SINGLE-FAMILY BUILDERS PRODUCED RECORD numbers of homes during the past year, and those homes were larger and contained more amenities than ever before. Furthermore, the American home buyer has become more and more demanding as time has gone by. And, as if things were not tough enough, builders faced persistent shortages of skilled labor as they sought to create quality homes for Americans.
In March, the NAHB conducted a nationwide survey of about 500 home builders of all sizes to track trends in construction quality as well as levels of customer satisfaction. We asked the builders about customer callbacks or construction-related complaints during the previous 12 months, how they responded, and how they are striving to improve their quality controls. The survey results show patterns that are quite similar to earlier NAHB surveys on this topic, despite record volume and mounting challenges on several fronts.
CALLBACK PATTERNS The majority of the builders (57 percent) reported only one or two callbacks per unit during the past year, and the median number of callbacks held at two—the same as in other recent annual surveys. There wasn't much difference across regions of the country, although the callback rate was a bit higher for larger builders (those starting more than 100 units per year).
RESPONSE TIME AND COST The median response time to customer callbacks was four days in our recent survey, the same as in surveys conducted over the previous five years, and 20 percent of the builders said that they respond within two days. The median response time for small builders (those starting fewer than 25 units per year) was significantly shorter than for larger builders—three days vs. six days—a pattern picked up in earlier surveys.
The cost of responding to callbacks increased over the past year, despite the prevalence of relatively minor issues. Indeed, the median cost reached a record $275, up from $200 in previous years. Soaring costs of materials and supplies, linked to 2005's record-breaking hurricane season, most likely were responsible for the cost increases. On the labor front, the vast majority of the builders (95 percent) said that they call subcontractors to follow up on at least some of their callbacks, although 60 percent also send their own maintenance workers—presumably for minor issues.
FIGHTING BACK The recent NAHB survey also asked builders what they are doing to reduce the number of customer call-backs. The results basically build upon similar efforts reported in earlier surveys, although some rather novel steps were identified, including efforts to “condition” customer expectations, getting buyers to acknowledge the distinction between valid and invalid complaints, and establishing clear warranties with buyers.
The most common steps taken, in order of importance, were: punch list before closing, walk-through before closing, extensive inspection during construction, hiring the most qualified subcontractors, and subcontractor education.
It's notable that the larger home builders not only have a relatively high frequency of callbacks but also are taking relatively strenuous steps to reduce callbacks: Punch lists and walk-throughs were almost universal, and subcontractor education was widespread.
Chief Economist, NAHB Washington, D.C.
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