Consumer Reports'
'Housewrecked' Cheered, Booed

Article Courtesy of Realty Times
January 3, 2004
By Broderick Perkins

A Consumer Reports' new home defects study is getting the expected reaction from consumer advocates who say such a report is long over due and from the home building industry which chides the magazine for "preconceived notions" and a "deeply flawed thesis." 

Not stranger to controversy, Consumer Reports' features "Housewrecked" in it's January 2004 issue to tell consumers that they often have more protection for a $20 toaster than they do for what's likely to become their most valuable asset. 

The story, nearly a year in the making and based on scores of interviews with home owners, builders, inspectors, industry representatives, government officials, and lawyers, reports that as many as 15 percent of all new homes sold -- 150,000 a year -- have a serious defect. Some 1.1 million consumers are projected to purchase a new homes in 2003. 

The defects include faulty foundations, serious moisture intrusion and shoddy framing all manifested as cracks, rotting, and inoperable windows and doors -- too often not showing up until long after the buyer has signed on the dotted line, Consumer Reports found. 

"Homeowners Against Deficient Dwellings (HADD) applauds Consumer Reports for its fair and accurate report "Housewrecked". Consumer Reports is the most unbiased consumer magazine in the nation and we thank them for exposing the national disaster in new home construction," said Nancy Seats, president of HADD one of several national grass roots organizations of home buyers dealing with new home defects. 

New home builders, enjoying their best sales year ever, don't share her sentiments. 

Days after the Consumer Reports released the issue, "the National Association of Home Builders (NAHB) and individual builders bombarded the editor, Mari McQueen, with protests saying the story exaggerated the problem," according to a source interviewed for the Consumer Reports report. 

Despite a growing number of reports of complaints and lawsuits -- some involving not just individual homes, but tracts within the same subdivision -- home builders admit to only isolated problems and deny any trend indicating an increase in defective homes. They also claim many suits are triggered by over-zealous attorneys and home owner associations and home owners who haven't given builders the opportunity to correct problems. 

It is difficult to document evidence of a growing trend in the actual number of defects because, until recently, media coverage has been spotty and localized and no government agency tracks them. Lately however, investigative reports, some of them with a national scope, have revealed more than just isolated problems. 

Consumer Reports said every home owner it interviewed sued only after the builder failed to correct problems and Consumer Reports isn't alone. 

HADD's "Special Investigative Reports" section on the website's home page cites the latest media coverage of new home defects. Recent reports from the Orlando Sentinel/WESH-11(NBC), Arizona Republic, St. Petersburg Times and the Wall Street Journal indicate the new home defect ratio is higher than 15 percent in some areas where home buyers were surveyed. HADD's additional News Archives lists even more related stories. There are dozens from 2003 alone. 

HADD, founded in 1998, received complaints from only 35 home owners during its first six months of operation. Today, with active representatives in 25 sates, twice that many, 70, file complaints every week, said Seats. 

"Many of the complaints we receive alert us to the fact that many homeowners in the subdivision have similar problems, and news stories from across the nation verify that often entire subdivisions are involved," Seats said. 

In a statement slated for publication in Consumer Reports' March edition, the National Association of Home Builders (NAHB) said "The isolated incidents highlighted in the story are not emblematic of the industry that built nearly a million new homes last year. Rather, they demonstrate that Consumer Reports developed this story with preconceived notions, and reported on only the issues that supported a deeply flawed thesis." 

The statement says Consumer Reports excluded mention of consumer satisfaction surveys that show a majority of new-home buyers are satisfied and that the story failed to include interviews with satisfied customers. 

Indeed one of the largest such surveys, J.D. Powers' 2003 New Home Builder Study of 21 metropolitan markets, found an 8 percent increase in consumer satisfaction nationwide, indicating a trend in the other direction. However, that report says there is an average of 1,372 construction problems per 100 homes or approximately 13.72 problems per home. In Atlanta, where construction problems were the highest in the nation, buyers experienced 1,439 problems per 100 homes, or 14.39 per home, J.D. Powers reported. 

