House Blend: May 2007

Lawsuit Valley

Despite a notice and opportunity to repair (NOR) law and recent state Supreme Court rulings in Nevada that seek to curtail class-action lawsuits, such lawsuits are still popular among plaintiffs' lawyers in Las Vegas.

A high-profile lawsuit in which Las Vegas Valley homeowners sued over damage caused by allegedly faulty Kitec brass fittings, made by Canadian manufacturer Ipex, is adding to the stress of builders in the Las Vegas market, a region that has already been hard-hit by the ongoing downturn.

The original complaint, filed in February 2006, names Ipex and three local plumbing supply distributors. More recent lawsuits filed this past January name builders John Laing Homes, KB Home, and Woodside Homes. Up to 15 builders could be sued.

POINT: A class-action lawsuit alleges that Kitec brass fittings that were installed in an estimated 35,000 to 50,000 homes in the Las Vegas Valley became corroded and failed when they came into contact with water.

Randall Jones of Harrison Kemp Jones, the Las Vegas law firm that is handling the class-action lawsuit, says some 35,000 to 50,000 homes covering more than 260 subdivisions in the-Las Vegas area may have had the allegedly faulty Kitec fittings installed.

“The fittings have caused at least hundreds of thousands [of dollars] in damage from plumbing systems that broke,” says Jones.

Jones believes that the court will ultimately agree to consolidate all the lawsuits into a single case. The class-action suit calls for a jury trial and asks the court to require Ipex, the distributors, and the builders to fix the problem and pay damages as set by the court. Jones estimates that the cost to replace the allegedly faulty fittings ranges from $350 to $500 million, or roughly $10,000 per home.

At issue is a chemical reaction known as dezincification, which accelerates corrosion in brass fittings when they are exposed to oxygen and moisture. Brass is an alloy that is primarily composed of copper and zinc. When fittings experience dezincification, zinc leaches out of the brass fittings, leaving a blockage of zinc oxide that leads to leaks, restricted water flow, and breakage.

Jim Carraway, of Murchison & Cumming, the attorneys for Ipex, says the manufacturer's position is that there are no defects in the brass fittings. He says the products have not failed on such a large scale anywhere else in the country, they were pre-approved by the city of Las Vegas planning department, and that similar brass fittings from Ipex competitors that the manufacturer tested in the Las Vegas area are also having dezincification issues.

Carraway gives three reasons for the accelerated dezincification: a reaction from the chemicals the county uses to purify the local water; recirculation pumps used in many homes to improve hot water delivery, which sends water through a home's plumbing system more often; and the county's water softeners.

“We believe this is more of a county water problem,” Carraway explains. “There have been less than 100 actual failures,” he says, adding that Ipex believes that the builders who specified the Kitec fittings should be held liable for damages, since many of them have known for years that there was a local problem with brass fittings.

Before Jones filed lawsuits against the first three builders, he filed an NOR with at least 15 builders. The NOR law provides builders with an opportunity to make an offer to repair or make a monetary offer to fix a faulty product. The only builder that responded to the NOR was Pulte Del Webb.

COUNTERPOINT: Ipex maintains that the corrosion shown in this picture, in a home in the Las Vegas area that is covered by the class-action lawsuit, is on a non-Kitec brass fitting that experienced dezincification issues similar to those experienced by the Kitec products.

Pulte spokesperson Caryn Klebba says her company made a monetary offer to 3,000 homeowners in Sun City Anthem of $7,800 per home to help repair the allegedly faulty fittings. She notes that roughly 2,500 homeowners accepted Pulte's offer.

After Pulte made the offer to the Sun City Anthem residents, Jones requested and was granted a hearing in February over the legality of Pulte's offer. Jones made the request largely because he felt the class-action attorneys should be involved in any settlement. The attorneys asked the judge to rule if the $7,800 offer was enough money to fix the problem, and if the 35-day period Pulte gave homeowners to accept its offer was ample time and in compliance with the state's new NOR law.

At press time, District Court Judge Timothy C. Williams had ruled against Pulte. The judge ruled that requiring the homeowners to sign a release to receive the $7,800 payment violates the NORlaw. Pulte maintains that its offer complies with the law. While the lawsuits against John Laing, KB, and Woodside are pending, the likelihood is the lawsuits against the builders and future complaints against home builders will be rolled into the general class-action lawsuit.

