Addressing current housing design trends, building fundamentals and the 2023 buyer.
Scott Davis: Gregg Nelson and Michael Maples co-founded Trumark Homes. The philosophy is really a tremendous shared interest in real estate investing. They met together during their college years and the 30 year plus history, lots of very successful award winning communities under the Trumark Homes umbrella.
When they started Trumark Homes in 2008, it was focusing on building communities and thriving locations throughout California throughout the years. In 2020 Trumark entered into an agreement with Japan based Daiwa House Group, who acquired a majority interest in Trumark, and that provided the company with an acceleration to grow outside of California, and to grow inside of California with NorCal and SoCAl. That really led to the first expansion to Colorado in the division in 2021.
On a philosophical basis, what I liked about meeting Greg and Mike the first time in early spring of 2021, was just the shared philosophy in homebuilding. They had a core mission statement to enhance the lives of people by creating aspiring living environments. And we all know what that means; when we drive into a development and we look at an enclave of homes, we walk up to the model park and we see and watch the people that live there, work there, play there, gather there, and it’s a special opportunity. That’s what drew me closer to learning more about their philosophy and what their aspirations and goals were to come into Colorado.
As far as the brand recognition, it kind of goes by community by community, but when you talk to people in California about Trumark’s brand reputation, it really is a cut above, a kind of a reputation that delivers cutting edge design, innovation and advances in homebuilding, whether it’s single-family detached, or urban-, suburban-living that seems to be at the core of Trumark Homes. There’s a definite affinity for a design, architecture and marketing message throughout the beginning of the community and land development, throughout the launch of the community and getting to the finish in a quality manner for some of the deals that are more masterplanned communities.
BD: What are some current housing trends and how is Trumark Homes addressing them?
SD: I think the biggest trend that we see, primarily in that move-up and move-down buyer, lower- and upper-end price point, is that people want spaces that they’re really going to use for a span of time. I think that came out of COVID a little bit; more time at home. Whether it’s that you’re living alone or with a lot of other people for the first time, and you’re fighting for that space, a little privacy, a little gathering space, a little sound separation, visual separation. That really changed what people want in their next home, or appreciate in their current home.
What you continue to hear is not necessarily just more square footage. That may have been something 10 years ago, but today it’s more about square footage that we’re going to use and enjoy.
In Colorado, also with a very active outdoor living environment, you think mountains, skiing, outdoors, bicycling, walking, trails, dogs, horseback riding. There’s a lot of outdoor environment much like California, just a different seasonal weather with a lot of snow in the Front Range. If you relate what that means to the home, I think the biggest thing that we’ve done that’s trending is really expanding that covered outdoor living experience. That’s more of a larger gathering space than you would see in similar priced homes or square footage homes by more of the national or production homebuilders. That’s one thing that comes out in our homes, it’s very easy to see and experience. The other thing is the integration to that inside-outside. The trends of having taller ceilings, the trend of having more abundant lighting through windows and sliding glass doors enhance that experience. You’ll see that in all of our products.
Then there’s some things that are unique to the floorplans that are created today. That flexible space, the little Zoom rooms, the homework centers, the peloton areas, the yoga or workout space. People will tell you that ‘boy if I had this in my home, you know I’d probably spend 15 to 20 minutes a day here to read a book,’ to do some exercise, to do something on a personal level before they get up and get out of the house and start their day.
Then lastly, the work-from-home is a real trend. We get out of state buyers that will see products on the internet and work for Google, for instance or Amazon, and they can work from anywhere, and now they finally have a choice to live in a heavy lifestyle community, in a home, and they made that decision, but then they’re looking for that product. What we will hear from that buyer is ‘one or two of us is going to work from home full-time, and we want that experience to leave our home and go into a work-from-home environment,’ and it’s not just a secondary bedroom, we hear that a lot. It’s really special when it’s on the main level of the kitchen, and you have some sort of a sound/sight separation.
The other thing we hear a lot is the affinity to want to personalize a home, and that means that if we can choose the things that are important to our family, maybe we want two different color cabinets in the kitchen, two different color countertops. They want hardwood flooring or LVP, ‘we have two dogs and they live with us all the time, they’re 13 years old and we want that all over the first floor. We want to be able to choose our flooring, our kitchen experience but we don’t want to build a custom home.’ That buyer enjoys coming in and being a part of the journey to personalize the home, tailor to their wants and needs without taking two or three times as long to build a custom home. They want the best of both worlds. They want some of the custom homebuilding buying experience, but they want to live in a community and not just build on a two acre lot on the side of the road, which is something we get a lot too.
