept smaller lots, even pay more for them, if there are nearby shops and amenities, but that will not be the case with New Daleville. “With only one hundred and twenty-five houses, there’s not enough people to have much of a center,” King says.
He admits that NVR paid a high price for the lots. “Arcadia pushed us pretty hard,” he says. “We might not have gone along if land in southern Chester County wasn’t in such short supply. There are currently eight hundred permitted lots in the county held up by a sewage treatment problem. But we can’t wait, we need to keep our machine going. Our houses at New Daleville will start at three hundred and forty thousand dollars and go into the low four hundreds. These are high prices, but Toll is selling town homes in this area in the high three hundreds, so we’re pretty optimistic.”
When Joe Duckworth originally envisioned New Daleville, he expected it would attract first-time buyers. Now the house prices have doubled. I ask King who he thinks the buyers will be. They will be first-time buyers with dual incomes, he tells me, and also “move-ups,” that is, people who have just sold a town home or condominium in the booming real estate market and are looking for something larger, newer, fancier. And what about first-time buyers who have not accumulated sufficient equity? They will have to be content with a town home or a condominium apartment, he says, or they might have to settle for an older house — a so-called fixer-upper. Alternatively, they could choose to move to an even more distant exurb, trading a longer commute for a lower house price.
Mike DiGeronimo’s main job as town architect is to review the builders’ house designs with the aim of assuring that the exteriors contribute to the overall experience of a neotraditional community. This is his first time working with a national builder. “The good news is that NV and Ryan have built in TNDs before, so they know what we’re looking for,” he says. “The bad news is that it’s not easy to convince them to alter their designs. They’re open to modifying certain exterior details, but they won’t change anything that affects the basic framing.” The houses that NV and Ryan have submitted to DiGeronimo have not been designed specially for New Daleville; they are stock “neotraditional” models from NVR’s architectural division. What makes them neotraditional is their rather simple, old-fashioned appearance, and the fact that they are narrow enough to fit on small lots. The construction drawings — there are more than sixty sheets per model — are highly detailed and have been engineered to minimize production costs. Understandably, the builders want to make as few changes as possible.
DiGeronimo reviews the designs of Ryan and NV separately. Ryan, founded in Pittsburgh in 1948, is NVR’s workhorse brand;NV Homes, which builds chiefly in the Washington, D.C., Balti more, and Philadelphia metropolitan areas, produces slightly larger and more expensive houses aimed at more affluent buyers. The NV houses tend to be a little more ornate, but the designs of both companies are what DiGeronimo calls generic neotraditional: two-story boxes with pitched roofs and gables, as well as dormers, porches, bay windows, and vaguely Colonial details. Compared with the designs of other builders, NVR’s neotraditional models are actually pretty restrained and recall sedate, five-bay, center-hall Colonials — no ersatz Palladian windows, no Gone With the Wind porticoes. The less-expensive models, because they are simpler, are more attractive to my architect’s eye. The fancier models have front doors with elaborate transoms and sidelights, ornamental gables, and windows topped by keystones and arched headpieces.
Most of DiGeronimo’s suggestions are aimed at simplifying the designs. He recommends cha
nging the scale and proportions of the entrances, getting rid of some of the ornamental trim on the façades, and eliminating the decorative molding at the eaves. Ryan generally favors dentil moldings consisting of repetitive little blocks, which DiGeronimo thinks are needlessly complicated. He points out that the size of the shutters is inappropriate — even if they are not operable (the New Daleville guidelines do not require real shutters), they should at least look as if they could cover the windows. He suggests small changes to make the porches look more authentic. Several of the models have two-story balconies but no access from the second floor. DiGeronimo doesn’t like this, but there is not much he can do about it.
These are definitely one-sided houses. NVR’s designers have lavished attention on the fronts and more or less ignored the sides and backs. Only the fronts have shutters, ornamental details and, in certain cases, brick façades. The arrangement of the windows is orderly and attractive on the façade, but around the corner it’s chaotic, with windows, bays, and fireplaces scattered without rhyme or reason. DiGeronimo is concerned about this in the case of the corner lots, where the side is exposed to the street. He makes some sketches that show how windows could be rearranged, cornices carried around from the front, and porches wrapped around corners, so that the houses present a more unified appearance. The sketches are nice, but will the houses turn out this way?
Mike Linthicum, a tanned, fit-looking man in his mid-forties, is in charge of Ryan’s Philadelphia West division, which includes Chester County. “We build about three hundred and fifty homes a year,” he tells me. “We currently have nine projects under way and twenty in the pipeline.” I ask him about the New Daleville design guidelines. “Ryan has built in four TND developments, so we appreciate Mike DiGeronimo’s concerns. The two big issues for us are the cost of design changes and how they will affect our production process, since we’re a highly systematized company.”
Linthicum has been with Ryan for twenty-two years. He explains the company philosophy, quoting Dwight Schar, NVR’s CEO. “Our business is like a hamburger stand. We make hamburgers and cheeseburgers. That’s it. We don’t customize the designs of our houses; except for the specific options that we offer with each model, they’re absolutely fixed.” Rigid standardization explains why the shutters on Ryan houses are often not sized to the windows. “We use the same shutter for all our houses,” Linthicum says. “LRK wants us to use different shutters for different windows. We would have to delete the shutters from the factory order and buy them separately. That will cost more, but since it’s in Londonderry’s ordinance, we may have to do it.”
