market stability

MARKET STABILITY

At the dawn of the twentieth century, architects and social visionaries proclaimed that housing in the coming age would be ruled by industrialization. Cities would be remade as modern, progressive utopias–stamped out of great industrial workshops and inhabited by those whose hands and minds crafted them.

One hundred years later, however, the housing industry has unquestionably failed to obtain this vision.  In a century that produced flight, space-travel, telecommunication, computers, nuclear physics, pharmacology, and the internet, the two greatest innovations in housing were drywall and the thirty-year mortgage.  Every other thing we consume has become more advanced, more reliable, more attractive, and more affordable.  Housing has become bigger, flimsier, and more expensive.  In a world driven by innovation, housing has by-and-large been driven primarily by inflation.

This inflationary trajectory exploded into the great housing boom of the 2000′s–an era in which amateur hobbyists with neither training nor oversight could leave their rightful avocations and make a killing veiling crumbling old homes in a thin veneer of contemporary taste.  Caught up in the frenzy of free money and flipping, housing in the early 2000′s became little more than the most fertile soil in which to grow the national money supply through ever more debt piled on the backs of ever more burdened homeowners.  Housing produced monetary policy, not homes.

The 2000′s boom has crashed into the end of the decade with substantial consequence.  In September of 2005, the US Department of Housing and Urban Development reported that new single-family homes were being built at an annual rate of 1,798,000 units. This was down slightly from earlier months.  June 2010 figures show homes being built at an annual rate of 468,000 units.  This represents a 74% decline in construction activity from the recent peak.

So what now?

Innovation.

LABhaus is a project seven years in the making.  Born of an urban luxury development group, LABhaus embodies progressive design, luxurious fittings, premium construction, and environmental awareness. Even the most basic LABhaus designs were conceived in the vein of multi-million-dollar lofts and boutique hotels.  LABhaus homes feature the finest custom kitchens, spectacular standard designer finish packages, custom-milled bathroom fixtures, and the most advanced construction techniques.  LABhaus designs are intrinsically modern, yet always elegant and restrained.  LABhaus plans are practical.  They feature generous room sizes, ample storage, and sundrenched spaces.  Yet what destinguishes LABhaus is attainability.

The unique LABhaus purchase model offers consumers MSRP pricing and offers landholders consumers an opportunity buy LABhaus homes without having to engage in typical real estate financing models which lead to massive price inflation for end-users.  The production process is similarly refined.  Drawing inspiration from the automotive industry, LABhaus invests substantial energy into design and innovation in advance to create the most attractive, most efficient homes possible and offers outstanding standard configurations and option packages.  As a result LABhaus’s industry-leading supply chain offers consumer’s fittings and features previously unfathonomable at such an affordable price point.

Most importantly, LABhaus homes are priced based upon the the lowest possible production cost within a given regional market.  This is in stark contrast to typical models for producing housing, in which developers and the real estate professionals manipulate the market to obscure production costs, obfuscate the production process, and create artificial scarcities.  LABhaus homes are priced based upon a very simple formula: land + production cost = total cost.  Not coincidentally, this is among the most conservative formulae for evaluating the value of real property. Even in a ‘post-bubble’ market, most competing new houses are sold based on the following formula: (((land + production costs + holding costs + developer fees ) * investor returns ) * marketing commission ). The returns and fees may be lower today, but the inflation still exists.  And even in instances of developments being sold out of foreclosure or developer bankruptcy, the multi-year morasse leading to such sales often means that buying ‘below cost’ still only means getting a discount on the project’s massive overhead, rather than its actual production cost or replacement value.

The market inefficiencies  in typical housing production also means that existing housing often sells for substantially above replacement cost.  Existing homes are often priced as a fraction of comparable new homes nearby.  So as developers are able to charge more for new homes, the price of existing homes rises as well.  While this may seem to be good for the pocket books of existing homeowners, it creates froth and instability in the marketplace and presents risks to homebuyers.  By relying on a pricing model tied to replacement cost, we believe that LABhaus homes are among the most conservative options for today’s homebuyer.  Many current LABhaus homes being built, in fact, are being built for up to 50% below their as-built appraised value.  While LABhaus homes certainly do not guaranty isolation from market instability, we believe the added value at the time of purchase provides the greatest possible cushion against such instability.  And therefore, we believe that LABhaus offers family’s the best option in today’s turbulent market.