An Alternative Approach to Buying a Home or Investing in Real Estate

Home production remains stuck in Levittown. Mass production techniques are used, but the speculative build model remains, creating unnecessary risk for the builder. Buyers, meantime, pay higher prices than they would if they had been organized in groups to secure discounts. Alternative strategies involving social cooperation have emerged in the form form of Intentional Communities, Co-Housing, and massive buying groups in China.

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Home Production Stuck in Levittown

Some of the benefits for the group buying of homes:

For buyers

• Know your neighbor before you buy (if a local community group).

• Community co-creation based on consumer choice, not developer profit.

• Choice in dealing directly with architects, contractors, and or developers for customization not achievable by traditional means.

• Mitigate or eliminate developer profits and lower cost of acquisition.

• Create park, pool and green space based on real demand and not by perception and budget of the developer.

• HOA formed and controlled by buyers from the beginning (this makes it easier to getting Fannie Mae project approval for competitive mortgages).

• Modification of property outside of traditional boundaries (i.e. granny shacks, in home businesses, common buildings for neighborhood child care, meals, etc.)

• Aesthetic novelty and improvement

• Improvement and choice in building materials

• Choice in ecologically friendly location, construction materials, energy sources.

  For Developers and Construction companies

• Reservations and sales may be made prior to significant money invested. Activity on posted projects serves as a proxy for studies, eliminating need for feasibility studies or "testing" the market.

• Use credit capacity of buyers in place of your builder credit lines or third-party investors (very important smaller builders).

• Market behavior based on real demand and not speculation (no need for "specs").

  A group buying system promises several levels of participation:

• Group with others to approach builders and bank REO departments to negotiate volume discounts. Current large inventories of builder spec homes, condos and foreclosures will allow for substantial discounts from list price. Builders with large inventories of spec homes and condos and will be best targets to approach for volume discounts. REO departments, traditionally accustomed to negotiating with single, large investors will make similar adjustments to accommodate large buying groups. This process may restrict choice and will likely be dominated by consumers and investors interested in lower prices and a higher return on investment. However, after purchase, buyers may form a secondary market to swap homes with others to achieve the home of their choice, provided their first choice was not attained through the initial group buying pool.

• Group with others to build entire plan from raw land to finish product. Buyers start at the beginning and negotiate and select the initial option to purchase land, similar to a developer. The group determines site selection, street layout, green space, size, number, and design of units. This process may be dominated by those groups that want novelty in design, use, and structure. Price may be a secondary consideration. But again, cooperation and consensus building is key.

• Comment: Our current system of production style homebuilding has emasculated architects and designers, while emboldening large corporations that build oftentimes wasteful, oversized tract home communities, disconnected to cities and work (sprawl). Social cooperation in property development and construction may create new relationships to space, new building patterns and opportunities for public space and authentic socialization. Over the past generation, the family size has gotten smaller while the house size has grown larger. The current foreclosure market demonstrates that too many buyers bought larger houses than they could afford. This is due not only to subprime and adjustable rate mortgages, but the social logic of competitive consumption. It creates waste as consumers attempt to outdo their neighbors. Perhaps more importantly, as material affluence spreads to India, China, Russia, Brazil and elsewhere, the structural logic of competitive consumption could tragically end as the resource base to support the American style of affluence is proving to be unsustainable.

Improved Pricing Model - Group Buy

Group Buying for Pre-Fabricated Housing

Pre-fabricated housing follows the typical production and retailing model to which the majority of consumer goods conform. Lowes, for example, now sells prefab homes as Sears did many years ago. IKEA is offering prefabricated homes in Europe. To create options with other designers and avoid the retail middleman, group buying strategies should prove highly effective in lowering purchase costs for pre-fab home buyers. When buying groups are localized, group buying should lower costs of contractor installation.

Here the traditional prices curves associated with higher sales volumes that are enjoyed by other consumer goods sectors should be passed to buying groups. Because of higher cost and higher profit margins enjoyed by home producers relative to other industries, dramatic savings may result. As important, since every pre-fab home ordered already has a buyer, the developer driven speculative build model is eliminated. As a result, prices have greater stability and lower foreclosure rates are likely to result when buying manufactured and prefabricated homes.

Contemporary manufactured and pre-fabribricated homes offer more variety and construction quality than in the past. The 140 mph wind ratings of Marianne Cusato's Katrina Cottages is testament to the strength and quality of today's pre-fabricated housing. Both traditional and modernist architectural is now available in manufactured housing. Pre-fab modernist designs have provided an affordable way to deliver modernist aesthetics not met in the project or tract house building model. Unfortunately, outside of the Katrina Cottages offered by Lowes, no other large distributors are buying in bulk to help bring costs down.

Many innovative designer-manufactures exist with many more in various stages of planning. Rocio Romero's LV home is an attractive and affordable option that is manufactured from a facility in Perryville, Missouri. A Seattle based company called Place Houses recently launched a mass production model of high end designs. But sill missing from this high end manufactured home model are the economies of scale offered by larger distribution. Because the high cost of the product and large potential numbers of purchases, I believe large savings could be achieved via online group buying practice as opposed to traditional bulk buying and distribution via retail channels.

Zau Tao's Group Buy Project in Shenzen

Co-Housing and Intentional Communities

Intentional communities are planned residential communities designed to promote a much higher degree of social interaction than other communities. The members of an intentional community typically hold a common social, political or spiritual vision. They also share responsibilities and resources. Intentional communities include cohousing, residential land trusts, ecovillages, communes, kibbutzim, ashrams, and housing cooperatives. Typically, new members of an intentional community are selected by the community's existing membership, rather than by real-estate agents or land owners (if the land is not owned by the community).

A Cohousing community is a kind of intentional community composed of private homes with full kitchens, supplemented by extensive common facilities. A cohousing community is planned, owned and managed by the residents, groups of people who want more interaction with their neighbors. Common facilities vary but usually include a large kitchen and dining room where residents can take turns cooking for the community. Other facilities may include a laundry, pool, child care facilities, offices, internet access, game room, TV room, tool room or a gym. Through spatial design and shared social and management activities, cohousing facilitates intergenerational interaction among neighbors, for the social and practical benefits. There are also economic and environmental benefits to sharing resources, space and items.

Changing role of the Developer

The Developer, as an intermediary and a generalist, will likely experience a reduced role in the process described. The production builder sales model still flourishes on inessential differences in product and the isolation of the buyer to individual transactions, making the production builder vulnerable to alternative processes that lower dependency on intermediares. Aside from bulk buying clubs organized for investor discounts for preconstruction condos, buyers (particularly owner occupants) have thus far lacked methods and strategies to leverage their strength in numbers. Business processes that will enable bulk buys from production builders need not be overly sophisticated - just form a group of qualified buyers, settle on a builder and community and start making offers. Larger builders and bank REO's, particularly in the current marketplace, will sell at lower negotiated prices to buying groups, while medium and smaller builders may work with buying groups to achieve larger production volume while reducing their need for third party investment and financing.