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May-June 2004 – Panelization

To be successful in life, some say, you need to see what you really want, and then spend the next 20 or 30 years making that vision a reality.This is what George and Jan Huxold have been patiently doing in their hometown of Kenosha, Wisconsin. Starting out in a career in law enforcement as a […]
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To be successful in life, some say, you need to see what you really want, and then spend the next 20 or 30 years making that vision a reality.

This is what George and Jan Huxold have been patiently doing in their hometown of Kenosha, Wisconsin. Starting out in a career in law enforcement as a police officer in the 1960s, George Huxold eventually traded the gun and badge for a tool belt, doing remodeling and carpentry work.

Then he branched out into new home building. From the start he saw the advantage of building systems, using the Wick Companies in the early 1980s. By employing a system to help quicken construction in Wisconsin’s short building season, he was better able to overcome unpredictable weather.

But the economy was his biggest obstacle. “Those were some exciting times,” George recalls with a chuckle. “With interest rates at 20%, we couldn’t give new homes away. That’s one of the reasons we got our real estate licenses.”

Fast forward 25 years, and today Huxhold Builders & Realtors is a full brokerage office, listing and selling residential properties, commercial properties, farms and vacant land. Jan handles the real estate side, George concentrates on new construction and daughter Jane keeps both on track. The company uses Wausau Homes (Wausau, WI) as its systems manufacturer, which offers both open wall panels and modular construction systems. “We switched to Wausau in the mid 1980s. They are a good company and they back up their product,” George says.

Huxold Builders home construction averages around 30 new homes a year, although it has been as high as 40 homes in good years.

“We do some modulars. But the majority are panelized because buyers want more complicated designs today.”

But the building system is just one piece of the puzzle in their plan of a attack in an ever-changing market. Here’s how the Huxolds found success.


Subdivision Development
It’s the first subdivision that is the most difficult, since you are typically risking your own money. That’s why George advises other builders to start small and then move up in volume and parcels. All the while you need to pay careful attention to your competition, interest rates and local economy. “Plan a year or two ahead. You have to reinvest in your business. Be aware that governmental regulations are getting more and more difficult. It can take three years or more to get approval for a development,” says George, who has two subdivisions going on currently. “But once you get a commitment, they (planning commissions) can still change the rules on you at a later date.”

Graduating from scattered site to subdivision building, however, allows you to take your business to a new level. “We like to keep them in the 20 to 25 lot size. I don’t want to gamble too heavily. I’ve been in this business too long. I remember when things were way down.”


Handle Both Reselling, Construction
The addition of a full service real estate brokerage has been critical to the success of their business, especially for move-up buyers looking for increased square footage or a more modern design. In addition to allowing the company additional profit centers, it also simplifies the lives of their clients. The company can handle both the resale of the older home and the new construction. “My wife handles the resale portion of our business and I handle new construction,” says George. “We’ve found that works for us.”

The electronic multiple listing service (MLS) has been effective for fueling sales in their subdivisions, as well as bringing in additional resale business.


No Snout Houses
In the Huxold’s market, local elected officials have deemed homes with garages facing the street as undesirable, calling them “snout” houses. “Now, 90% of our homes have to have the garage alongside or in the rear. We used to offer a Prairie Model, which was one of our best-selling designs. But now we can’t offer it. I think it’s plain arrogance on the part of these planners. It should be the choice of the home buyer. Putting a driveway alongside the house is going to run an extra $1,200 to $1,500, which is a lot of money to a first-time buyer,” says George. “It’s really unfortunate and we are seeing it more and more. A lot of elected officials talk about affordable housing. But I don’t think they truly care at all.”


Cutting-Edge Designs
“In our market, entry level housing is drying up. It’s mainly move-up now. That’s what’s selling,” George claims. “Home building is very market driven. You have to give the people what they want,” he says.

To bring in more buyers, Huxold Builders turned to Design Basics (Omaha, NE), a floor plan and design service, for help. “Paul Foresman at Design Basics provided a lot of insight on my market. Once I started offering their designs, it was like ‘boom.’ My sales shot up.”

The company found particular success with Design Basics’ Hometown Collection. “It has been a real sparkplug for our business.” George says Wausau has been amenable to building the new designs.


Keep Marketing, Salespeople Hungry
Perception is reality in real estate sales. That’s why the Huxolds set up shop by building a brick building on a well-trafficked highway. “A solid brick building conveys that we are going to be here for a very long time. And we get a lot of walk-in traffic at this location. Plus, we try to have a new home open every week.”

Huxold Builders rewards its real estate salespeople (six to seven in-house) on a commission basis only, rather than salary and commission. “We have found that they aren’t hungry enough if it’s salary and commission. They get complacent. Now we use a sliding scale of commission based on how much they sell. And they make more money that way. The carrot is more effective than the stick. Plus, they keep selling, which means I keep building.”


