Message from Doug

Housing Affordability and Regulation

With home appreciation on the rise, and the cost of new homes increasing, out come the predictable cries for affordable housing.

But fear not, local groups have come to the rescue with “solutions” to the affordable housing crisis. In a recent Atlanta Business Chronicle article, along with an op-ed piece in Georgia Trend magazine, solutions to the problem have been identified.

One suggestion is to offer more down-payment assistance for first-time affordable buyers. That sounds similar to what happened prior to the housing collapse and the Great Recession.

Another is to issue a $250 million bond for housing, with some of that money providing short-term and emergency solutions for people facing evictions. It that a long-term solution?

The Atlanta Business Chronicle article said that a housing task force visited Seattle for a peer exchange. In Seattle, they approved a special levy of property taxes to go towards housing affordability. Will that “rob from the rich and give to the poor” scheme be proposed for Atlanta?

Throughout all of these talks and grandiose solutions, has anyone bothered to talk with actual developers and homebuilders? Have any of these think tanks invited the Greater Atlanta Homebuilders Association to the table? That association is filled with some of the best building minds in the Southeast. Have their opinions been asked?

Have the people that actually build the houses been consulted on the subject of housing affordability?

If they had been consulted, Metro Atlanta homebuilders would have easily identified one big factor that contributes to the overall cost of the house: government regulation.

According to an NAHB/Wells Fargo Housing Market Index report, government regulation of some form or another accounted for six out of the top nine significant problems builders faced in 2017.

In a recent study by NAHB/NMHC, regulation imposed at all levels of government (local, state and federal) accounts for 32.1 percent of the cost of an average multifamily development. One-fourth of the time the cost can reach as high as 42.6 percent.

For single-family homes, government regulations account for, on average, 24.3% of the final price of a new single-family home.

When you apply the percentages from NAHB’s studies to Census data on new home prices between 2011 and 2016, it shows that regulatory costs for an average single-family home went from $65,224 to $84,671 – a 29.8% increase.

By comparison, disposable income per capita increased by 14.4% in that same five-year span. So, the cost of regulation in the price of a new home rose more than twice as fast as the average American’s ability to pay for it. That is certainly a big factor in housing affordability.

I was recently told by a local developer that it can take three years to convert raw land into vacant developed lots in Metro Atlanta, primarily due to regulation and red tape.

Everybody wants affordable housing, just not in their backyard. Residents and local jurisdictions say they want affordability. Then, they put strict guidelines on lot size and density. This forces the builder/developer to build larger houses on that property.

If we really want to address housing affordability, let’s ensure that those that actually build the homes have a voice in the process. Only then will real progress be realized.

To Your Success,

Message from Doug

Learning and Getting Better

It has been estimated that there are more than 150 concrete contractors in Metro Atlanta. Before the Great Recession, that number was well over 200 concrete contractors plying their trade in this metropolitan area.

That’s a lot of foundation contractors. In spite of that large number, our company was the only local contractor at the recent Concrete Foundations Association Convention – an event where concrete contractors go to learn how to be better contractors. (You can read more about that event on page 2.)

So, why is that? Why were we the only concrete contractor in all of Georgia to attend that important event? Are we the only foundation contractor in Metro Atlanta that cares about building better basements? Where were the other contractors?

If your concrete contractor isn’t interested in keeping up to date on codes, reducing jobsite injuries, and improving their business, then what are they interested in? Are they interested in doing the right thing? In ensuring that you are getting a straight, square, correct foundation?

If you have a problem with a foundation they put in for you, will they still be around in a year to fix it? Do they know how to prevent problems from occurring in the first place?

What kind of company have you chosen to construct your foundations – the most important part of your house?

They say that if you aren’t growing, then you are dying. I believe that. I think a similar truth can be said about business: If you aren’t getting better, then you are getting worse. Is your concrete contractor getting better or worse?

To Your Success,

While in Utah for the concrete convention (see article here...), my kids and I went to Moab, which was our home base for hiking in Arches National Park.

Message from Doug

Happy Holidays!

Merry Christmas and Happy New Year! 2017 has been a good year for the Metro Atlanta construction market. Home sales are brisk, commercial construction is solid, and the construction tower crane is once again the unofficial state bird of Georgia.

Since you and I ply our trade in the construction industry, we are – to a large extent – dependent on the ups and downs of Metro Atlanta’s construction economy.

While a healthy economy presents us with presents us with challenges in manpower, scheduling and cost control, it is still a lot better than the challenges we face during a slow economy. Let’s all be grateful for the challenges we’ve had this year.

When there is a lot of work to be done, worker productivity is crucial. For trade contractors, the biggest area for improvement is on the labor side. Once the material costs are established, they rarely fluctuate enough to have an impact. The labor component is what determines if you make money or lose money on the job.

