The 2009 show house ‘New American Home’ was never completed
A desert mirage
The Washington Post
By Katherine SalantSaturday, January 16, 2010
Every home builder in the country would probably describe 2009 as an "annus horribilis." But Las Vegas builders Adam Knecht and Ernie Domanico had a particularly horrible year.
Last January, their construction company, Domanico Custom Homes, was breaking ground for the New American Home, which was supposed to be a spectacular show house and a centerpiece of the International Builders Show, scheduled to open in Las Vegas next week.
Instead, the New American Home all too accurately reflects the state of luxury home building -- and the ravaged Las Vegas market. Unable to secure financing, the builders lost the unfinished home to foreclosure in December. [A view of the partially completed home is at the top of this entry.]
The half-acre building lot for the 6,800-square-foot, two-story house is about six miles west of the Las Vegas Strip. Domanico had already built six similarly sized houses on the quiet cul-de-sac; this one was going to be the 30-year old firm's crown jewel and bring it national exposure.
Designed by the KTGY architectural firm in Irvine, Calif., to accommodate a multigenerational household, the New American Home was supposed to boast the latest technology, upscale finishes and an extraordinary level of energy efficiency. But less than a month into the project, the private investor providing the financing pulled out. Many builders would have halted work, but Knecht, who was Domanico's general manager, said he believed that they would eventually get the $1.8 million they needed because of the unusual nature of the project. It had the backing of the National Association of Home Builders and more than $1.5 million worth of upscale products that were going to be donated by the project's sponsor, the National Council of the Housing Industry, a subsidiary of the NAHB. The builders decided to proceed with their own money.
Construction continued apace, hitting all the target deadlines, until August. But Domanico was forced to stop the job at 75 percent completion. They had run through their own money and had not secured the financing they needed to finish. Overnight, the job site went from the constant cacophony of about 30 tradespeople at work to an eerie quiet.
The list of unfinished work includes many of the donations Knecht had expected, such as flooring, countertops, lighting and appliances.
A market in decline
Knecht continued to seek financing for four more months. It didn't help that Las Vegas has one of the highest foreclosure rates in the country and every banker in town was skittish. Of the 37,124 resales in 2009, 26,338 were foreclosures, Las Vegas real estate agent Kathy Janus said. Only a tiny fraction of the foreclosures -- 27 of the 26,338 -- were large houses, as Knecht's New American Home project was. "But it only takes one in your neighborhood to make appraisals plunge," she said.
This neighborhood was not spared by Las Vegas's hard times. Two blocks from Domanico's building site, a 5,000-square-foot foreclosure had recently sold for $600,000. And, down the street, a half-finished foreclosure that a bank had been trying to sell for more than a year burned to the ground in June.
As he sought financing, Knecht found that the donated products, which included already-installed windows and a vanishing window wall, impressed no one, nor did the NAHB imprimatur. One lender did finally step up, but its offer was $700,000 short of what the builders needed. Finally, the bank holding a lien for the building lot foreclosed. The lot and partially completed house were sold at auction on Dec. 28 for $490,000.
The buyer will still have to put in at least $1 million to finish the house to "an average quality" for that segment of the Las Vegas market, Knecht said. Had the house been completed as designed, its value would have been about $3.5 million, he estimated.
Another indication of how far the market has fallen in Las Vegas is the asking price for the two remaining lots on Bella Kathryn Circle next to the would-be New American Home. In 2006, when Domanico began to build houses there, half-acre lots were going for $480,000 to $520,000. Today's price is only about $200,000, Knecht said.
Builders traveling to the convention next week will see a New American Home -- but as a virtual tour at the convention center, accompanied by an exhibit of the building products that were supposed to have been installed in the real house.
With the house three-quarters completed, couldn't the NCHI have come up with the funds? Tucker Bernard, the executive director of the council, said, "We're a nonprofit organization, and we can't get involved in fundraising." When asked why some of the NCHI members did not come forward, Bernard said, "We reached out to the larger companies, but even they have tightened up their belts, and the sponsors have their own budgeting issues."
Design by committee
In most custom projects, decisions about design and materials are made by the homeowners, in consultation with their builder and architect. The New American Home is organized very differently, Bernard said. Aesthetic control is shared by the architect, the interior designer and the builder, but decisions about the products that will be used are made by the companies making the donations.
The design is intended to reflect the leading trends that the NAHB has gleaned from its focus groups. But, Bernard emphasized, that comes second to the main purpose of the program, which is to showcase new products that are (or will soon be) available "off the shelf" and can be incorporated into any new house.
Too big to succeed?
