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December 2013

Builders Bullish on Local Real Estate

By NWREporter

December 2013

Four distinguished panelists spoke in mostly upbeat tones as they discussed recent successes and challenges as well as their outlook for the future. Appearing at the annual John L. Scott Builder Breakfast were Joseph McCarthy from Stoel Rives, Peter Orser from Weyerhaeuser, Marc Rousso from JayMarc Homes, and Joseph Strobele from the LEXAS Companies.

J. Lennox ScottIn opening remarks before a capacity crowd of builders, developers, bankers and brokers, J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, provided a snapshot of the market, comparing activity in the four-county Puget Sound region, and contrasting inventory and prices to 2007, when the market peaked.

Moderator Gordon Prouty, publisher of Puget Sound Business Journal, invited the panelists to set the stage for the discussion by providing a quick synopsis of their own backgrounds and situation.

Peter Orser, the president and CEO of Weyerhaeuser Real Estate Company (WRECO), said the first two quarters of 2013 were "very, very strong." He believes we're "on the way to a slow and reasonable recovery," and said he is "really excited about next year."

Joseph McCarthy, a partner in the real estate and construction group at Stoel Rives, noted renewed interest in condominium and multifamily development, and also used the word "exciting" in his outlook.

Marc "Captain Vision" Rousso of JayMarc Homes reflected on his decade of experience in sales with John L. Scott before moving on to become a land developer and home builder. During the downturn, he went three years with no paycheck and found fundraising to be "a huge challenge."
He also shared his company's core values for providing customers with "the best new home building experience," saying he believes these values have helped propel JayMarc's growth.

Joseph Strobele, the co-developer of ESCALA and the co-founder and president of the LEXAS Companies, discussed how both his military background and work on the services side of real estate in banking helped prepare him for his current role.

Prouty then asked each member of the panel to discuss current successes and challenges.

For Strobele, getting sites proves to be challenging. McCarthy mentioned the re-emergence of condo developments as a positive. Orser said WRECO, through its homebuilder subsidiaries (including Quadrant in the Puget Sound region), is rebounding and anticipates selling 3,000 homes this year. Rousso said financing is a source of both successes and challenges, but expects a new CFO will help the company better match growth and execution.

Builders Breakfast

The moderator also asked panelists for their perspectives on the local economy, and how it differs from other markets.

Orser described Seattle as "a very unique spot" with a red-hot economic engine. Texas stands out as the best place to do business. "They support free enterprise," he declared.

In response to another question, the panelists offered comments on taxes and regulations.

McCarthy, whose law practice encompasses multifamily, condominiums and planned communities, noted the rollout of the Rental Registration and Inspection Ordinance in the City of Seattle as an example of a new regulation. The program is intended help ensure rental housing meets basic safety and maintenance requirements With it, he expects a ramp-up of enforcement mechanisms for tenant complaints, even though RRIO does not cover complained-based enforcement of City housing standards. He also mentioned the SeaTac wage initiative, and noted an emerging trend of "wage- theft" complaints and lawsuits on non-unionized real estate sites, which will likely raise costs.

Orser expressed frustration about timelines for obtaining building permits. "No one is home to process them."

Strobele said "everything is taking longer." In downtown Seattle, it's inspections, while on the Eastside, growth is straining infrastructures.

As for costs for construction materials and labor, Orser reported many items are more costly, including concrete, lumber and labor, but relationships have enabled WRECO to manage them. A bigger challenge he cited is getting workers for the residential construction industry, and suggested vocational opportunities are needed. Rousso echoed that comment, noting during the downturn, the labor force moved to other industries, and has not returned.

For Strobele's projects, costs for materials have not increased as much as labor, in part because they tend to purchase bulk quantities of appliances and other needed items for large-scale projects.

In summarizing the discussion, the moderator noted challenges are apparent, but said he also detected a lot of optimism.

The ever-optimistic Lennox Scott wrapped up the meeting with comments on the evolving role of technology in today's real estate arena, noting more than 90 percent of buyers use the Internet at the outset of their search. In response to consumers' rising preference for using mobile devices in their search, he showcased his company's a real-time GPS Home Search App. Regardless of the platform, buyers are empowered and "it's all about the photos," Scott remarked.

Scott also expects next year to be a transition time for real estate and his company's network of 110 offices and 2,500 brokers. He believes the market will transition from recovery mode to a sustainable level.

Editor's Note: http://bizjournals.com said it's selling its homebuilding unit to Tri Pointe Homes Inc. of California for $2.7 billion.