BUILDING HOMES: BUILDING PROBLEMS

Top builders downplay homes' flaws

By Dan Tracy
Sentinel Staff Writer

November 4, 2003

Correction: This article about production home-builders misidentified Arthur Rutenberg Homes Inc. Arthur Rutenberg Homes is an independently owned custom builder. It is not related to Lennar Corp., a production builder that operates a division called Rutenberg Homes. Also a chart on that page tracking builders by problems per home omitted a surveyed home built by Lennar. There were 15 Lennar homes surveyed -- with 57 priority problems, 31 concerns and 23 worth noting -- with an average of 7.4 problems per house.

Bali and Jose Quinones paid Centex Homes $183,000 to build their home, the place where they sleep, cook their meals, watch television, go swimming in the backyard pool.

It is their most prized and expensive possession.

For Centex, it was just one of more than 20,600 "units" constructed nationwide during 2001, a year of record earnings for the company.

The Quinoneses moved into their "unit" during August 2001. They subsequently discovered a leaky window and door that resulted in mold in the front room, cracks in the exterior stucco walls and swimming-pool deck, and circular imprints in the garage floor from buckets left on wet concrete.

"This is the poorest quality," Bali Quinones said.

The Quinoneses' home in south Orange County is typical of the 18 Centex-built houses inspected by the Orlando Sentinel and WESH-NewsChannel 2 during a yearlong investigation into the quality of new-home construction in Central Florida.

Centex, which refused repeated requests for interviews or comment, averaged more problems per house -- 9.2 -- than any of the other major production, or tract, builders in the survey of 406 randomly selected homes built during 2001. It is the first statistically valid study done of new-home construction in Florida and likely the nation.

However, it's impossible to draw sweeping conclusions about the quality of any individual builders, such as Centex, because the number of inspected homes built by each is too small to offer a statistically reliable picture of its work.

More than 130 builders had homes in the survey, 80 with just one home. Nearly 80 percent of the houses inspected were constructed by production builders, large national or regional companies that dominate Central Florida and other hot housing markets nationwide.

Production builders have become wildly popular in recent years because they market aggressively and often offer spacious designs at a square-foot price that is difficult for small, custom builders to match.

They keep their prices down because they are able to buy large tracts of land rather than more expensive single lots and can purchase materials such as lumber, nails and drywall in bulk, further reducing their costs. They also offer lower pay to subcontractors, arguing that the workers still can make money because the production builders offer steady work, often in the same subdivision.

The Sentinel and WESH ranked the 11 firms with the most houses in its computerized database by the number of problems found. The top 11 built 185 homes, representing 45.5 percent of the sampling.

Centex, based in Dallas, was followed by Cambridge Homes, 8.7 problems per home; Maronda Homes, 8.6; Morrison Homes, 8.3; U.S. Home, 7.5; M.I. Homes, 7.5; Lennar Corp., 7.4; Engle Homes, 7.3; David Weekley Homes, 6.2; Pringle Development, 6.2; and Ryland Group, 5.4.

The average number of flaws per house for all builders in the database was 7.5; four of the top 11 production builders exceeded that average, while five had fewer problems than average. Two, U.S. Home and M.I. Homes, were right at the 7.5 figure.

Although the number of problems per house varied by company, the types of faults were universal from builder to builder. In other words, homes by Lennar or Ryland had the same problems -- such as major cracking or sloppy interior drywall or mold -- as Centex homes; there were simply fewer instances of these faults.

Flaws ran the gamut from serious -- cracks in walls, driveways and foundations large enough to hold a quarter; leaky windows, doors and roofs; leaky and poorly laid-out HVAC ductwork; mold; and poor drainage -- to aesthetic: lumpy carpets, bowed and cracked drywall and unanchored toilets.

All the production builders but one -- Pringle Development -- declined numerous requests for comment for this story and series. Though Sentinel and WESH reporters made available inspections records of 157 homes built by the 10 largest builders, the builders canceled a scheduled interview, saying through a spokesman that they did not think their side would be fairly represented. The spokesman also downplayed the Sentinel/WESH findings, saying many were inconsequential or the result of poor homeowner maintenance.

A representative of Pringle, based in Leesburg, dismissed the majority of problems found in his company's homes as "cosmetic." The flaws were mostly cracks and leaky ductwork.