Over the years, as the New American Home has ballooned in size (the 2009 house had 8,800 square feet), many reviewers have suggested that its design ideas are rarely cutting-edge and are relevant only for the top 5 percent of the market. They say the houses don't reflect "the way Americans want to live," as the promotional material often asserts.
Tyler Jones, who heads the Las Vegas firm that built the previous New American Home, said that it's a fair criticism but that the great majority of builders who tour the house are looking for something else. "Nobody comes through and says, 'I will build like that,' " Jones said. "Most builders come for bits and pieces of takeaways."
Bob Hubbell, president of the Washington area division of Brookfield Homes, said he has toured the New American Home in years past to see the latest in technology and products and to learn what was in the pipeline.
Would a smaller New American Home have been easier to finance? Knecht said reducing the size by about 25 percent would have reduced the cost significantly, but the real issue was never the 6,800 square feet, which is not uncommon for the high end of the Las Vegas market. It was securing the financing, especially without a buyer already under contract. These days, that's a daunting proposition for a new house of any size or location.
Knecht said that were he to start such a project today, he would insist that there be a buyer who would assume the burden of a construction loan, a standard practice in custom building.
Rob Williams, the architect who designed the home, said he could have incorporated most of the showcased products in a house half as big, but the project was intended to be a "dream house" that demanded extravagance.
Its sprawling footprint is bookended by a capacious master suite at one end of the first floor and a grandparent suite at the other. The second floor includes three large bedrooms, each with its own bath, and a "man cave," a large room intended to be a hangout for Dad and his pals to play cards, shoot pool -- and watch six televisions simultaneously.
Despite this year's fiasco, the NCHI remains enthusiastic about its New American Home program, Bernard said. The builder for next year's 8,500-square-foot house in Orlando just got building permits and is going full speed ahead to meet the September deadline.
Knecht has left the family business and is moving into an emerging niche in the Las Vegas market, buying partially built foreclosures, finishing construction and selling them. He said Domanico remains in business, though the phone number was not in service when a reporter called.
Personal comment: We are glad that the International Builders Show is here! This article gives readers some idea how bad the residential real estate situation still is out here, and don’t even mention commercial real estate! The depressed market does offer some excellent opportunities for someone with a lot of cash and the ability to wait out the recession.
A desert mirage
The Washington Post
By Katherine SalantSaturday, January 16, 2010
Every home builder in the country would probably describe 2009 as an "annus horribilis." But Las Vegas builders Adam Knecht and Ernie Domanico had a particularly horrible year.
Last January, their construction company, Domanico Custom Homes, was breaking ground for the New American Home, which was supposed to be a spectacular show house and a centerpiece of the International Builders Show, scheduled to open in Las Vegas next week.
Instead, the New American Home all too accurately reflects the state of luxury home building -- and the ravaged Las Vegas market. Unable to secure financing, the builders lost the unfinished home to foreclosure in December. [A view of the partially completed home is at the top of this entry.]
The half-acre building lot for the 6,800-square-foot, two-story house is about six miles west of the Las Vegas Strip. Domanico had already built six similarly sized houses on the quiet cul-de-sac; this one was going to be the 30-year old firm's crown jewel and bring it national exposure.
Designed by the KTGY architectural firm in Irvine, Calif., to accommodate a multigenerational household, the New American Home was supposed to boast the latest technology, upscale finishes and an extraordinary level of energy efficiency. But less than a month into the project, the private investor providing the financing pulled out. Many builders would have halted work, but Knecht, who was Domanico's general manager, said he believed that they would eventually get the $1.8 million they needed because of the unusual nature of the project. It had the backing of the National Association of Home Builders and more than $1.5 million worth of upscale products that were going to be donated by the project's sponsor, the National Council of the Housing Industry, a subsidiary of the NAHB. The builders decided to proceed with their own money.
Construction continued apace, hitting all the target deadlines, until August. But Domanico was forced to stop the job at 75 percent completion. They had run through their own money and had not secured the financing they needed to finish. Overnight, the job site went from the constant cacophony of about 30 tradespeople at work to an eerie quiet.
The list of unfinished work includes many of the donations Knecht had expected, such as flooring, countertops, lighting and appliances.
A market in decline
Knecht continued to seek financing for four more months. It didn't help that Las Vegas has one of the highest foreclosure rates in the country and every banker in town was skittish. Of the 37,124 resales in 2009, 26,338 were foreclosures, Las Vegas real estate agent Kathy Janus said. Only a tiny fraction of the foreclosures -- 27 of the 26,338 -- were large houses, as Knecht's New American Home project was. "But it only takes one in your neighborhood to make appraisals plunge," she said.
