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Residential Department: From the Editor: December 2016


From the Editor

The future of home construction is looking brighter

From The EditorAlmost 10 years ago, one of our neighbors began tearing down his small one-story house for what we later learned was a planned remodel into a much larger two-story home. The contractors removed everything down to the studs on the original foundation of this 1970s-era ranch and then began constructing a towering new home around the old skeleton.

And then the housing market crashed. It was sad to see the beginnings of such a gorgeous new home sit there for years, with weeds growing in the summer as tall as the new porch, and wind whipping and ripping the Tyvek house wrap in the winter. Finally, a couple years ago, construction began anew, but work still progressed at a snail’s pace. Our neighbors —likely new owners by this time — finally moved in earlier this year and an eyesore that had stood for years became a home once again.

This story probably played out in neighborhoods across the country after the housing crisis, and new construction numbers bear this out. In the healthy years before the crash, new-home starts numbered around 1.3 million per year. In 2016, that number will be around 800,000. The primary problem, according to Robert Dietz, chief economist for the National Association of Home Builders, is a lack of construction labor and a lack of lots. We interviewed Dietz for this month’s Q&A, which you can read on Page 22.

Lack of labor also may explain why another neighbor had no windows for the better part of this past spring and summer as he went through a renovation. Six months of living inside a dark house could not have been fun. To help shine a light on the issues surrounding the financing side of construction, we focused this issue of Scotsman Guide on residential construction and development. In addition to our Q&A with Dietz, we present articles on construction and renovation lending, beginning with one by Carl Markman of REMN Wholesale that declares renovation lending to be the ultimate holiday gift for originators, Realtors and homeowners. Turn to Page 35 to read this article.

In addition to lots and labor, the third issue facing builders is financing. Aaron Buss of SIC Funds discusses the pros and cons of turning to hard money to help out small builders who may come to you looking for a loan. Check out his article starting on Page 111. If you are interested in the competitive edge that construction and renovation products can give you, then read the article by Kim Newby of Waterstone Mortgage Corp. on Page 74. Finally, for another take on renovation lending, turn to Page 140 to see why Ragen Cunningham of Plaza Home Mortgage Inc. believes now is the perfect time to add renovation loans to your tool belt.

Moving beyond the topic of construction, this month’s issue offers a little something for everyone. For some insight on how today’s young couples discuss money problems — and what originators can do to help these potential borrowers — take a look at the article by Gordon Hui of Smart Design on Page 57. If you are looking for a path forward through today’s highly regulated mortgage environment, read the article by Brian Rogerson of Wallick and Volk, which begins on Page 87. And, for an interesting take on the importance of modernizing property inspections, turn to Page 127 to read what Jindou Lee of HappyCo has to say on the subject.

All of this content, and more, is available inside this month’s issue of Scotsman Guide, which we developed just for you. Also, don’t forget that we will begin accepting submissions for Top Originators 2016 on Jan. 3, 2017. The submission period ends on Jan. 31. Watch for more information, and don’t miss your chance to be ranked among the best in the industry.


Will McDermott is managing editor for Ask a Lender. Reach him at or (800) 297-6061.

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