Attic Wrap -- Another Energy Saving Technique

With Dupont's recent release of their Dupont (TM) Tyvek (R) Attic Wrap (TM), today's builder is armed with one more energy-saving tool to differentiate themselves from other builders.

Without going into too much detail about the mechanics, methods and materials of Dupont's Attic Wrap, suffice it to say, it is similar in use and function to other Tyvek weatherization products . . . but specifically designed for roofing systems as a semi-permeable barrier to keep attics warmer in winter and cooler in summer.

Attic Wrap, installed across the top of roof rafters (beneath roof decking), has a metalized surface that reflects heat, while also serving as a breathable membrane to allow moisture release. By creating a sealed space with less air movement, it reduces air flow through the insulation and the attic -- thereby cutting down on loss of conditioned air from the house, and the infiltration of attic air back into living space. Moisture reduction, channelling of water in the event of leaks, and lessened chance of ice dams, are a further benefit.

Estimates put the potential cost to install Tyvek Attic Wrap on an average size new home at around $5,000, but if estimates of a 15-20% reduction in energy costs is accurate, the cost might be recouped in as little as five years. For today's environmentally conscious and energy-minded consumer, this cost may be acceptable, particularly in slightly higher-priced housing and areas with more extreme weather.

Dupont's Tyvek Attic Wrap was featured at the 2006 National Green Building Conference ("Product Most Likely to Have an Impact"), and was on display at the 2007 International Builders Show, among with various other Dupont / Tyvek products, so it will be interesting to see how quickly it will be picked up by builders and used.

My experience (many years ago) working with Dupont Tyvek Home Wrap showed a definite resistance on the part of builders to using it in new home construction unless specifically requested by the homeowner . . . and I think workers liked installing it even less than builders liked using it (I can vouch for that). I think the initial reaction here will be similar. Custom homes will be the first to take advantage, and this growing consumer demand will then lead spec builders and developers to greater use of Attic Wrap, until it as commonplace as Home Wrap is today.

LEED For Neighborhood Development Pilot

As the LEED for Homes pilot program reaches an end (scheduled to end spring '07, with the rating system made public summer '07), which follows on the heels of the successes of the commercial LEED for New Construction program launched in 1998, it is great to see the concept continued into communities as a whole, with the introduction of the LEED for Neighborhood Development project.

Although, it will be interesting to see how successful this latest phase will be.

The Leadership in Energy and Environmental Design (LEED) Green Building Rating System (TM) rates appropriate building projects on various environmentally friendly elements of design, construction and operation. Offered by the U.S. Green Building Council (SGBC), the LEED system is considered a benchmark in rating construction practices affecting key areas of human and environmental health. To date some 550 commercial buildings have been LEED certified, along with 26 homes under the residential construction pilot program.

The Neighborhood Development rating system now takes this program to a new level -- branching away from isolated buildings to incorporate entire communities. An exciting premise if developers choose to hop on board, as the benefits to the environment are clear, but unlike individual builders able to experiment with LEED certified homes and offices to gauge public interest and reaction, the commitment here is far greater . . . and more challenging. It's a big investment in somewhat unproven territory (although there are plenty of hugely successful examples of ecologically sensitive developments, sans the accompanying certification, which does hint at public demand and thereby ease some of the risk).

Applications for the pilot program are currently being accepted and it will be worthwhile watching these initial applicants and the results they achieve. Regardless of the outcome, the efforts of the Green Building Council -- along with collaborators Congress for the New Urbanism and the Natural Resources Defense Council -- is laudable, and I wish them every success . . . along with those who make the effort to register for LEED certification and strive for greener building methods, be it residential, commercial or an entire neighborhood.

Construction Sector Fortune 500 Rankings and Investment

The oil, banking, drug and insurance industries -- consistently having top performing companies among their numbers -- usually garner consider public attention for their strong ranking on the annual Fortune 500 list. This year is no exception. However, the media hype of the past few years about the hot real estate markets around the country would suggest similar success for any company involved in the construction industry as well. Homebuilders seem sure winners, likely to rank high on the list.

