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Houston Home Builder ZK Homes Discusses Homebuilding OutlookPosted by Sarah Nichols on Friday, February 4th, 2011 at 1:18pm.
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Homebuilders in Houston have had to be creative to keep their businesses profitable. Due to the lackluster housing market, homebuilders like ZK Homes have become more innovative in their business strategies. Established in 2004, ZK Homes, owned by Lee Zieben and John Kirksey, Jr., began just shy of the economic downturn. Zieben discussed how his company has weathered the economic storm as well as his perspective on what’s ahead for the Houston building market in 2011 and beyond. Zieben adds a little political insight, too, as he ran as a Republican for the State Representative for District 137 in 2004 and in 2002 became one the youngest gubernatorial appointees in Texas history.
What kind of construction does your company build?
Our development company Zieben Kirksey Development creates high-end gated communities and then its sister company, ZK Homes, builds the homes ranging from $350-$800K. We currently have three communities. Pine Ridge Villas are patio homes in Bellaire. Enclave at Bellaire is a community of townhomes. We also have Enclave at Lake Pointe, a 100 unit new patio and town home project inside Sugar Land right by the Whole Foods. Recently, we launched another division of our business, building high-end, green built custom homes.
How has your company fared in the last few years?
Before 2009, we were producing about 12 houses a year. When everything slowed down, the economy made it lot harder to do business and get financing so we built six homes in 2009. Fortunately, we didn’t have to let any of our employees go. When our sales started ramping up, we brought in some new sales people and we were able to build 19 homes this past year, however our profit margins still remain conservative.
You still made the Houston Business Journal’s Book of Lists for Largest Houston-Area Homebuilders for 2009. Were you surprised?
Profits were way down for everyone and we somehow made the list. When I saw we made it to the 25th largest builder, I laughed. What’s incredible is that Houston has become the largest homebuilding market in the nation. It goes to show how drastically the market has been affected when we are the 25th largest builder in Houston. I’ll be interested to see where we rank next time.
What homebuilding sector has been affected the most?
The large tract home builders in the $150K market have suffered the biggest loss in terms of profits, like KB Homes, Lennar and David Weekly. Those kinds of builders are such big machines, operating in several markets besides Houston. They were building so many homes when all this happened that they had to pull their reins back. Plus, their banks weren’t letting them do as much and that slowed them down. Houston Custom home builders have been hit too because their customers are much more cost conscious now. Buyers can’t just go in and spend what they want on a home.
What has your company done to stay competitive?
One of the big initiatives we pushed for last year was to get into green building by launching ZK Green. My partner, John Kirksey, is a Certified Green Builder. In 2010, he won the Green Building Advocate of the Year Award for the Houston’s Best Awards from the Greater Houston Builder’s Association and the Texas STAR Award from the Texas Association of Builders. We don’t certify every home, but they are all LEED (Leadership in Energy & Environmental Design) Silver level or higher. We are also building the first Gold level LEED home in Sugar Land. We use tankless water heaters, spray foam insulation and rain sensors with our irrigation systems in all of our new Houston and Sugar Land custom homes. We install 16 SEER air conditioning systems that filter the air at a hospital grade level. We also use water-based paint so there’s no chemicals in it. Our carpets are made from recycled materials, etc. We work very hard with our vendors and contractors to keep our costs down and pass that on to our homeowners, whereas typical true custom and green homes can be very expensive.
What is your advice on how builders can increase business prospects?
Be innovative and focus on providing value to your buyers. Find new ways to provide products and features in a more efficient manner. One way we have tried to be efficient is by using portals where our vendors can log in to bid. Our construction managers carry tablet PCs and PDAs while working in the field.
Do you see any emerging trends for new homes in 2011?
Even though we have been implementing these types of building practices, green is the new hip, sexy thing. I was just at the International Builders Show in Orlando Florida. Four years ago when I went, green building wasn’t even mentioned, now half the whole floor was on green home building products. At the show, GE showcased new appliances that have a wireless signal that can interface with your electricity meter so when you look at your power usage, you can determine when to use it. There are peak times and off peak times at night when fewer people are using it. Houston is the first city in the US to have installed new smart electric meters on people’s homes. This new line of appliances talks to your electric meter so when it hits off peak, it will automatically turn on your dishwasher and your washer and dryer so you will pay a lot less to use them. We are installing them in 2011.
What advice do you have for homebuyers?
If homebuyers want to build a custom home, I think now is an incredible time to do it. One, interest rates are low; two, they can buy products and get labor at a lower cost than before; and three, a lot of companies, like ourselves, are looking to retool their businesses to be more innovative since it’s harder to get clients and we want to make ourselves stand out. That falls in line with us becoming the 25th largest builder. We’re trying to separate ourselves and pushing up. Other guys who haven’t separated themselves are going down. Home buyers can take advantage of that.
From your perspective, what is the homebuilding outlook for 2011 and beyond?
I think we’re going to see things slowly come back. I think it’s going to be about 10 percent better this year and really pick up in 2012. I just saw a slideshow from the Greater Houston Partnership and I also recently read an article by Mike Inselman from Metrostudy speaking to GHBA members. Both are saying that the worst is behind us. We’ve already bottomed out and are slowly on our way back up. If you can imagine a graph, we have just finished hitting the bottom of a trough and we’re heading back up the other side. I think this year we’ll continue to come back and next year is when we’ll start to see things roaring again. I also believe that the current political climate must change and when it continues to do so as we saw in the past elections, consumer confidence will continue to grow. Think back to how slow things were mid-summer all the way up until the November elections we just had. After that, things started to pick up again. No matter your political views, when you look at ratings of the President combined with the Republicans winning some elections, people felt excited after the election and it showed in their spending. I think even the President is seeing this and he is now changing his tune a little bit. I think we’ll see this even more after the Presidential election, and the building industry will benefit from it.
Sarah Nichols is the former editor of Houston Construction News with experience writing about the many facets of the construction and real estate industry. She has served as a technical writer and internal communication specialist for several Fortune 500 companies and has been a freelance writer for America Online, Livestrong.com and Houston House and Home magazine. Sarah is a graduate from Texas Christian University with a B.S. in Journalism and has received certification as a Graphic Illustrator. Sarah can be reached at firstname.lastname@example.org.
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