Michael Incardone, national builder sales manager at Kichler Lighting, shares his insights on the housing market.
“As a whole, I’m very positive about the future,” Incardone states. “When looking at the permits and the housing stats, it’s very clear where the business is.” He refers to the area experiencing the most new construction as the “Smile Belt,” so named for the pattern you would draw if you started at Washington D.C. and then continued curving down along the coast and ending upward in California.
“The herd seems to hang around the water. For example, two of the top 100 builders are located in Alabama,” Incardone states. Texas was relatively immune to the rest of the country’s housing woes and remains one of the strongest markets in the nation.
Even troubled areas like Florida and California are picking up. “California has been headed upwards pretty much all of 2012,” Incardone affirms. “The majority of the growth in the boom was the Inland Empire (Riverside county) and the inland areas south of Sacramento. That has slowed immensely, but the thing about California is that a large percentage of its increase in permits and starts is with multi-family, urban in-fill, and townhome/condo projects. People want to live near where they work and now they are able to do that with the lower cost of these types of projects. Back in 2005, a condo within 20 miles of downtown would list well over $700K. Today, that same place can be purchased for $400K. Buyers must now choose $400K for a condo close to work, or $400K for a house with a yard but be 40 miles away,” he explains. “Inventory is no longer an issue. The California resale inventory is healthy and not interfering with new home sales. For someone to consider opening a lighting showroom in this state, it would require a very clear business plan focused heavily on “Who is the buyer?”
According to Incardone, Florida is very similar to California. “There are select cities that really dragged the entire state into the newspapers,” he admits. “Lakeland was booming and now it’s a ghost town, yet Orlando and Jacksonville are doing terrific. Miami is cruising along well. Florida is different because the extremely high land taxes pushed national builders out of Florida even before the crash. It costs a builder $30-40K in taxes just to develop a lot for construction! That same lot in Arizona or California would cost $5,500 in taxes. The builders cannot pass that $40K along to most homeowners so they often absorb much of it,” he remarks. “Florida has a nice amount of large privately held builders who have great market share and are plugging along well.”
In the Pacific Northwest, Washington and Oregon have often been considered as one, according to Incardone. “Washington has really made great strides to be a lean, self-sustainable state, but Oregon hasn’t done as much. Personally, I see Washington as its own state. It has always been completely ignored by large national builders,” he explains. “In 2005 they had only two national builders versus Arizona, which had 47. There are a ton of local small builders in Washington. The obstacle lies with the banks, not the buyers. The banks are still the #1 problem for builders across the country. In Washington, it is a major problem/risk for the banks because conceivably these small builders could close doors tomorrow. That said, business is definitely on its way up,” Incardone says.
How can lighting showrooms build on the business in their communities? “Strategize what kind of builder you want to attract and then be sure you understand that customer as well as that builder’s buyer,” Incardone suggests. “The demographic of the average home buyer has changed so much over the last five years between the Baby Boomers and the Gen Ys, and the influx of immigration. A lot of showrooms are treating the home buyer the same way they always have, but it’s not the same customer anymore!” Today’s home buyers are more savvy and use the Internet constantly, he points out.
Builders are also stepping up their game. “I’ve had multiple builders tell me that selling upgrades [is where it’s at]. They’ve become smarter about what they put in their design centers as well as the way they showcase the lighting within them,” Incardone comments. Undercabinet lighting in particular has become a major trend.
Often the best strategy is to seek out the local builders over the huge national ones. “I find that the national builders offer the basics, but the local builders differentiate themselves by the amenities they offer. In general, they tend to have a much nicer base home when it comes to hardware and lighting.”
Another advantage: by partnering with some of the better custom and local builders in the area, “you’ll find that the product decisions are made locally by someone who understands the community you service and understands the buyers’ needs. The purchasing isn’t being done in some regional office far away,” he says. “I think the conversation between the lighting showroom and the builder should not be ‘Let me get you lights’ but ‘Let me help you be different and better than your competition.’”
The other benefit that a lighting showroom can provide to builders is education — and the local, smaller builders seem to be able to spend more time with the lighting sales rep and want training than some of the big national builders, according to Incardone. “Lighting distributors have the biggest advantage as the go-to source for educating builders and home buyers face to face. You could very well have a lifetime buyer if you handle [the relationship] correctly,” he adds.
While Incardone notes that interest in LED downlights among builders has been growing, he doesn’t see many model homes using them. When it comes to lighting controls, he observes that most first-time home buyers have no interest, the Gen Y demographic is curious, and the Baby Boomers find the notion of a whole-house control system to be over their heads. Landscape lighting is another category that builders typically don’t pick up on, but that Incardone feels can be a boon to lighting showrooms selling to the builders’ buyer. Again, a smaller, local builder may be more approachable and agreeable to try out a landscape lighting system than one of the larger companies.