GuildQuality Builder & Remodeler Market Predictions Q4 2010

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For the 9th consecutive quarter, more than 100 of North America's best homebuilders, remodelers, real estate developers, and home services contractors offer their near-term predictions for the residential real estate and construction market.

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GuildQuality Builder & Remodeler Market Predictions Q4 2010

  1. 1. Guildmember PredictionsThis report contains a summary of the feedback received from our members in theQ4 2010 Market Predictions Survey conducted on December 9. This survey is afollow up to the survey we began in October 2008, and have continued on a quar-terly basis since then. In this and prior surveys, GuildQuality requested feedbackfrom the owners and operators among our more than 500 home builders, remod-elers, contractors, and real estate developers that use our service. In each of thesurveys, more than 100 people provided feedback.Our members are representative of the best businesses in the building, remodel-ing, and real estate profession. And just as the strength of the building industry hashistorically forecasted the strength of our entire economy, I believe that our mem-ber sentiment is a leading indicator within the building industry.About GuildQualityNorth America’s best builders, remodelers, contractors, and real estate companiesrely on GuildQuality to help them monitor and improve the quality of their work.GuildQuality provides customer satisfaction surveying, web-based performancereporting, peer benchmarking, and performance marketing for construction andreal estate companies that seek to deliver a consistently exceptional customer ex-perience.GuildQuality offers a trial membership to all homebuilders, remodelers, developers,and contractors. Experience GuildQuality first-hand with a free trial.Thanks to all those who participated!We greatly appreciate your participating in the survey and welcome any com-ments, suggestions, or requests you have about this and future reports. This image is the Wordle representation of every comment received in the Q4 2010 Predictions Survey.To review prior reports, search for “predictions” on the GuildQuality Blog. GuildQuality is Building a Community of Quality (888) 355-9223 www.guildquality.com © 2010 GuildQuality Inc. Page 1 of 5
  2. 2. Guildmember Confidence IndexThe Guildmember Confidence Index is a forward looking indi-cator that summarizes the predictions of the members whoparticipated in our survey. A positive number suggests thatmore members predict improvement than decline.In Q4 2010, members continue to predict improvement in boththeir companyʼs performance and the market. Relative to thepast two quarters, there was considerably more optimism forthe market in general, and slightly greater confidence in peo-pleʼs own companies. Guildmember Confidence Index. A positive number indicates more people forecast improvement than decline. A negative number indi- cates more people forecast decline than improvement. 100% would indicate all respondents forecasted improvement; -100% would indi- cate all respondents forecasted decline. GuildQuality is Building a Community of Quality (888) 355-9223 www.guildquality.com © 2010 GuildQuality Inc. Page 2 of 5
  3. 3. Confidence Level DistributionWhen asked what kind of change they expect in the market ingeneral, 36% of members predicted conditions would stayabout the same. This is the lowest percentage of “no change”predictions weʼve received since we began the survey. 54% ofmembers predicted either improvement or significant improve-ment.23% of members predicted their own business performancewould “remain the same”. As with their predictions about themarket in general, this is the smallest percentage of memberswho predict no change. Of note, for three consecutive quartersweʼve seen an increased percentage of members predictedboth improvement and decline, with fewer and fewer predictingno change.Our Guildmembers are bullish for the near future. Confidence Level Distribution. Guildmembers were asked to predict whether the performance of their company and the market would sig- nificantly improve, improve, remain the same, decline, or significantly decline over the next six months. GuildQuality is Building a Community of Quality (888) 355-9223 www.guildquality.com © 2010 GuildQuality Inc. Page 3 of 5
  4. 4. Comments: Each quarter we alternate between asking a people with retirement portfolios are more comfortable now with dippinghandful of open ended questions, and not asking any open into them. There are a variety of reasons that have provided and oppor- tunity for a significant increase in remodeling expenditures. Further manyended questions. In Q4, we asked no open ended questions, contractors are sitting at home believing that the market just isnt therethough a handful of members provided us with additional feed- and are not marketing and do not have a business plan. Their approachback. Their comments: and attitude has turned into a big opportunity for my company to market and sell new clients with little or no competition. Further........we have a very strong presence in the market in a down economy which instills con-1. 2010 was a record year for us - top line and bottom line. We have added fidence in our company in our market. Customers comment often about 4 employees to our staff over the course of the year and expect to add at the fact that we have been around forever and that they selected us be- least one more by year-end. cause of our reputation and presence........even in a down economy.2. Best fourth quarter in five years. 