Dialed-In Margins
As an authorized builder for Wausau Homes (Wausau, WI), the company has access to the Wausau Advantage, a software package that has the ability to deliver bids, track sales leads and perform a multitude of other chores. With it, George can convey Design Basics’ floor plans and designs over the Internet. Wausau’s engineers, in turn, create full construction drawings in AutoCAD and e-mail them back for approval, usually in a matter of days. Thanks to this electronic capability, they don’t have to spend weeks mailing blueprints back and forth. Pricing a home for a buyer, moreover, can be done in about an hour.

“Having a system to back you up is not just the wave of the future. It’s really a necessity today. I frankly don’t see too many independent stick builders anymore,” George says.


Final Piece of the Puzzle
As for the future, George says the final piece of the puzzle will be when he works part-time, perhaps as a consultant. “I like to golf, get out on the boat on the lake a bit. But I still enjoy this business an awful lot. It really is all about making people’s dreams come true. It’s very rewarding.”




   

Component Construction Increasingly Common

Site building is edging closer to building systems every day. A lack of talented framers is causing contractors to increasingly turn to prefabricated roof and floor trusses, wall panels and I-joists, to speed up construction time, increase quality and reduce the likelihood of callbacks, a new study says.

The resulting demand for factory-built components in the United States and Canada is forecasted to accelerate in the next two years, increasing 5.3% per year to $16.9 billion by 2006, according to a new study by the Freedonia Group (Cleveland, OH). The lack of talented framers and carpenters in the workforce, when combined with poor quality dimensional lumber, are forcing site builders to switch to prefab components.

“Although gains will be somewhat restrained by a soft outlook for site-built housing, particularly within the key single-family segment, advances in component demand will be bolstered by increased utilization of components on a per-structure basis,” says Robyn Margulies, senior research analyst at Freedonia. “Gains in component use will be particularly strong for walls and partitions and I-joists. Growth will be stimulated by the advantages associated with factory-built components in comparison to traditional site-built methods, including cost efficiencies, reductions in construction time and more uniform product quality. These factors will in turn lead to increases in component use per housing start, continuing the pattern established in the 1992 to 2001 period.”

Increased component penetration will in turn be supported by the advantages in cost, construction cycle time and product quality offered by the components relative to site-built construction methods, Margulies says.





  Factory Finishing Siding Win-Win for Deltec, Customers

Deltec Homes (Asheville, NC), a panelizer of round homes and other cutting-edge designs often placed in equally extreme environments by their clients, has discovered a new source of revenue for the company that also benefits its buyers and builders. The company has invested in a process to stain or paint siding at the factory.

The siding, which comes in a variety of sizes and materials ranging from pine and cedar to cement-based, is painted or stained within the environmentally controlled factory and dried for 24 hours on racks. The siding is then affixed to the panels or shipped loose with the home package. Finishing siding at the factory dramatically simplifies on-site finishes, especially in northern climates. Most paint and stain suppliers require that their products be applied when temperatures are above 50 degrees, says David Hall, president of Deltec, which launched the new capability Jan. 18.

Deltec clients who elect to use this pre-finishing process earn a 10-, 15- or 25-year warranty, depending on the number of times the siding is run through the machine. Cabot or Sherwin Williams, Deltec’s suppliers, have certified their siding finishing processes (under the name of DelKote), enabling customers to qualify for the warranties.

“How many painters do you know who are in business 25 years or who warranty their work? This process is win, win, win,” says Hall. “Our clients win because they get a warranty directly from respected suppliers like Cabot or Sherwin Williams. Our builders win because they don’t have to bother finishing the exterior or finding a reputable painter. And we win because this is a very simple process to add to our system and we see ancillary profits from it.”

Hall recommends other systems manufacturers investigate the possibilities of pre-staining or painting their own siding. “This is a neat business. It takes very little space and the benefits are substantial,” Hall says.

Deltec already had a 20,000 sq.ft. building they could devote to the process, but Hall says a manufacturer could add a similar capability in under 3,000 sq.ft. “The machine itself is not much bigger than a desk. You run the siding through the machine and it stains all six sides, including the butt ends. What takes up space are the drying racks, which we have on wheels to be able to maneuver around.”
Deltec purchased the staining/painting machine from Kaufman Industries in Pennsylvania. Hall says the whole operation, including drying racks, cost in the neighborhood of $80,000. He expects to recoup the costs in less than six months.
Deltec primarily markets its homes directly to consumers, carving a lucrative niche market in the vacation home industry. Its round homes are often destined for mountaintops or Caribbean islands. “The California coast has been a particularly lucrative market for us of late,” Hall claims.

Deltec offers several roles for builders—independents can turnkey the homes for their clients, or act as consultants, providing advice for owner-builders who want to act as their own general contractors. For details, call 800-368-7401.


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