Not true.

The top ranked company in the Homebuilders category -- Pulte Homes -- doesn't show up until number 147 on the overall list. Of the Fortune 1000, only 15 are homebuilders (Pulte Homes, Lennar, D.R. Horton, Centex, KB Home, Toll Brothers, Hovnanian Enterprises, NVR, Beazer Homes USA, MDC Holdings, Ryland Group, Standard Pcific, Meritage Homes, WCI Communities, and William Lyon Homes).

At first glance a poor showing overall for residential construction and home builders, particularly with profit as a percentage of revenue hovering at a mere 9.9% (versus 29.9% for Mining & Crude Oil, 23.8% for Internet & Retailing, 18.3% for Commercial Banks, and so on down the list). Making the building industry seem questionable as an investment.

Except upon closer investigation . . .

First, Homebuilders stand second only to Oil and Gas Equipment, Services in terms of profit growth over the past five years, offering profit growth for the industry at 40.5% over that period. Further, over the past five years, Homebuilders also holds the top position as the best return on investment for any industry category -- providing an annual shareholder rate of return to investors of 34.7%.

Second, placing the burden of carrying the entire construction industry on Homebuilders alone would be unfair. Although it is the most obvious starting place when considering an investment in the sector, residential builders are but a small piece of a larger puzzle. A broader look would draw in participants from other sectors of the Fortune 1000 whom are significant players in the building field as well, on both residential and commercial sides.

Noteworthy industry categories and companies from the Fortune 1000 are: Engineering, Construction (Fluor, Jacobs Engineering Group, Emcor Group, Peter Kiewit Sons',URS, Shaw Group, Washington Group International, CH2M Hill, Granite Construction, Quanta Services, Perini); Forest and Paper Products (International Paper, Weyerhauser, Bowater, Louisiana-Pacific, Universal Forest Products, Plum Creek Timber, Potlatch); Home Equipment, Furnishings (Masco, Fortune Brands, Newell Rubbermaid); Building Materials, Glass (Owens Corning, USG, Armstrong Holdings, Vulcan Materials, Martin Marietta Materials, Texas Industrial); and, this can be further extended even to Industrial to include such companies as American Standard and Lennox; Specialty, with Home Depot and Lowe's; or Wholesaler's: Diversified which offers up Fortune 500 newcomer BlueLinx Holdings, among others. Also, Metals, Chemicals, Electronics / Electrical, Telecom, Energy, Real Estate, and more . . .

Slowly the pool grows, as does the ripple created by these companies:

-- In terms of shareholder return, over a 5-year period Hovnanian Enterprises, ranked #2 among the Fortune 500 "Best Investments", returning a tidy 60.3% . . . Ryland Group ranked #6, Beazer Homes USA #14, D.R. Horton #19, and so on . . .

-- For the five year period ending 2005, paint maker, Sherwin-Williams (Chemicals), reflected a 101% growth in Earnings Per Share, placing the company among the top five fastest growing companies in the nation.

In fact when broken down, overall construction trends impact Fortune 500 companies on many different levels. Whether residential or commercial, the myriad elements involved in any project, regardless of size, are far-reaching. From planning and design elements, through raw materials, finished products, contracted services, financing, insurance and real estate sales, when speaking of the "building industry", there is no neat bundle of companies to consider . . . there are in reality hundreds of companies that owe their success or failure to some degree on the current state of building and development across the nation, each worth considering as an investment.

For the past five years it appears that a well-researched investment in construction related companies would have fared well. The question is, what does the future hold? With traditionally hot residential markets facing a very real downturn, prices in decline, and inventories rising, is it time to jump in or stay out?

I'm not a financial advisor or investment expert, so don't recommend anyone rushing out and spending their life savings based on my musings, but, commercial development still seems to be holding its own, and finding product and service suppliers to that segment (with a little due diligence) may be worth considering. As for residential? That will have to be the subject of a follow up post . . .