10. Our 2010 has been good. Last three months slow but the last three weeks our traffic has increased and quality is good. We expect a good3. Decline due to weather related (cold) seasonal / normal construction cy- first quarter 2011. Weve seen increases in both new home and remodel- cle. ing.4. Foreclosure wave is more of a factor now than 6 months ago. Many 11. Our local economy continues to decline....we have had major job loss in banks have finally worked through the process and foreclosures are for the last 30 days, white and blue collar. However, that is on the back of us sale or sold, and are in significant enough numbers to be adversely im- having maybe the best year ever for lot sales, certainly the second best if pacting appraised values. Appraisers are covering themselves by ap- not the best since start up in 2003. prasing new construction at the "average" sales per square foot rate, which is less than the cost to build. For us to get deals done, clients need 12. We expect to see an increase of over 10% in our sales!!! to be willing and able to cover the spread with cash. So far, ours have, 13. Prospects are not afraid of remodeling now, but they do take longer to but its a case by case basis. plan.5. I believe as the real estate market levels out and people see that taxes 14. Quite a few more leads right now, but not necessarily people going for- will not be rising they will be more encouraged to spend their money re- ward with any more work. modeling their homes. Our company is using technology to our benefit through things like builder trend and GuildQuality. The advancement in 15. Remodeling is stable but no new construction. smartphones such as the android system are helping greatly as well. 16. Still a very competitive market. Low margins.6. I feel we are stuck in slow motion. We expect 2011 to be similar to 2010. 17. There are opportunities available, whether they come to fruition remains7. If the tax credits extend into 2011, we could experience significant organ- to be seen. izational growth. 18. There has been a lot of recent activity in our market in the $400,000 to8. It will take a while for the steadiness I see in the market to affect our bot- $600,000 price range and it seems that in this price range prospects are tom line. Projects usually take 3-6 months in the design process. far more concerned with price than quality and builder reputation. Many of these prospects have recently purchased deeply discounted lots and9. Michigan was at the forefront of the economic decline and will more than are looking to take full advantage of the current economic conditions. likely lead the nation in the recovery. I have actively planned my business growth plan based on the fact that I knew there was a pent up demand 19. Things are looking up! for remodeling projects that clients have not pursued in the last 3 years due to the economic conditions. Many clients simply cannot wait any 20. Until such time as the market is no longer flooded with foreclosures and longer, many are more comfortable with the security of their employment, bank owned homes, the real estate industry will suffer. Were it not for GuildQuality is Building a Community of Quality (888) 355-9223 www.guildquality.com © 2010 GuildQuality Inc. Page 4 of 5
  5. 5. new home sales continuing to be steady, our unemployment rate would pent up demand for remodeling caused a slight rise in activity, it was be well over 10% nation wide. It appears that the bottom has been shortlived and does not seem to be happening this winter. I had expected reached and that, nationally, we are lingering at that level now; the only -- and am saddened to be correct -- that 2011 will be a tougher year than way to go is up if we can clear the market of give away homes by HUD 2010. and banks. 30. I am adding three new sales personnel, but I do not think I will see the21. We actually had a very strong past 6 months. We anticipate that this fis- results of their production until Q3 2011. cal year we will do about 250% of our revenues of the previous year. Of 31. The $8,000 mortgage credit pulled sales forward, but we dont think it course, this year will still be about 25% less than two years ago. All said, created very many sales. Our expectation about the decline relates to the with our new lean and mean systems in place we anticipate that this year absence of this credit. will bring very good bottom line results. We are hoping that next year will bring the same. 32. We are already seeing several commercial projects coming to fruition and a handful of residential projects that have been waiting for some time.22. We are adding a sales person to keep work flowing at a constant rate. The only trouble now is that everyone wants it right now, because they23. We are not going to see any improvement until the banks change. Its too are tired of waiting and/or dont want any issues to halt their progress. hard for people to get a mortgage, they are adding hugh fees and high 33. Although, Im guessing that it may well remain stable and unchanged for interest rates to builders on their credit line. the first three months as things continue to balance out.24. We have a marketing department that is constantly getting our name out. 34. We are designing 5 projects now for construction in 2011. We have had Website has played a big role and refferalls from other trades, real estate significant increase in qualified leads during Aug -Dec 2010, 2010 YTD agents has made me think the next few months are looking good for our Avg job size has increased from $12k in Jan 2010 to $74k in Nov 2010. company.25. We have seen a change in client attitude over the last two months and are more prone to take on projects and at a higher price point. Not like it was, but better. However the time from sale to production is still much longer and no one is in a big hurry.26. We perceive an improvement in customer confidence. People, while still cautious, seem to be ready to make decisions on their home and other spending priorities.27. We theorize that difficulty buying or selling homes will lead more people to remodel their existing homes. There arent very many safe or high- return investments around, so we see more people willing to spend money to improve their life in a direct way rather than watch their money sit in the bank or in low-yield investments.28. Weve been very fortunate to take on a number of projects this fall & win- ter. Cautiously optimistic about 2011.29. While all the buzz is that the remodeling industry is recovering the truth is we have yet to hit bottom in the SF Bay Area. Property prices are still falling, though more slowly. Money is still impossible to obtain and the fear factor related to jobs and the future is still at an all time high. The GuildQuality is Building a Community of Quality (888) 355-9223 www.guildquality.com © 2010 GuildQuality Inc. Page 5 of 5

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