Linthicum is very conscious of construction costs. The foundation of NVR’s corporate success — earnings per share have steadily risen over the last five years — is a highly rationalized building process. Linthicum tells me that Ryan can deliver a house for a construction cost of thirty-six to forty dollars per square foot.* This is an impressive number — most regional production builders manage sixty to seventy dollars per square foot. Large production builders are extremely efficient, with the result that, over the last several decades, although wages have risen and quality has improved, real per-square-foot construction costs have remained remarkably stable.1
When I mention Ryan’s construction figure to Vince Graham, the TND developer, he says, “That’s amazing. I didn’t think you could build mobile homes for that price.” He estimates that the average construction cost of custom houses at I’On is $165 per square foot. “Buyers are demanding higher-end finishes these days,” he says. As well they should, since a four-bedroom house in I’On is currently selling for a million dollars. A comparably sized Ryan house at New Daleville will be a third that price.
Like many national builders, NVR prefabricates the framing for its houses. The company operates production facilities in six states, staffed by their own workforce. These factories manufacture walls and partitions in the form of panels (insulation, exterior siding, and interior plaster wallboard are added on the site). Since the wall panels are not modular, they allow for a variety of designs, and the finished houses do not look like “prefabs.” Prefabrication is not primarily an economic measure — panelized houses are not cheaper — but a way to control quality and overcome the difficulty of getting skilled site labor. The house is shipped from the plant to the building site as a “package” of wall panels, roof trusses, plywood, and precut lumber for floors. Later packages include doors and windows, precise quantities of insulation, siding, and so on. “Trim” packages include wood trim and cabinetwork. On-site subcontractors, supervised by NVR managers, put the pieces together. This process allows NVR to buy materials in bulk, tightly control quality, and reduce theft and wastage.
The idea of precut houses is not new. During the early 1900s, Americans could buy so-called mail-order houses from catalogs. The kits, consisting of precut lumber and trim, cabinetry, even nails, were shipped by rail; local builders did the construction. Although in a few cases entire factory towns were built using mail-order houses, the main buyers of kits were individuals.2 The most famous mail-order house catalogs were those of Sears, Roebuck and Montgomery Ward, but there were dozens of competing companies, and it has been estimated that between 1900 and 1940 more than a quarter of a million houses were built this way.3
Linthicum explains that his company follows a very tight building schedule. “You’ve heard of the just-in-time principle? Once an order is sent in from the sales office, our plant takes about a week to put together the framing package. It arrives on the site, and the subs have a week to assemble the frame. Then a second package arrives with windows and exterior trim. Once the Sheetrock contractor finishes the inside, the interior trim package is delivered.” This intensive process reduces construction time by as much as two-thirds (it takes Ryan only three to four months to build a house). But such a highly organized process also doesn’t leave much room for aesthetic adjustments — or, indeed, any other kind. Mike DiGeronimo has his work cut out for him.
*This does not include site work, such as grading and landscaping, and “soft” costs, such as marketing, development overheads, and profit.
22
Ranchers, Picture Windows, and Morning Rooms
One doesn’t buy a house just because of its curb appeal, but the view from the curb is important. It’s what we see every time we return home.
The history of the American housing industry is littered with failures. Even the redoubtable Thomas Edison stumbled when it came to housing. In 1908 he patented an elaborate method for mass-producing inexpensive concrete houses. His idea was to erect cast-iron forms for the entire house — walls, floors, and roof — and fill them with concrete through a sort of funnel at the top, all in one pour. After several trials, he abandoned the project.1 In the thirties, there were a number of attempts to market all-steel houses, though none succeeded.2 During the forties, the General Panel Corporation invested $6 million in developing and marketing a prefabricated wooden house designed by Walter Gropius, the famous architect and Bauhaus founder. Although the company planned to manufacture thirty thousand houses a year, it produced fewer than two hundred and gave up.3 In the seventies, the federal government launched the grandly named Operation Breakthrough, whose goal was to harness the know-how of large corporations such as General Electric, Du Pont, and Inland Steel to produce industrialized housing. It turned out that building affordable and attractive houses was a lot more complicated than putting a man on the moon.
The construction of a typical house requires thousands of board feet of lumber, hundreds of sheets of plywood, and many cubic yards of concrete, square feet of exterior siding and wallboard, bundles of insulation, gallons of paint, reels of wiring, and lengths of copper piping. A builder not only coordinates a dozen different trades to put all this together in a timely and efficient manner but must put it together in a way that is attractive — and affordable — to buyers. He must also judge to what extent buyers are open to innovation. Houses are the largest investments
that most families will ever make, and as prudent small investors, they tend to be conservative and to avoid unnecessary risk. While architectural critics frequently disparage the uniformity of housing, that is precisely what buyers demand; they don’t want to be stuck with an odd or dated house at the time of resale. Contrarians don’t do well in the housing market.
But houses are not only investments, they are homes, and hence sources of personal pleasure and pride. Like clothes, they convey status and social standing; like cars, they tell people something about their owners. Thus, the decision to buy a house is emotional as well as financial. I understood this the first time my wife and I went house hunting. There were houses that we knew, from the second we saw them, were not for us; we didn’t need to go inside. Of course, one doesn’t buy a house just because of its curb appeal, but the view from the curb is important. It’s what we see every time we return home.
The schizophrenic house buyer is both a status seeker and an investor. In addition, he or she is a consumer. Renovating a kitchen, for example, is done with one eye on convenience and one eye on resale, as well as a glance at the attractive advertisements in the latest issue of House & Garden. The demand for consumer goods being driven by what’s new and up-to-date — the latest thing — the house buyer is not immune to fashion.
Last Harvest: From Cornfield to New Town Page 19