This neighborhood was not spared by Las Vegas's hard times. Two blocks from Domanico's building site, a 5,000-square-foot foreclosure had recently sold for $600,000. And, down the street, a half-finished foreclosure that a bank had been trying to sell for more than a year burned to the ground in June.
As he sought financing, Knecht found that the donated products, which included already-installed windows and a vanishing window wall, impressed no one, nor did the NAHB imprimatur. One lender did finally step up, but its offer was $700,000 short of what the builders needed. Finally, the bank holding a lien for the building lot foreclosed. The lot and partially completed house were sold at auction on Dec. 28 for $490,000.
The buyer will still have to put in at least $1 million to finish the house to "an average quality" for that segment of the Las Vegas market, Knecht said. Had the house been completed as designed, its value would have been about $3.5 million, he estimated.
Another indication of how far the market has fallen in Las Vegas is the asking price for the two remaining lots on Bella Kathryn Circle next to the would-be New American Home. In 2006, when Domanico began to build houses there, half-acre lots were going for $480,000 to $520,000. Today's price is only about $200,000, Knecht said.
Builders traveling to the convention next week will see a New American Home -- but as a virtual tour at the convention center, accompanied by an exhibit of the building products that were supposed to have been installed in the real house.
With the house three-quarters completed, couldn't the NCHI have come up with the funds? Tucker Bernard, the executive director of the council, said, "We're a nonprofit organization, and we can't get involved in fundraising." When asked why some of the NCHI members did not come forward, Bernard said, "We reached out to the larger companies, but even they have tightened up their belts, and the sponsors have their own budgeting issues."
Design by committee
In most custom projects, decisions about design and materials are made by the homeowners, in consultation with their builder and architect. The New American Home is organized very differently, Bernard said. Aesthetic control is shared by the architect, the interior designer and the builder, but decisions about the products that will be used are made by the companies making the donations.
The design is intended to reflect the leading trends that the NAHB has gleaned from its focus groups. But, Bernard emphasized, that comes second to the main purpose of the program, which is to showcase new products that are (or will soon be) available "off the shelf" and can be incorporated into any new house.
Too big to succeed?
Over the years, as the New American Home has ballooned in size (the 2009 house had 8,800 square feet), many reviewers have suggested that its design ideas are rarely cutting-edge and are relevant only for the top 5 percent of the market. They say the houses don't reflect "the way Americans want to live," as the promotional material often asserts.
Tyler Jones, who heads the Las Vegas firm that built the previous New American Home, said that it's a fair criticism but that the great majority of builders who tour the house are looking for something else. "Nobody comes through and says, 'I will build like that,' " Jones said. "Most builders come for bits and pieces of takeaways."
Bob Hubbell, president of the Washington area division of Brookfield Homes, said he has toured the New American Home in years past to see the latest in technology and products and to learn what was in the pipeline.
Would a smaller New American Home have been easier to finance? Knecht said reducing the size by about 25 percent would have reduced the cost significantly, but the real issue was never the 6,800 square feet, which is not uncommon for the high end of the Las Vegas market. It was securing the financing, especially without a buyer already under contract. These days, that's a daunting proposition for a new house of any size or location.
Knecht said that were he to start such a project today, he would insist that there be a buyer who would assume the burden of a construction loan, a standard practice in custom building.
Rob Williams, the architect who designed the home, said he could have incorporated most of the showcased products in a house half as big, but the project was intended to be a "dream house" that demanded extravagance.
Its sprawling footprint is bookended by a capacious master suite at one end of the first floor and a grandparent suite at the other. The second floor includes three large bedrooms, each with its own bath, and a "man cave," a large room intended to be a hangout for Dad and his pals to play cards, shoot pool -- and watch six televisions simultaneously.
Despite this year's fiasco, the NCHI remains enthusiastic about its New American Home program, Bernard said. The builder for next year's 8,500-square-foot house in Orlando just got building permits and is going full speed ahead to meet the September deadline.
Knecht has left the family business and is moving into an emerging niche in the Las Vegas market, buying partially built foreclosures, finishing construction and selling them. He said Domanico remains in business, though the phone number was not in service when a reporter called.
Personal comment: We are glad that the International Builders Show is here! This article gives readers some idea how bad the residential real estate situation still is out here, and don’t even mention commercial real estate! The depressed market does offer some excellent opportunities for someone with a lot of cash and the ability to wait out the recession.
It seems teh "New American Home" was a project that should've been taken two or three years ago before the housing bubble burst. Of course, that was the problem with the market at the time, it was artificially-created to prop up values so that people could buy at a high price hoping it'd get higher, but then they couldn't afford the payments on the houses, so they'd default. I'm getting into too many political arguments that I get into at the Hut with one of the other drivers that get me so frustrated, I want to quit that place.
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