At Herbert Construction Co. we think a lot about having systems in place that improve labor productivity. How can we remove obstacles for our field crews? How can we reduce lost time due to waiting on supplies or not having the right tools? Where can we eliminate re-work due to changes or incorrect information?

All of these areas represent opportunities for improvement and profit – if we work on them. This is especially important as labor becomes more difficult to find.

Here are some ways we set our crews up for success, and how it helps our customers:

Foundation Checklist – We fill out a 39-point checklist before starting the job. This ensures that we have the correct information for the project.

CAD Plan – Every project we do is first drawn with our own in-house CAD system. This allows us to find dimensional discrepancies before we get to the jobsite. It also puts all the information in a clear, simple plan that our crews use.

Jobsite Meeting – During the footing layout, we meet with our customer to establish wall heights, determine water & sewer sleeve locations, and to gather any last-minute information. This is the one and only time our customer has to meet us on the site.

Robotic Layout – Each footing and wall is laid out with our Robotic Total Station layout instrument. This is a much faster and more accurate method than the ancient method of layout with tape measures and string line. The robotic layout ensures our foundations are straight, square and correct.

Stocked Crew Trucks – Each evening, job-specific tools and supplies for the next days’ projects are loaded onto each truck by our shop crew. With everything already on their truck, our crews leave earlier in the morning, which reduces their wait time in traffic and gets them onto the jobsite earlier. We are more likely to finish the job that day, which keeps our customer on schedule.

In what areas of your company can you create systems that reduce wait times, minimize mistakes, and increase productivity?

To Your Success,

Message from Doug...

15 Ways Builders Can Solve Their Trade Shortage

In the May 2017 issue of Professional Builder magazine, Contributing Editor Scott Sedam wrote a captivating article showing how builders are doing an inferior job of managing their trades – at a time when trade shortages are a limiting factor virtually everywhere across the country.

According to the TradeComm survey that he conducted, strong local builders consistently do better than nationals or multi-divisional regionals at working with their suppliers and trades. Here are 15 ways in which they do that.

1. Communicate to suppliers and trades. What are your plans? How much business is in the pipeline? What does the economy look like for the next year?

2. Ditch bid price as your sole criterion and resolve to buy only on total cost, which is the one thing that really matters.

3. Know that to get the best trades, you must earn them.

4. Understand the issue is not merely the best trades, it’s best crews, and that can make the difference between profit and loss.

5. Kill the paperwork load. Assemble all documents that a trade must use to build our home, and then work towards cutting that in half.

6. Simplify wherever possible. If there are shortfalls in your systems (like last-minute changes), then both you and your trades will pay the price many times over.

7. Bid packages 100% complete, with final plans and specs fully detailed and accurate.

8. Start packages 100% complete, detailed and accurate with job-specific plans and working drawings.

9. Negotiate firm dates with sales and the design center for all options and selections and hold sales accountable to manage customers to those dates.

10. Manage VPOs down to the minimum. Every VPO is a loss – for builder, supplier and trade alike.

11. Reduce charge-backs to an absolute minimum, with a goal of zero. Like VPOs, each charge-back is a loss for all.

12. Have the best-trained field construction managers in town.

13. Maintain an intelligent, proactive schedule that reflects the true capacity of your systems, processes, and people working within the current capacity of your suppliers and trades.

14. Offer nonmonetary rewards.

15. Accept your responsibility to become involved and show leadership on the local level in the development of the trade base and demand the same of your colleagues, competitors, school officials, and politicians.

Sedam also states that the strong local builders by and large are substantially more profitable than the true giants of the industry. He believes that the supplier/trade element is an essential driving factor for that. I agree.

My paternal grandfather invented the “spraying implement” that we all know as the bug sprayer. The vehicle in the above photo is a super-sized version of that bug sprayer and was built by the folks at Northwest Exterminating. Since their headquarters is just down the street from our office, I brought my Dad and my kids there to get a photo in front of the vehicle. I wanted my kids to see what my father’s father invented – as a way of honoring him on Father’s Day.

To Your Success,

Message from Doug...

Setting Goals Helps You Achieve What You Really Want

Last month my Dad and I attended the annual concrete convention in Las Vegas. The general mood of our contractor friends across the country matched that of what we see in Atlanta: Optimism.

There seems to be a lot of momentum and a strong tailwind for Metro Atlanta in general, and in its construction sector in particular.

Of course, growth in construction activity always seems to be accompanied by higher costs in labor and materials. We are already hearing about hefty redi-mix concrete increases coming in the first quarter.

While at the concrete convention, I spoke to almost 200 contractors about implementing systems within their companies. This was the fourth time I’ve been hired by the convention organizers to speak at the event, which is attended by concrete contractors from around the world.