"We know that builders don't get everything right 100 percent of the time. But we are working towards that goal through our quality assurance programs, customer service training, education for the building trades and improved dispute resolution practices. Americans would have been better served by a consumer report on Consumer Reports than this 'investigation,'" NAHB said. 

HADD's list of stories notwithstanding, a quick search of the Web reveals it's still a lot easier to find stories about surveys of satisfied new home customers than it is to find objective reporting about new home defects. That is, in part, why for decades Consumer Reports has tackled such issues -- to reveal to consumers what they may face when buying certain goods or services. 

Consumer Reports says poor documentation and spotty regulation exacerbates the problem of new home defects, by not revealing the true depth of the problem. That's where media like Consumer Reports can help shed light on a subject. 

New home defects, the magazine (and others) reports, are caused by a host of conditions including, bottom-line oriented assembly line-like production; demand for housing outstripping the supply of quality materials and skilled laborers and private and government building inspectors; the complexity of building today's energy-efficient homes; the lack of building codes in some areas; the lack of uniformity in others; and the lack of even enforcement of what codes and regulations do exists, among others. 

Without a level playing field of regulations for new home construction, the problem has spawned grass roots consumer advocacy activism including HADD, and Homeowners for Better Building which provide forums for consumers looking to air and solve their problems. The sites also call for better laws including some sort of Home Owner Bill of Rights

"Consumers Union believes that home buyers deserve a better system to prevent serious housing defects and a fair way to resolve disputes and to compensate consumers for shoddy work," the magazine reported. Consumers Union is the parent company of Consumer Reports and related publications. 

The magazine also focused a side bar on EIFS or Exterior Insulation and Finishing System. Less expensive than cement stucco, the synthetic stucco is energy-efficient, waterproof, and easily crafted, but problematic if it's not correctly installed as thousands of home owners have discovered in the past decade. 

"Consumer Reports ... reports that ... 15 percent of new homes built each year suffer from substantial construction defects ... it inaccurately singles out one cladding, EIFS, as being uniquely problematic ... If proper building practices are followed all cladding will perform well," said L. Douglas Mault, director for industry relations at Dryvit Systems, Inc. an EIFS developer. 

And that's the problem, as the magazine reports. 

Too often, proper building practices were not followed so much so that in North Carolina and Georgia some EIFS products are now banned, according to "Housewrecked". 

Consumer Reports' extensive article also provides tips on researching and choosing a builder, recommendations for actions by regulatory and building officials, a list of defect warning signs, remedial steps to take to correct problems and suggestions for preventing them. 

One suggestion -- hiring a home inspector to monitor construction -- is perhaps the best of all but it's also the most difficult to accomplish. 

A buyer-hired home inspector would act on the buyer's behalf inspecting construction at key times -- when the foundation is installed, when framing (wiring, plumbing, etc.) is constructed, when the walls go up and when the roof goes on -- and would likely catch potential problems before they became expensive headaches. 

The problem is many builders, citing liability and contractual issues, forbid outside engineers, architects or others to accompany buyers before the final walks through. 

"There are two problems here," said Myron Ferguson, author of Build It Right (Home User Press, $18.95 and publisher of the User Friendly Home website. 

"The first is finding inspectors qualified to do this and finding builders that will let that happen. It's a good idea, but a long ways to go," said Ferguson who concedes he sees no easy solution to the home defects problem because of industry fragmentation, the complexity of building a single home and builders who appear to be in denial about the problem. 

"The home building industry is so fragmented that the crusading approach (of HADD and HOBB) won't do much good. As it is right now, if a subcontractor screws up, most builders won't even know it until they get a call from the home buyer that their house is falling down," he said. 

"I'm not very upbeat about anything much happening that will make any significant difference in the near future. Education for home buyers before they start to buy a home is paramount. The press can play a role, but we simply won't reach the vast majority of home buyers. Get the NAHB to actively push builders to do a better job," he said.