Data from the National Association of Realtors show that single women accounted for 22 percent of home sales nationally in 2006—up from 14 percent in 1995. Single men purchased only 9 percent of total homes sold last year, a number that's unchanged since the mid-1990s. Builders already target women when decorating many model homes, emphasizing lighter colors and showcasing kitchens, so selling to single women should be a natural. — S. Zurier

Source: Contra Costa Times

TNDs have sparked a revival of classical elevation styles in recent years, but the tides may be turning. A recent study of 1,000 homeowners nationwide by window and door maker JELD-WEN found that when given a choice among eight architectural styles, the largest cohort of respondents (26 percent) selected ranch as the type of home in which they'd most like to live—a trend no doubt fueled by aging boomers' propensity for single-story living. Contemporary façades scored a close second (20 percent), followed by Old World Mediterranean, Craftsman, cottage, colonial, and Victorian designs. Tudor was the least popular.—J. Sullivan

In a growing trend, state politicians in California, Connecticut, and New Jersey have introduced bills aimed at eventually banning the sale of incandescent light bulbs. Incandescent bulbs—the ones most people are used to—burn more energy and are being replaced by compact fluorescents that use far less. But fluorescent bulbs, which contain mercury, must be recycled or handled according to state and federal regulations. Household users of mercury-containing fluorescent lamps are typically exempt from special disposal requirements, but some states ban homeowners from disposing of the bulbs. EPA expects compact fluorescent sales to double in 2007.—N.F. Maynard

SOURCE: THE STAR-LEDGER (NEW JERSEY)

In March, Taylor Woodrow Homes launched a new Web site, FloridaGreatBuys .com, that featured 27 homes in seven communities in Florida whose prices—ranging from $263,810 for a 1,616-square-foot condo to $1,275,000 for a 3,178-square-foot oceanfront unit—had been discounted by anywhere from $27,000 to $500,000. Taylor Woodrow marketed these homes as inventory closeouts, grand-opening specials, or—in a unique twist—homes whose former buyers had walked away from their deposits. The builder offered new-home buyers access to those forfeited deposits, which they could apply to their down payments. A company spokesperson could not say how much deposit money was available.—J. Caulfield

Tankless hot water heaters are now standard in 15 out of 19 of Centex Homes' Arizona communities. The Dallas-based builder recently announced a partnership with Rinnai Corp., the world's largest gas appliance manufacturer. Tankless hot water heaters are up to 50 percent more energy-efficient than traditional water heaters.—P. Curry

A new survey by Green Builder Media of 250 home builders reports that U.S. home buyers are willing to pay a premium of 11 percent to 25 percent for “green” houses. The definition includes building practices that improve energy efficiency, indoor air quality, reduce jobsite waste, or use recycled, renewable, or non-polluting materials. The builders reported that the average buyer of a green home is college-educated and between 35 and 50 years old.—P.C.

In another sign of the housing market slowdown, power tool and hardware product manufacturer, Black & Decker Corp., based in Towson, Md., anticipates weak demand lingering into 2007. “We expect that key sectors of the U.S. economy will remain slow,” says Nolan D. Archibald, the company's chairman and CEO. The company, which faced weak demand and retailers reducing inventory, saw sales decrease 1 percent to $6.4 billion in fiscal 2006. Sales of power tools and accessories decreased 2 percent for the year, the company says. Black & Decker plans to continue cost-cutting measures, as its operating margins remain under pressure from high raw material prices in fiscal 2007.—E. Butterfield

Modular Goes Green

The first LEED-certified pre-fab houses debut.

Los Angeles-based developer LivingHomes has introduced the first line of standardized, pre-fabricated houses certified in the U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) building rating program.

Modeled after the widely known LEED standards for commercial construction, the pilot phase of LEED for Homes started in 2006 and evaluated roughly 4,500 homes, says Michelle Moore, vice president for community and communications at the U.S. Green Building Council. The rating system for homes should be available to home builders nationwide this summer. The designation has four possible levels—LEED Certified, Silver, Gold, and Platinum. In 2006, LivingHomes' model home was the nation's first house to achieve Platinum status. All of LivingHomes' pre-fab houses meet at least LEED Silver standards.

LEED certification gave the developer a quantifiable measure for sustainability in a pre-fab house, LivingHomes president Steve Glenn says. “We use LEED as a way to keep ourselves honest about what we're doing and why,” he adds.

STANDARDIZED SUSTAINABILITY: The Ray Kappe 1 plan in LivingHomes' line of pre-fab houses is based on its Santa Monica model home, which is the nation's first house to achieve LEED Platinum status. It features an open main living space divided into a series of platforms.

The line includes two models from Pacific Palisades, Calif.–architect Ray Kappe and one from David Hertz of Santa Monica, Calif. Kappe says he had wanted to design a modular house for at least 10 years, but could never find anyone interested in building it.

“One of my goals is that you don't feel like you're in a box,” says Kappe. “You're in an architecturally designed box. ... When I couldn't get modular done, I used many of my custom homes as experiments to see if I could get that kind of feel. It's nice to finally get [a modular house] done.”