Cutting Energy Costs With Paint -- The Case for Ceramic Insulating Paint

Small ceramic beads. That's the trick. But there's more . . . each tiny microsphere, only slightly thicker than a human hair, is hollow.

While not as widely used as might be expected, insulating paint is worth a second look. A NASA spinoff technology, ceramic paint and ceramic paint additive offer a number of advantages over regular paint at reasonable cost.

Either as a ready made heat reducing paint product or as an insulating paint additive that can be added to any regular paint, the concept is the same. Insulating ceramic microspheres, with vacuum hollows in each, form a tight layer upon drying, creating a strong "vacuum layer" on anything painted . . . thereby reducing conductive heat. Products which do not have true ceramic "vacuum beads" in their mix operate differently and do not have the same properties as ceramic insulating coverings. Reflective paints / thermal barriers, such as E-Barrier serve a similar purpose, but work in a different manner.

Among the benefits claimed by manufacturers and distributors of ceramic paint insulators (specs and capabilities vary) are:

• Insulating capability greater than 7" of fiberglass
• Energy efficient paint that can cut A/C costs by up to 40%
• Rust inhibitor
• Mildew and algae resistant
• Stain / scrub resistant
• Non-toxic / environmentally safe
• Fire retardant
• Noise reducing
• Protects against UV and chemical damage
• Waterproof and not affected by heavy rain / winds
• Elastomeric finish that will not crack, chip or peel
• Encapsulating
• Roofing product lowers roof temps by up to 50 degrees
• Durable and versatile

Top companies producing versions and variations of ceramic insulating paint include INSULADD, Keysolutions, and HY-TECH (a NASA research partner).

While there appears limited use of paint as an insulator at this time (and not even much along the lines of discussion and reviews either), chances are that as an emerging technology it will gain more exposure in the near future -- not just for informed homeowners and do-it-yourselfers, but for developers and residential / commercial builders looking to gain an edge and reduce energy costs for buyers.

Construction Costs Up: Turner Building Costs Index

According to the recently published Turner Building Cost Index, construction costs for 3rd quarter 2006 are forecast to increase 1.78% over 2nd quarter costs, reflecting a 10.33% cost increase over 3rd quarter 2005.

Whether this trend will continue remains in question. Reduced demand for building materials is impacting pricing on some products, such as a recent sharp reduction in lumber pricing, which might stabilize the cost index in the near future.

The Turner Building Cost Index is compiled by Turner Construction Company, a leading national builder (and subsidiary of HOCHTIEF). The quarterly Index differs slightly from other construction indices in that it considers a collection of national data to include material costs, market competition, labor costs and productivity levels, in tracking building costs and price trends -- factors not always accounted for in other similar indices.

Overall, not great news for many markets already faced with higher interest rates, reduced and canceled orders for new home construction, and the attendant price drops and incentives that usually follow such reduced demand. Not surprising to see that housing starts are down . . . but there is a glimmer of light in the commercial sector, which will be explored later.

Hypocausts to Homes . . . Radiant Floor Heating is Here to Stay

From the Hypocausts of Rome that heated the floors of public baths, to palaces and homes in Korea and China, the use of radiant floor heating has been around for centuries . . . if to a somewhat limited extent. With advances in the efficiency and ease of installation however, radiant floor heating becomes an increasingly appealing alternative to more standard heating practices. But is it really "better"?

Arguments in favor of radiant heating claim that the heat produced is more comfortable, cost-effective and physically beneficial than other forms. With the heat source in the floor, it is "warm feet and cool head", versus the "cold feet and hot head" syndrome of convection heating (in which stratified warm air hovers near the ceiling, away from the ground). Temperature is more uniform, is channeled directly where needed, and causes less drying of the air and skin. Radiant heat is also quieter, essentially maintenance free, and more aesthetically appealing. With lower thermostatic settings requirements and room by room individual thermostatic control, energy costs are significantly reduced -- anywhere from 20% to 40%. Finally, there are health advantages. Research indicates that radiant floor heat can reduce dust mite populations from 50%-80%, while at the same time reducing the circulation of dust and allergens that is typical of forced air systems.

