.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;}
On a rainy Friday afternoon, people filled school buses that hauled them from a parking lot down the road toward the high-end homes populating marked-off lots surrounded by farmland. Attendance was down from last year, at around 6,500 people for the first two weekends of the Home Builders Association of Greater Des Moines’ three-weekend HomeShowExpo 2009 event. But those who toured the six Northwood Estates homes in Johnston seemed more serious about home building and remodeling than the entertainment of seeing the builders’ work.

This reflects a new trend, where low construction costs and mortgage interest rates, energy-efficiency incentives and pent-up demand are leading to what home builder Steve Dallenbach calls a “perfect storm.” Interest in custom home building is rising after a tough year, but the factors driving renewed interest may be short-lived.

“New home builders are in a very unique situation where the cost of materials and labor are well below recent levels, which when coupled with government incentives makes this a rare time to be building a house. At any price tag,” said Dallenbach, who is participating in this year’s home show.

“I think things are definitely in the turnaround stages right now,” said Tom Stevens, a HomeShowExpo participant and owner of TS Construction Inc. “A lot more people are talking and really deciding now is the best time to start building.”

Stevens said the cost to build a home has dropped to the levels of a few years ago and that “nobody is ever going to be able to build a house for the price right now.”

Framing lumber composite prices were a little more than $200 per 1,000 board feet in early June, according to figures from the National Association of Home Builders, compared with around $400 in June 2005.

Colin King, co-owner of K and V Homes with Dean Vogel and a HomeShowExpo participant, agrees that the cost of most building materials is down or holding steady and he has made deals with his vendors and trade partners to try to maintain 2008 prices.

Meanwhile, the federal government created a series of incentives aimed to encourage energy-efficiency improvements as part of the 2009 stimulus package. Consumers who purchase and install specific products such as energy-efficient windows, insulation, roofs and doors can receive a tax credit for 30 percent of the cost up to $1,500 through December 2010, and those that install geothermal heat pumps can receive a 30 percent tax credit for systems in place before 2017.

Dallenbach estimates that with all the savings, his home in the HomeShowExpo this year qualified for more than $18,000 in direct tax credits or rebates. Stevens is installing geothermal units in all of his construction projects as well. “People are taking advantage of that and upgrading,” he said.

Meanwhile, mortgage rates have held between 5 and 6 percent on 30-year fixed-rate loans, which home builders say is a great deal. King added that a lot of banks are offering perks such as long-term lock-in-rate options and options to buy down points.

The one obstacle, Dallenbach said, is that many people don’t realize that all of these factors are aligned to make custom-home building attractive right now. And that prices and interest rates could soon rise.

Stevens agrees: “The next six months to a year is the window of opportunity that people are going to have to take advantage of everything that’s out there right now.”

However, King sees a delay from customers who want to sell their current home first and move into temporary quarters while their new house is being built to ensure that they don’t have problems selling it down the road. “A lot of couples are ready to go, but until their house sells, they really don’t want to start,” he said.

King, who has been building homes since 1997, said activity is down about 25 to 30 percent for his company. He is working on three custom-home projects right now, and has shifted focus toward remodeling and home improvement projects to help weather the economic downturn.

Stevens is working on six custom-home projects right now, mostly in the $400,000 to $600,000 price range, but could soon land a couple of deals for much more expensive homes. In his busiest year, he completed 13 homes. To handle the decline in work, he has tried to cut expenses and keep his name out there. He moved out of his home office last year and is in the process of moving to a more visible location off of Iowa Highway 141 in Grimes. This is the first downturn he’s been affected by in his 11 years as a home builder and 15 years as a house framer, but hopes his efforts will position him well for when the market improves.

Dallenbach has been in the residential construction business ever since a client for whom he designed the Governor’s Square shopping center in West Des Moines asked Dallenbach to design his house 20 years ago. “I didn’t even own a pair of boots or jeans,” he said. “I was a suit-and-tie guy.” But he claims he has been busy building homes since, partnering with John Larson in Dallenbach & Larson Development LLC. However, during this downturn, the company has had to adjust, getting into land development, consulting, multifamily construction, starter-home construction and condominium conversions. It is working on about five custom-home projects now, which Dallenbach would like to refocus on when things improve.

Another change Dallenbach has noticed is that custom-home building activity has shifted from West Des Moines, where he has worked most of his career, to other cities such as Johnston and Ankeny, where more lots are available. After building several dozen custom homes in Glen Oaks Country Club and east of Interstate 35, he said, “it’s disappointing to me that I have to do my business in another community.”

With Aviva USA constructing its headquarters on the western outskirts of West Des Moines and other businesses relocating to that area, it also means the higher-level housing market that appeals to executives isn’t nearby. “My personal opinion is so much of the city’s emphasis went towards commercial and business development that the residential component was left on its own and just did not receive the incentives and attention that that type of development normally needs,” Dallenbach said.

Chris Shires, development coordinator for the city of West Des Moines, agrees, but says that could change as the city extends infrastructure to the west and southwest. “With the advent of the town center project, we’ve really just seen mostly commercial/office development. Now we’ll see a period of residential development.”

Dallenbach is overseeing about 360 acres in the former Michael’s Landing development for two banks involved in the Regency Homes downfall, which will provide a variety of lot prices for home building. But he is still negotiating with city officials over how that area should be developed.

King also noted that higher-end custom-home construction is taking place in other suburbs, including Waukee, Clive, Ankeny, Norwalk and Altoona. Developer foreclosures also have made lots more available and affordable, he said, though it sometimes creates unforeseen problems. The homeowner of a project he’s working on in a foreclosed development in Altoona, for example, had to pay an extra $2,500 for sewer work that the developer normally would have covered.

Stevens finds he is building more homes on rural acreages and that people are looking for more efficient use of space, such as incorporating a home theater into the living room rather than building it as a separate room. This has made average home size smaller.

Dallenbach sees a shift in people looking just at luxuries first to now looking at energy-efficiency features. Many of these features, he said, are “like the low-hanging fruit. They’re easy to accomplish, have minimal if sometimes no extra cost and do provide energy savings immediately.”