The goal of standardizing the houses is to achieve enough volume to make them more cost-effective to build, Kappe explains. Currently, costs are $215 to $250 per square foot, excluding transportation, foundation, and installation.

“Right now, they're less expensive than custom, but the idea is to get them to the place where they're affordable. It's very difficult unless you get quantity,” Kappe says. “Then, you have enough repetition to drive the price down.” - Pat Curry

Lab Work

The NAHB Research center unveils a new facility for testng and technology assessment.

Early next month, The Nahb Research Center in Upper Marlboro, Md., will throw the switch on its new 42,000-square-foot laboratory and market research facility. The new facility will allow the Center to test products and systems under simulated real-world conditions.

“[It] will enable us to further integrate our engineering and market research expertise and provide our clients comprehensive product commercialization services to help them overcome the many barriers to innovation in the home building industry,” says Research Center president Michael Luzier.

The goal of the Research Centeris to make housing technology more affordable. But it is hard to bring a new building technology to market, Luzier says, because of the many impediments to advancing new technology in housing—a highly segmented industry, a deep supply chain, a lengthy code approval process, and many decision-makers in the process—the introduction of products can take a long time, 20 to 30 years. The Center hopes to change this. “You will see new products faster because we are going to shorten the time it takes for [them] to get to the marketplace,” Luzier says.

Large enough for a two-story house, the facility will allow the 80-plus staff to do large-scale thermal testing, acoustic performance testing, and two-story, shear-wall testing. Additional lab space will be customized for a market research and observation gallery overlooking the testing area, which will allow real-time observation of products in use for focus group sessions. - Nigel F. Maynard

For more information on the NAHB Research Center, visit www.nahbrc.org.

Southern Springboard

Frontier Homes sees its purchase of Turner-Dunn's land assets as a stepping stone for expansion into other states.

When Ontario, Calif.–based Frontier Homes finalized its $29 million purchase of the real estate assets of bankrupt builder Turner-Dunn in February, it not only established its first beachhead in Arizona, but possibly set the stage for further growth in the Southwestern U.S.

Mike Dwight, Frontier's senior vice president, confirms that his company is looking in New Mexico and Texas for land opportunities similar to the 430 home sites in five subdivisions in Pinal County, Ariz., it picked up at auction. Turner-Dunn abandoned those sites—including a few nearly completed houses and 144 units in various stages of construction—after it filed for bankruptcy protection in August 2006.

It might seem odd that any builder would choose to enter a Phoenix market that crashed last year, but Dwight says the deal is less risky than coming into the market as a startup. Plus, Frontier's senior managers built homes in Arizona when they worked for Forecast Homes (now part of Hovnanian Enterprises), and Frontier's Southern California divisional president, Doug Stewart, has lived in Gilbert, Ariz., for two decades.

Frontier is estimating that it will take them about 18 months to complete this project. Its homes in Phoenix will range from 1,300 to 3,000-plus square feet within nine floor plans. With prices starting at around $170,000, Frontier is targeting entry-level and first-time move-up buyers. Dwight says that because Frontier acquired this land in bulk, it has enough margin leverage to sell homes at below-market-rate prices. (For example, a 2,097-square-foot home is priced at $218,000.) - John Caulfield

Frontier has two sales offices in Casa Grande and Maricopa, and prospects have included a smattering of previous buyers whom Turner-Dunn stiffed. Frontier isn't asking those buyers to put down another deposit.

Measured by the Foot

A new study debunks some (but not all) caveats for walkability.

Pedestrianism by design has become a mandate for most urban planners, but certain assumptions about what makes a neighborhood walkable haven't been empirically challenged—until now. A recent study by the RAND Corp. confirmed that pedestrian activity increases in areas featuring grid street patterns with four-way stops and in mixed-use zones with a diversity of businesses. But researchers found no evidence that shorter blocks (of less than 600 feet) encourage walking, as is the conventional wisdom among New Urbanists.

IN THE ZONE: Walking activity increases in neighborhoods with at least four different types of businesses, the RAND study found.

The study, which examined several criteria in the New Urbanism Smart Scorecard (a set of guidelines developed by the Congress for New Urbanism in partnership with the EPA) also found mixed correlations between walkability and density. Significant increases in pedestrianism were noted in neighborhoods with a housing density of greater than 14 units per acre. However, walking activity was lower in areas with a density of 11 to 14 units per acre than in areas built out at seven to 11 units per acre.

Data for the study were crunched from the 1995 National Personal Transportation Survey, which included interviews of 42,033 households nationwide. But researchers say there is still room to drill down further. “We will need to examine whether these [criteria] have to be done in concert in order to have a big impact on walking,” says Rob Boer, the study's lead author. “We also need to explore ... whether people who are interested in walking may seek out certain types of neighborhoods.” - Jenny Sullivan