Alan Parrow, Pringle's director of marketing, sales and design, conceded one home that had cracks needed repairs and said the owner would receive them free. Sentinel/WESH inspectors also found leaks in the air-conditioning system of five homes, but Parrow said they were too minor to merit fixing.

Overall, he said, "We're very proud of our quality here."

Living with problems

There's no shortage of owners who are unhappy with their production builders. Of the more than 100 homeowners interviewed by Sentinel/WESH reporters, the vast majority had production houses -- and complaints about quality.

Laura Prentiss, a 35-year-old homemaker, is typical. She was drawn to her $212,000 house, built by U.S. Home, because of the roomy layout and the new golf-course community surrounding it in Winter Garden.

But she soon found many of the faults the Sentinel/WESH inspection found were common to all production houses, and she has demanded numerous repairs since moving in during March 2001.

The builder has torn off the wood-laminate floor in the kitchen because it was warped and buckling from water that leaked in from two windows, which have been caulked. Portions of two walls were loaded with mold, also caused by the water. U.S. Home, owned by Miami-based Lennar Corp., has replaced those sections, along with some moldy cabinets.

But Prentiss has been forced to live with and walk on the underlying concrete pad in her kitchen for more than a month waiting for the repairs to be completed. The floor is supposed to be fixed this week.

"It's full of cracks and holes and gouges. It's disgusting," she said of the floor. She's also unhappy about the portion of her roof that is sagging, the apparent result of poorly aligned trusses. That has not been fixed, nor has a soggy, unevenly graded back yard Prentiss said "you could swim in" during much of the past rain-filled summer.

High-volume production

The faults found in the survey, critics say, are the result of companies more interested in rapidly building homes and increasing profits than in turning out a first-rate product.

"They're not looking at necessarily how good the quality is, but at getting the C.O. [certificate of occupancy] and the production," said Jeff DeBoer, director of the Osceola County Building Department.

For the large builders, the key to making money, quite simply, is production. With an industry-wide average profit margin of 8 percent to 10 percent per house, they follow a business philosophy similar to that of a supermarket. Grocers need high volume because most of their items, such as tomatoes or canned beans, have small individual markups. It's the same for the home builders.

"Their ability to produce the house at the rate that they do allows them to be very profitable," said David Weaver, a Legg Mason analyst who follows public companies specializing in residential construction.

Small, custom home builders, a market niche mostly filled by local companies, typically offer more expensive houses, with higher markups. That allows them to sell fewer houses but remain profitable enough to stay in business.

All the big production builders, Weaver said, have been logging record profits -- some for each of the past five years -- because of the strong economy during the late 1990s and, more recently, historically low interest rates. The two have combined to trigger a huge surge in new-housing demand.

More than 1.7 million new-housing units were built nationally last year, breaking the record set the year before of more than 1.6 million, the U.S. Commerce Department reported. More than 1.8 million new units are expected by the end of this year, the agency said.

Greater Orlando hit nearly 18,000 new homes during 2002 and likely will top 23,000 this year, both local records, according to MetroStudy, which tracks new-house construction.

Sales may plateau next year, or slightly diminish, but will remain strong in the area, predicted Anthony Crocco, director of MetroStudy in Central Florida.

Interest rates, he said, should remain low enough to keep Central Florida consumers buying. And Orlando's balmy climate should continue attracting new residents and potential buyers, he said.

That means the good times should roll on for the home builders, who are creating subdivisions along or near just about every major highway and population hub in the region.

Business is booming

The 11 builders with the most homes in the Sentinel/WESH survey have multiple projects under way, including:

Baldwin Park (Weekley and Cambridge), off State Road 50 near downtown Orlando; East Park (Engle), off Narcoossee Road in south Orlando; StoneyBrook West (U.S. Home and Lennar) in Winter Garden, just off State Road 429; Pines West (Maronda), off U.S. Highway 27 in northeast Polk County; Avalon Park (Ryland), along Alafaya Trail in southeast Orange County; Saxon Woods (Morrison) in DeBary, just off Saxon Boulevard; Parkstone (Centex) in Winter Springs, just off State Road 434; Aloma Woods (M.I. Homes), off State Road 426 near Oviedo; and Royal Highlands Retirement Community (Pringle), on U.S. 27 between Leesburg and Clermont.

Their bottom lines reflect the furious pace:

 

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