For our launch with the RainDance and Pelican communities, we’re showing the market with model parks what you can have in a new home today. Whether the time frame is two months out, four months out, six months out or eight months out. We’ll have finished inventory, homes halfway finished and we could do a pre-construction home where the buyer really wants to personalize everything.
In RainDance we have basements, not really in California or some of the Arizona markets, not really in Texas either, so those buyers that tend to move to Colorado are enamored with our basements, and the finished basement is quite something. It’s a retreat on the lower level that you and your kids can turn into a fun factory. And that is really a great value, and we offer those experiences with finished basement options for our customers on pre-construction. And that seems to be a real desirable trend right now in homebuilding in the Front Range of Colorado.
BD: Can you provide insight on the current housing fundamentals?
SD: Housing fundamentals in Colorado are going through a transitional year. I just attended the Zonda
brand event, and they looked at all the numbers from last year and this year, and they didn’t make a whole lot of forecasting, going through a transitional year, but what we’re seeing is that we had a high rate of mortgage sensitivity in the middle June to November/December of last year, which caused a lot of cancellations throughout all the public production builders and some of the private builders, and I think in the entry-level and first move-up markets that’s going to continue to be a struggle.
In the upper end, where there’s more cash buyers and not as much rate sensitivity, there’s more equity being reinvested into the new home, so homeowner to new homeowner. We’re seeing a pickup in interest to do that pre-construction, personalized or dirt-sale. In inventory, we do have migration still coming into Colorado, it’s a little flat right now, we’re slightly positive five- or 10,000 people came in last year. So we are still experiencing flat growth and the population unemployment rate is down to 3.5%, which is a nice number to have, almost an under-employment situation. So the job markets are that we have more jobs here than we have people fill in the Front Range.
As far as pricing we saw about a 30%-38% increase on the Front Range over the last three years from new home and resale markets.
So the buyers that are out there, again selling their home and buying a new home, they’re more cautious, not rushing the decision. People are walking their homes today before they buy versus buying off the internet during COVID. And they’re looking for lifestyle, and they’re looking for a pickup in their own.
Again, using the amenities that are there in a masterplanned community that helps make you happier and improve your quality of life, or is it just a cost and not something you would use? Those types of things considered today, I believe are being considered more than in the last two years.
We’re coming off that frenzied 2021/2022 build, build, build and three buyers for every home, and we’re coming into an environment that is renormalizing, little less supply chain challenges on the materia, still a little bit of a labor shortage, still a little bit of a lengthening on build time and build cycles from homebuilders, but it’s getting better. Buyers are very aware that they have choices, and one of our big things is to make sure that our build quality is top quality. That has to be something that buyers see, not just in the model park, but they actually see in the inventory that’s being built for sale.
We also have a lot of touch points for pre-construction buyers. We have an on site sales team, an on site builder team and hundreds of years of building experience in Colorado which makes it nice, having built in three different states, everybody’s different. And people have a lot of questions that come in from out of state that didn’t grow up and live there with the builder and sales team. So it’s nice to be able to sit down and take the time that they need to answer questions, common anxieties and to move forward on a home that’s going to be the best for them based on their timing, their needs, their budget and how much they want to personalize the home. We really try to get to that level of detail during the qualifications before we go into contract.
BD: If any, what specific features have you noticed homebuyers asking for?
SD: Well, they love the new kitchens. They like homes being unique and different. There’s a very successful public builder that runs an everything included program, and some private builders do as well. If you take that too extreme and every home is so much alike, it’s just the same home a different lot. So those individuals that come from that realize ‘wow to make my home unique is going to cost me a lot of money and a lot of time after closing to fully personalize the home.’
For their next home, they may want to personalize the items that you would typically find at a design center. So we see a lot of the kitchens, the flooring, things of that nature. We offer a lot of tile in our product and that is something that is a wow factor, there’s a lot of cool composites and sections and sizes today. We kind of got out of tile as a homebuilding industry and kind of went, you know, heavy into carpet and LVP (luxury vinyl plank) and some laminated hardwood, and now tile seems to be a trend that people are really, really excited about. And then I can differentiate the tile in the powder room, the backsplash in the kitchen and the primary bedroom/bathroom suite versus the whole house package solution.
Giving people enough choice without overwhelming them with too many choices is one of the biggest trends that I see, that I think is something that Trumark offers and does well. It’s just harder to do than simple entry level building. And it’s not a stop-and-go custom, so we can still do it in a timeframe of delivering a home in about six to eight months. The custom market to compare here is probably more of an 18 to 24 month build if you compare stop-and-go building custom selections, waiting, making a decision moving forward, to more of our business model with timing.