Your Goals for 2017

As I’ve mentioned here before, I set personal and professional goals at the first of each year. A year goes by so quickly that without goal setting, I’m not as likely to accomplish what I really want. Goals help keep me on track.

Here are a few goals that I’ve set for 2017:

Create More Systems.

We’ll continue to document how we do things, find ways to be more efficient, and create formal processes for the tasks we do every day. By establishing more systems in our company, we’ll be able to do more work, promote people from within, and increase profits.

Do More Work.

We are adding crews and purchasing equipment. We will be taking on more work and adding new clients. If you haven’t used our company yet, give me a call. We can chat to see if our two companies are a good fit.

Increase Employee Training. Over the last five years our labor costs have increased dramatically. Each year we devote more time and effort towards finding, hiring, training and keeping laborers. While we’ve made a lot of improvements, we will invest additional time and money in each of those areas, with an emphasis on training.

Complete an Ironman 70.3. This fall I’ll do my first half-Ironman race. The Augusta Ironman 70.3 triathlon is comprised of a 1.2 mile swim, a 56 mile bike ride, and a half-marathon (13.1 miles) run. I’ll do the event – and try my best to keep up – with my friend Carl Hire and his daughters.

What have you committed to accomplishing in 2017? It’s already February…decide what you really want and keep moving forward!

To Your Success,

Message from Doug...

Positive Reports Signal an Improved Economy

Americans’ confidence in the economy soared in November. That is good for us in the construction industry in Atlanta, as well as the entire nation as a whole. That will show itself in strong holiday spending as well as growth next year.

The Conference Board’s monthly index of consumer confidence soared to 107.1 in November. This was the highest it has been since July 2007. Americans spend more when they are confident in the economy and its future.

The report also shows that Americans feel much better about the job market. Nearly 27% of respondents in the survey said jobs were “plentiful,” which is the most since August 2007. Historically, a high number like that has pointed to solid job growth ahead.

Trump’s Lofty GDP Goal

During President-elect Donald Trump’s campaign, he pledged to bring jobs back to America and increase overall economic growth. In a September speech, he said, “It’s time to establish a national goal of reaching 4 percent of economic growth.”

Over the last four decades, only Bill Clinton has come close to a 4% GDP rate, averaging 3.9% while he was in office. President Obama has averaged only 1.5% GDP.

While some economists believe 4% would be a tall order, many have improved their GDP forecasts based on Trump’s proposals to cut taxes and increase spending on infrastructure. They believe a GDP rate of 2.5% may be more likely in 2017 and 2018.

U.S. Presidents’ GDP Annual Average

Jimmy Carter (1977-1980), 3.3%

Ronald Reagan (1981-1988), 3.5%

George H.W. Bush (1989-1992), 2.3%

Bill Clinton (1993-2000), 3.9%

George W. Bush (2001-2008), 2.1%

Barack Obama (2009-2016), 1.5%

Source: Marietta Daily Journal

U.S. Home Prices Improve

The Standard & Poor’s CoreLogic Case-Shiller national home price index is slightly above the peak it set in July 2006. That high point comes after four years of steady gains.

David Blitzer, managing director at S&P Dow Jones Indices said, “The new peak set by the S&P Case-Shiller CoreLogic national index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance.”

The ongoing recovery in home prices will increase Americans’ household wealth and grow the equity in their homes. This should provide an incentive for homeowners to consider selling their home and moving into another one.

In spite of the recent S&P report, other sources say there are still challenges in housing markets around the county. In many cities, home prices have not fully recovered and remain below their peaks. The quick rise in home prices has created an affordability issue in many markets as prices have outpaced household incomes.

According to S&P, home prices have increased at a 5.9% annual rate, adjusted for inflation. During that same time, Americans’ after-tax incomes have increased just 1.3%.

In spite of some housing challenges around the country, many Americans are optimistic about the upcoming year. They expect to see improvements in their income and household wealth. I hope you receive both of those in the coming year.

To Your Success,

Message from Doug...

Our Founding Fathers

I’m still on cloud nine from the results of the recent election. I had resigned myself to another four or more years of Democratic torture. Incredibly, Donald Trump and the Republicans pulled off a monumental win!

I recently traveled to Philadelphia for a concrete conference and committee meetings. While I was there, I visited the incredibly historic sites where our founding fathers conceived our great nation. I walked the grounds where the men that shaped our nation walked. I saw the building where they debated, discussed, and ultimately agreed on the direction of our new nation.

Here are a few interesting facts about some of the men that founded our country:

Thomas Jefferson created the draft version of the Declaration of Independence. He could read and write in six languages. He introduced macaroni and cheese to the colonies. Jefferson died on the 50th anniversary of the adoption of the Declaration, July 4, 1826.

John Adams was a gifted politician. He wanted Jefferson to be added to the group that drafted the Declaration of Independence because he needed a Virginian on the Committee. Eventually, Adams became Jefferson’s political enemy, although they would reconcile in their old age. Adams also died on the 50th anniversary of the adoption of the Declaration.