The only real downside appears to be that installation -- which can be done either during construction or as a later remodel -- comes at considerably higher cost than other heating mechanisms. Estimates for a hydronic (water) system approximate twice that of conventional heating (although slightly more cost effective when dealing with larger areas versus smaller). Electric floor systems run even higher. Since it is a heating system only, a cooling system would be an additional expense. Most systems also require a layer of insulating material between the floor surface and the system itself, causing a slight change in floor height and an additional cost, but that has changed . . .

A leading provider of floor heating systems, SpeedHeat(R), recently released their Generation4(TM) product, claiming "the most technologically advanced electric radiant floor heating system in the world". Generation4(TM) permits direct contact with floor finishes, allowing for faster warming at lower, safer temperatures -- without the expense of additional insulating material (such as a thin concrete layer). The flexible heating element used is less than 1/16" thick, making any change in floor height negligible, and works with carpet, ceramic tile, stone, floating wood, laminate, vinyl and more in providing a variety of options for use.

While other parts of the world already use radiant floor heating considerably more than the US, (particularly Europe), increasing energy costs, environmental consciousness and health awareness, are all likely to make radiant floor heating a bigger player in years to come . . . offering opportunities for builders, contractors, and other innovative companies to possibly get ahead of the curve.

Stay tuned . . .

FTTH: Builder's Technology Profit Center?

FTTH / FTTP (Fiber to the Home / Fiber to the Premises) is here to stay. It is more readily available, and in growing demand from homebuyers. Any developer serious about competing in today's market should give consideration to FTTH design and planning from the earliest stages of development.

With FTTH technology, builders can offer consumers "Extreme Broadband" fiber optic multimedia capability, with performance speeds exceeding 100 Mbps . . . directly to the home.

Pulte Homes' promotion of their "Connected Communities" is one such example of developers catering to the current and future telecom needs of buyers, while staying ahead of the competition. The 3 components of Pulte's Connected Communities are:

• Broadband (high-speed internet)
• A community-wide website or portal
• Structured wiring in homes

By offering an FTTH network, Wi-Fi Hotspots and community portals, Pulte brings to the consumer all the technology they want, need . . . and are willing to pay for. And with 82% of buyers between the ages of 41 and 69 ranking "internet wiring" as one of the most important features in a new home, the demand is certainly there. (Source: PR Newswire)

The best part for developers is that providing this sort of residential connectivity, rather than being a drain on the bottom line, actually provides an additional upside over and above its popularity in the market.

Network infrastructure for the communication triple play of voice, video and data can rely on a choice of hybrid-fiber coax cable (HFC) or fiber optics, among others. The fiber optic network however, can offer lower installed cost over time, while at the same time commanding possible premiums of $4,000 - $15,000, against an investment of $12,000 -- a nice little profit center.

For the homeowner, the benefits of the huge bandwidth capability available in fiber optic networks is clear -- particularly as new technologies emerge -- while for the builder / developer there are other advantages. By implementing minor modifications to lots and streets in the utilities construction plan, it is possible to further optimize the network layout to achieve even lower costs, higher operating efficiencies, and simpler long-term maintenance.

The architecture supports scaling over time in line with the rate of home sales, with certain high-investment elements (splitters, electronics) provisioned in accordance with actual house completion. For future phases, planning in the form of additional fiber in cables, hand holes, slack coils and conduit, can be integrated until needed, at considerable savings.

Finally, as network assemblies and components that are prefabricated become more available, costs should further decrease.

More detailed information is available through the Fiber to the Home Council, including a very useful and detailed report by Corning Cable Systems, FTTH Design for Residential Real Estate Development (used as a resource in this blog).

Consumer demand for structured wiring and the latest technology is on the rise, but so is their willingness to pay for it. And lower costs with higher return sounds like a decent business strategy. Something to be given a great deal of consideration in this softening and increasingly competitive real estate market . . . and sure beats a "free flat screen TV" as an incentive to try move housing inventory!