July, 2008

SELLING GREEN

As more homebuilders embrace green building, learn how to get your share of this growing market.

By Kelly O'Hara

No matter where you live, it’s a steady drumbeat of troubling economic news—oil prices at stratospheric heights; gas and diesel prices flirting with $4-plus a gallon, and a general unease over commodity costs that have people not only tightening their belts, but punching another hole in them.

Overlay this with the newfound explosion of interest in “being green” and “saving the planet,” and it seems that careful, thoughtful consumption of resources is the watchword for today’s consumers. Where these two trends intersect lies an opportunity that more and more homebuilders across the country now recognize.

Where these two trends intersect lies an opportunity that more and more homebuilders across the country now recognize.

Builders who are making concerted efforts to build green, extremely energy-efficient homes that help homeowners save on bills feel they are optimally positioned in a slow market.

A recent McGraw Hill report estimates that this year, the green building market will be between $12 billion and $20 billion. (In 2005, that number was $7.4 billion.) The report also said that this year, green homebuilding will account for a 6% to 10% market share, which is projected to grow to $40 billion to $70 billion in sales by 2012.

In addition, new national certification programs for green homes that meet certain criteria, such as those offered by USGBC under its LEED program, or NAHB’s National Green Home Building Program, join a variety of local and regional programs that offer homebuyers a third-party blessing on their new green homes. (The certifications award points based on key green indicators and methods used in construction.)

So what does this mean for LBM dealers?

Recognizing and selling to homebuilders striving for various shades of green offers a bright spot in a dim market. But to capture the business, LBM dealers need to know what makes green homebuilders unique; how to help them accomplish their goals, and how to provide the right information—and the right products—at the right time.

But to do that, you need to know how green homebuilders distinguish themselves in the market.

Big Business

Clark Wilson, the CEO of Green Builders Inc., based in Austin, Tex., says his foray into green building started with a simple reflection: “What does the world need?”

Wilson, a builder for the past 30 years, had a chance to ponder that question after selling his previous homebuilding business, and waiting out a five-year noncompete agreement. During that time, he began to review the market, acquire land for future development, and think about what opportunities might lie down the road.

Wilson’s home base of Austin may have helped him decide that communities of built-from-the-ground-up green homes would be his market niche. He says the city of Austin, which he terms a progressive community, actually had the nation’s first “green” plan for buildings constructed within the city.

Wilson also says that when he examined his market, he noted that most green building was purely in the custom home segment, and that other options for greener construction consisted mostly of “bolt-on” options added to conventional building. He wanted to create affordable homes, ranging from $180,000 up to $700,000, that literally incorporated green before the first bulldozer rolled onto the site.

“We intend to be ‘the Whole Foods of Homes,’” he says, with a nod to the chain of stores that made organic foods accessible to the masses.

Green Builders’ four main tenets of green are energy efficiency, water conservation, use of green materials, and the promotion of healthy living. And “Don’t waste anything; that is the essence of what we’re doing,” Wilson says.

To date, Green Builders has built about 50 homes using this philosophy, with plans for more underway. Wilson acknowledges that like most areas of the country, his market has slowed a bit, but it hasn’t stopped. In fact, he says that while his area is off its “world-record pace of 25% to 30%” growth,” they have less than a three-month supply of new homes available.

Green Builders’ homes are built to Energy Star guidelines, and are in the process of being certified by NAHB’s National Green Home Building Program. (Green Builders was honored by NAHB in the green “Affordable Home” category in May. See sidebar on Page 38.)

Wilson says his company looked at both LEED and NAHB’s certification programs before electing to go with NAHB. “We studied them both very closely and they’re both very good,” he says about the two most predominant national green certification programs.

Wilson’s words of advice for LBM dealers who want to sell him and other like-minded green builders materials?

“Know your area. Know the part of the home that you’re providing parts for. Know it cold,” he says. That means builders like him want to know what windows are best suited to their particular climates, and want a solid cost/benefit comparison that shows why a particular window saves the most energy. And a green homebuilder wants to know that every decision, every technique, and every product they use in a home is contributing to its four key green ideals.

For instance, Green Builders uses a turnkey framing contractor because Wilson has found that this actually eliminates waste, a key green feature. (He adds with a chuckle that when the framing is jobbed out, the casual, wasteful attitude of “It’s not my wood” goes away.)

