Great deals won’t last forever
The following are answers by Naum Shteinbah of Streetside Development Corp. to questions by New Homes/New Condos editor Barb Livingstone:
Question: What trends are you seeing in this economy — in your company and in your industry — that are different from a year ago?
Answer: A year ago this time, we didn’t really believe that the U.S. economy could collapse so fast.
We were also assured by multiple analysts and economists in both government and private sector that the Canadian economy was much more insulated from the effects of a potential U.S. economic disaster than it really was.
These assumptions were obviously wrong. The effects are being felt by all sectors of the Canadian economy.
Housing construction — especially, multi-family housing construction — has substantially bigger capital exposure and commitment to the projects-in-progress as compared to, say, singlefamily housing builders, who can choose to roll back their production and “hibernate” during the slowdown.
For the large-volume multi-family builders, the available choices are tough. Either finish projects under a lot of financial and emotional stress, or shut down.
Most of the first-time builders that jumped in the market on the strength of the demand generated during the boom have pulled back and shut their operations down, already.
Stronger companies capable of surviving this slowdown will learn to pace their future development plans better and, likely, way more conservatively.
Pre-selling a significant part of the new communities as a rule is returning as condition of financing but is also a decision making factor to proceed with a project.
Marketing and sales programs will need to be adjusted to allow for longer sellout time.
Most builders lost at least some of their well-trained employees that were so hard to find during the boom years.
Re-distributing workload to the remaining staff core is an ongoing task.
At the same time, contractors and consultants are now willing to give builders more attention; thus, a chance to design and deliver better quality homes.
Question: What are the incen- tives your company is offering to bring consumers into this buyers’ market?
Answer: I am a big believer in the company reputation and history. Nobody in their right mind would consider buying a vehicle or a piece of electronics from a fellow on the street telling them that “he made it himself and it’s good because he says so!”
Well, many buyers purchase their homes just like that. Yet, it is by far one of the biggest buying decisions most people will make in their lifetime.
Nobody’s perfect. A home is a product of work of the hundreds of hands.
As a realistic buyer, I would want to be confident that my builder would be there for me to resolve the problem if one arises during (and sometimes even after) the warranty period had expired.
I believe Streetside has that reputation.
After delivering thousands of homes in the past 20 years, we have stood behind our product and our warranty obligations no matter how costly these obligations have been to address.
This is by far the biggest incentive we have to offer in the uncertain times like these.
We do, of course, offer a variety of ongoing selling incentives to our buyers.
They include special pricing, assistance with purchase financing, higher degree of home customization to accommodate buyer’s requests, as well as special one-time promotions.
Question: What do you see happening in your industry and your company during the next 12 months?
Answer: The following things could happen in the next 12 months.
Capital investment in new land and development costs are the mandatory pre-requisites for the new multi-family homes brought to the market.
In the past two years, this investment practically did not happen in Calgary due to investors lacking necessary market opti- mism and financing capacity.
Although there are sites in Calgary ready for immediate development, it takes years sometimes to bring a new project to construction and then a couple more to the actual delivery of a new home.
Once the existing inventories of completed multi-family homes are absorbed (be it a year or two), there will not be enough new homes ready for occupancy.
So a shortage, believe it or not, is quite a reasonable possibility in two to three years time, I believe.
In addition, the majority of the smaller companies with current housing inventories to sell would likely exit the market for a while after their product sellout.
This would result in no smaller-scale new multi-family communities brought to the market in the next 12 months.
Larger builders are also doing a lot of inventory selling and not a lot of new construction at present.
I don’t see this situation changing much in the next 12 months.
I am curious to see the transformation and adaptation of the suppliers and contractors normally catering to the new multi-family construction.
Will they turn to commercial and industrial construction instead to stay active, or simply downsize? And what is going to be the effect on the industry?
As a company, Streetside is extremely fortunate to be backed by Qualico Group, one of the largest and most established real estate corporations in Canada, providing us with means to continue and complete our current projects in progress.
In addition, we have identified and received shareholders’ approvals to initiate two new communities that are currently in development stages that should be ready for construction in 2010.
Question: How have you posi- tioned yourself in this economy with potential customers?
Answer: Streetside has become a major player in the Calgary housing industry. Streetside is a brand and a recognizable name in the Calgary and area housing markets.
In-house, we try cultivating the attitude of doing business on the premise of “we’ve got nowhere to hide,” so to speak.
The company is simply too visible. This attitude requires all of us at Streetside to treat every customer complaint, for example, from a corporate point of view.
Our reputation is solid and we want to protect and improve it as such.
We constantly survey our customers trying to find the ways to improve our service and incorporate customers’ feedback into the design of our new communities.
As a large volume builder, we may not necessarily have the capacity to be “everything for everybody,” but the homes we build bring a lot of value to our buyers.
Our customers get much more for their money then just a “housing unit.”
Question: What are the advantages for homebuyers in this buyers’ market? And what are your tips for buyers looking to purchase a home today?
Answer: Most of the industry insiders do agree that the real estate prices are starting to “bounce at the bottom.”
Absolutely great deals on new homes are still in abundance, but they will not last — guaranteed. Once the current inventories are sold out, it will be business as usual.
If you are ready to purchase a new home, now is the time.
Think about this example: say, you saw a new town house that you and your partner really liked, but decided to wait a few months longer to see if the prices get lower.
Even if they did yield a bit, chances are by the time you get back they could be up again, your dream home might be bought by someone else already.
Buying a home should never be treated like playing the speculative stock market game, but as a long-term investment in your lifestyle.
If there was one tip, I’d like to offer to the new homebuyers today, do your homework.
Keep in mind that there is no “free lunch.” Good quality comes with a price tag. Interior finishing is quite visible. Ask how are the walls are built inside? Who is certifying the building envelope? Can the company demonstrate the experience in building and servicing what they’re selling? Treat buying a home like entering into a longterm relationship with the builder. Chances are this approach will pay off in the end.
Naum Shteinbah, general manager of Streetside Development Corp. Below, Streetside’s Penncross project, winner of the 2008 SAM Awards for Best Apartment-Style Condo (wood frame).