Right now in Colorado, everything we’re doing is single-family detached, one home on one lot. We’re looking at some mixed-use opportunities. Developers that we know, that we have relationships with over 15 years, are wanting that product in their community. They like the new architecture. They like the setup of being a design, develop, build solution, or part of a new masterplanned community, part of a filing or maybe the whole community if it’s a developer that’s not a builder. We’re under discussions with each where we could come in and take the whole thing or end product segment, or we could come in and take a portion of it. So we’re not restricted to one product type or one price range.
Back to trends and what people want. It’s really that power to personalize and have something unique. Homes are expensive today, compared to five years ago. Interest rates are different today compared to even a year ago. And that is causing people to really want to make their next home choice based on what they like in their current home, what they wish they have and they have no ability or desire to remodel, and so they’re ready to move into a new home and experience that journey.
Tall ceilings is something that we hear constant positive feedback about. We typically have a 10 foot ceiling on the main level, and a nine foot ceiling on the second story, and for our basement ceiling height finish we go up to nine feet. That extra foot makes a difference. It elevates the windows and there’s a lot more natural lighting coming into the home. It really makes for a neat, new home experience versus kind of more the same but what was built 20 years ago, just higher prices.
BD: What’s next for Trumark Homes?
SD: Well, we gotta get through what I call a choppy headwind year right, with homebuilding and development. So we’re very focused on the short term benefits of being an efficient builder. Making sure our communications are tight. We do have several 100 years of experience, but only 24 employees.
Many have worked together before, we do have support from Trumark corporate with the marketing and financial efforts.
Our Co-Founders, Mike and Gregg are very active. So we do have a lot of development experience, knowledge and going through different cycles. One of the things that we are interested in is expanding our price range brackets. We happen to have started from about 750 to 1.5 million. We have some opportunities to go up to about 2.5 million, and we have some other opportunities to lower down in that 500 to 750 price range, which is pretty exciting. There’s a lot of little smaller square footage but there’s a lot of neat/cool products that’s being designed in California and Colorado in the attached markets that can be really cool in that 500 to 600 to 700,000 price range.
The one thing California is missing, and that’s really either a kind of a state legislation, is the step-up product of the condos that used to be here during 2004, five and six, that is not here today. It is less than 1000 homes a year but demand of probably 3000 homes a year for the condo market in that 300,000 price range. So one of the things that we want to make sure that we do is to just not limit Trumark to only the move-up buyer. We want to spread down and share some of that design impact for people that are coming together and want to buy their first home, and not go for a build-for-rent community. They really want to just enjoy, personalize the home, want to have a pet of the house, be with friends and neighbors that they get to know and go to school with, and make those kinds of memories. We are looking to expand as we get into some larger communities that we can develop and build an enclave of that product segment experience, and we think that’s exciting for not only our land team, but our design team and our building and sales team as well.
BD: Is there anything else you would like to add?
SD: I think being a new brand is exciting. Having experience in your market and launching a new brand is something that is challenging and exciting. So we welcome the opportunity to continue hiring people that have a passion for the business. So having an employee team, really good bench strength and a very, very low turnover is kind of what I’m accustomed to. That’s important because having happy employees and humbling development make for happy customers. Professional relationships are very important to us too, as many of us know top architects, engineers, surveyors, designers and land planners in the market, and it’s nice to be able to get those groups and ideas together to collaborate.
We have a very collaborative team and we have a very competitive team. We’re looking to enhance the Trumark brand that Mike and Gregg have started, and then really grow market share even in a kind of a headwind year. Things are really looking good. We’ve got three model parks opening up for view. We’ve hosted many realtor events, not only our board from Japan, but we’ve hosted many realtor events ongoing at about two a month. We have a lot of relationship advantages coming in and realtors and our early round of customers.
We just had a custom builder move his family into one of our new homes in a community, four teenage boys, and bought one of our finished homes, which is exciting. We have people moving in from out of state, we have people downsizing and we have people upsizing. That’s where Mike and Greg wanted Trumark to be, kind of a suburban crossroads where Millennials meet boomers.
One of the biggest things that if you keep an ear out for, is that you’ll hear the grandparents with the money talk about wanting to spend more time with the grandkids, and when the adult children are spread out throughout the country that becomes a little bit of a challenge. So it’s nice to be in an area, in particular Colorado, whether it’s north or south, that allows that gathering, that frequent gathering where you don’t have to hop on a plane and fly out to the northeast during the holidays and deal with all that. So having homes and amenities, and the gathering spots that bring together more time between the grandparents, the grandkids and the adult children. That’s pretty special.
That’s really what we want to cast a wide net and encompass, is to make sure that we can be one of their builders of choice. We can appreciate them looking at our product, and we’re very open minded to continue to innovate and test ideas that may come in through our on site sales team from those prospects.