Using trusses that span from outside wall to outside wall also eliminates the need for extra headers inside the home, since the walls are simply supporting the drywall instead of the structure’s weight.

And when it comes to insulation, Wilson was sold on the benefits of using Icynene, even though he says the sprayed-on material was not the cheapest choice. Instead, long-term benefits provided by the insulation allow completely sealed attics, and the downstream benefits of a tighter house allow for a smaller HVAC system, which translates into long-term energy savings and greener performance.

“There were naysayers who said that [green homebuilding] was only the arena of customer builders.”

Wilson says of starting his niche of affordable green homes. “But we’re priced right in the market. We decided not to achieve a premium [for these] from the get-go, but when the market returns, we should have a better margin than our competitors.

Driving Demand
John Friesenhahn, a partner with Imagine Homes in San Antonio, Tex., is another green homebuilder who believes that energy- efficient, cost-effective homes built to the highest standards are the wave of the future.

Friesenhahn says that he was involved in green homebuilding back in the 90s, only at that time, the process was simply about energy efficiency. Today, this philosophy has extended into water conservation, minimizing waste, improving indoor air quality, and all of the other facets of true green building.

“You have to look at the whole house as a system,” he says. “You can rack up a lot of costs not doing that.”

Imagine Homes has built 150 homes to date, and all of them are certified as both Energy Star homes, and under regional “Build San Antonio Green” guidelines. (Homes are certified green under the program using a green building checklist, and builders submit plans and the checklist to the organization for review. Homes that meet the specifications earn a certificate showing how the home scored, and also receive a Homeowner’s Manual that provides details on operating the home. See details at www.buildsagreen.org).

Imagine Homes was also recently honored by NAHB for one of its production homes, a 2,600 sq. ft. two-story home located in a walkable community.

While Friesenhahn believes green homebuilding will become the standard for homes across the country, he concedes that that tipping point has not quite arrived.

“We’re driving the demand” rather than the consumer at this point, he says, saying that helping homeowners and others understand the benefits of a green home is an education process. “A lot of people still don’t know [a green home] is an option.”

To spread the word, Imagine Homes has embarked on an aggressive education program. To date, about 200 local realtors have attended a 90-minute PowerPoint presentation that Imagine offers to explain why green homes function better, and to give the realtors the knowledge they need to in turn relay to potential buyers.

“What we’re doing today will be the standard five years from now,” he says.

Imagine Homes touts a variety of benefits in the presentation, including higher- performance windows, and that it tests after construction to ensure that all ducts are tight. And because the home is built tightly, it can use a smaller air conditioning system, which translates into better energy efficiency.

The company also builds with fingerjointed studs, which can use younger growth lumber, and uses TJI Joists by Weyerhaeuser to eliminate unnecessary framing, again conserving lumber.

Imagine Homes also uses low-VOC paints and stains, which contribute to better indoor air quality, and fiber cement siding, for its long-term low maintenance. Carpets in the home are made of recycled nylon.

Friesenhahn says that reducing waste is a key tenet for building greener homes, in addition to the fact that landfill costs are increasing for post-construction waste. His team reduces waste by up to twothirds on their sites by grinding excess material, and the byproduct is used to create paths in the communities.

Friesenhahn says his relationship with his LBM dealer has been key in allowing him to stay current with the latest trends in green building.

“We have a very good partnership,” he says. “They’re very willing to bring in reps to help us all learn about new products.”

In one instance, he sites LP’s TechShield Radiant Barrier as an example. The product consists of a thin sheet of aluminum overlay that is laminated to OSB. The product features channels that allow trapped moisture to escape without compromising its radiant barrier performance.

When Friesenhahn wanted to use the product, his preferred LBM dealer was more than willing to work with him.

There were “other [dealers] who weren’t as willing to bring in a new product,” he says, noting that staying up-to-date on innovations helps him and his company use the latest technology in their homes.

“There’s nothing I would change about working with our current supplier,” Friesenhahn says. “They’re open to researching new products, and will come to me and say, ‘Here are two other similar systems that have some stronger parts.’” He adds that “Some others say, ‘Oh, you don’t want to do it that way. You need to do it the same way we’ve done it for 50 years.’”