John Hancock was one of America’s richest men in 1776. The son of a poor minister, he inherited a fortune from his uncle, a shipper and merchant. Known for his outsized signature, he was the first to sign the Declaration. Hancock was one of the few American Patriots who had a bounty placed on his head by King George III.

Benjamin Franklin had little formal education but went from printer’s apprentice to wealthy and world-renowned writer, publisher, and inventor. He was the most famous American in the world at the time of the signing of the Declaration. His many scientific and practical inventions include the stove that bears his name, fire insurance, bifocals, and the lightning rod.

Charles Carroll was unique as the only Roman Catholic to sign the Declaration of Independence. Carroll later helped found the B&O railroad (of “MONOPOLY” board game fame). Carroll was also the last surviving signer, dying in 1832 at the ripe old age of 95.

James Wilson is probably the most important signer of the Declaration many of us have never heard of. An attorney from Scotland, he was instrumental in drafting the Constitution. Wilson was one of the first Justices appointed to the Supreme Court.

George Washington didn’t sign the Declaration in July because he was busy commanding the Continental Army. When he was elected president, Washington owned the largest whiskey distillery in the country. When he died in 1799, Napoleon Bonaparte gave a eulogy and ordered a requiem that would last ten days. He only had a single tooth of his own left at his death. His dentures were made from ivory, bone and even human teeth.

James Madison was the smallest President ever. He was 5’4” and only weighed about 100 lbs.

Alexander Hamilton wasn’t born in the American colonies. He was born on the island Nevis in the West Indies. Hamilton founded the New York Post. Hamilton famously died in a duel with Aaron Burr in Weehawken, NJ. His eldest son, Philip, also died in a duel just three years earlier, also in Weehawken, NJ.

Robert Morris, was known as the “Financier of the Revolution.” Without Morris, the colonies would have failed to secede from British rule. Upon his retirement, Morris embarked on risky investments and was incarcerated in a Philadelphia debtor’s prison for 3.5 years. In his final years, his wealth was gone and he lived on a small pension that his cousin had arranged for his wife, Mary.

The events and circumstances that brought these brilliant men together at that exact time in history are truly a God-given miracle. It is because of these patriots that our nation endures to this day.

To Your Success,

Message from Doug

We Were Attacked!

We are in the process of hiring an additional estimator. Last month, while opening what we thought was a resume attached to a potential hire’s email, ransomware was unleashed on our company.

It completely disabled the computer of the person that opened the attachment. It also locked and removed files located on our company server.

When we realized what was happening, we immediately contacted our IT company. They quickly shut down the server remotely to prevent it from spreading to other computers in our office.

Our IT company dispatched people to our office and they arrived within an hour of the attack. They went to work right away to determine the threat. They worked late into the day to isolate and remove the malware. Then, they restored our server and workstations one by one.

Since we automatically backup our server daily, the IT guys were able to restore the entire system from the previous day’s system backup file. However, we lost all information and files that were created on the day of the attack.

Some of the main areas that were affected the most:

• Our Senior CAD Operator lost some drawings of foundations that he had recently completed.
• Payroll items entered by our Office Manager were lost and had to be redone.
• Our Administrative Assistant lost many files that were stored in an area that was not included in the daily backups.
• I lost a pre-application video that I created to show potential new hires what type of work we do. That video took me 5 ½ hours to create, and then in an instant the saved file was gone. Fortunately, it only took me 4 ½ hours to create it again the next day.

 All things considered, we came out of the crisis pretty well. It could have been disastrous. Had we lost all of the files and information that is on our servers, we would have lost the ability to operate. The interruption to our operations, or the time and cost to create all new files, systems and information could have put us out of business.

Fortunately, our preparedness and our IT company’s great service allowed us to come into the office the next morning and get back to work.

Lessons Learned :

1. Have a good backup system. Create a process that automatically backs up your server or computers at night.

2. Backup your entire company daily. A lot can happen in a day; be sure to back it up.

3. Take the weekly backup off-site. While this didn’t apply to our situation, most backups are stored next to the server. If a fire burns your building down, the backup would be destroyed as well.

4. Have a relationship with a good IT company. We use Southeastern Computer Associates in Kennesaw, www.SCA-ATL.com, and they do a fantastic job for us.

5. You are never completely protected. Bad guys are constantly finding new ways to get around anti-virus and firewall software. You can only hope to minimize the damages caused by an attack if it happens.

6. Store all information in areas that get backed up. Files that were stored on a user’s desktop were not backed up, and were lost forever. Be sure that all files are stored where they are backed up.

If you don’t have a daily backup system for your electronic files, I strongly urge you to put that at the top of your “To Do” list.

To Your Success,