Sidebar 1:
DEALERS SEE GREEN:
Hayward Lumber’s EnviroSmart Program

Forward-looking lumber dealers are finding a variety of ways to embrace green building, and to set themselves apart as good partners with green homebuilders.

Hayward Corp., a fourth-generation family owned lumber company in California, operates seven lumberyards in Monterey, San Luis Obispo, Santa Barbara, and Kern counties, as well as seven Design Centers, and a truss manufacturing facility (Hayward Building Systems).

According to marketing director Suzanne Scattini, the company first became interested in promoting the value of green products in the mid-90s, in response to architects asking for green building materials. The company hired a person to research and develop a green program, and started offering a list of green products available on a special order basis, including FSC lumber. (Company CEO, President and Chief Sustainability Officer Bill Hayward is also currently chairman of the FSC-US Division.) facility (Hayward Building Systems).

The company brands its commitment to sustainable environmental stewardship as The EnviroSmart Program. Scattini says EnviroSmart products are chosen after an internal team evaluates them. Based on the team’s recommendations, new products are then added to the growing list.

Scattini adds that the EnviroSmart program is “just the tip of the iceberg of a larger business strategy of sustainable differentiation. We are using our whole culture of sustainable business practices to differentiate ourselves from the competition. We are designing environmental values into our services, as well as offering products that improve the environmental performance of a house. These kinds of products and services are improving the customer’s bottom line by reducing maintenance costs or energy costs and they are benefits that few of our competitors can offer.

“Our customers think of us as more than just a building material supplier. They think of us as leaders who can help them grow their business, market differently to their customers, or build in ways that fit their own internal value systems while at the same time, still driving their bottom lines.”

Scattini says many green products cost a little more than traditional options, which actually provides Hayward with an upsell opportunity.

She also says that as more and more builders in their areas are being asked to build to the LEED standard, Hayward is uniquely positioned with expertise to help them achieve those goals.

“Because of our expertise in these areas, we have recently helped some of our local commercial builders win LEED commercial projects from larger, national commercial builders who were not aligned with a supplier that understood LEED. We not only understand LEED, we have built our Truss Plant to the LEED standard.”

Sidebar 2:

SELLING THE PACKAGE:
Parr Lumber’s “Get Real” and High Performance System Programs

Opportunities abound for lumber dealers who can actively embrace the green building movement and find a way to partner with their builders to achieve greener homes.

The Parr Co., established in 1930 with headquarters in Hillsboro, Ore., has not only recognized this opportunity, it has wholeheartedly embraced it.

Ranked as the 17th largest building material supplier in the nation, the Parr Co. consists of Parr Lumber Co., Parr Cabinet Outlet, Cascade Wholesale Hardware, NSC, NSCi, and Parr Marketing Group.

It operates 40 facilities in Oregon, Washington, California, Arizona and Utah, which include pro/retail building material yards, contractor-focused facilities, and cabinet outlets.

Parr introduced a program called “Get Real” in November 2007 to help customers find both sustainable and eco-friendly products. Products that carry the “Get Real” logo meet various program standards, such as lumber that has been harvested in a sustainable manner, with either SFI (Sustainable Forestry Initiative) or FSC (Forest Stewardship Council) certification. Other products that have the “Get Real” logo are either completely or partially manufactured with the use of recycled materials; or must supply clean air or energy efficiency benefits.

In addition, Parr has introduced a new service that it calls the Parr High Performance System. This provides builders with a complete building envelope that is designed, built, and installed to perform with extreme efficiency while being environmentally friendly.

“We’ve been studying building sciences for the past seven years and determined the best way to impact our builders was to simplify the process for them,” says Nate Bond, director of sales.

“Our high performance shell takes into account proper planning for insulation, air barriers, weatherization and high performance windows and doors,” Bond says.

Every home built with the system is then tested with blower door, duct blasting, and thermal imaging tests.

The company says its system offers benefits including:
• Energy efficiency—a reduction in utility bills by 30% to 45%
• Reduces job site lumber waste by 75%, compared to a traditionally built home
• Cleaner indoor air quality with a constant flow of fresh, filtered air
• A superior thermal insulation blanket— creating consistent room-to-room temperature