Have you guys seen any increase in bankrupt custom or small builders in your area?
I’ve definitely seen them in Dallas, TX. There are lots & homes available – galore
I’ve found & toured some NICE custom homes [4000 to 6000+ square feet) for 20-40% off market value…and man oh man…if I didn’t have such large investing plans for 2008 and 2009 I would snap one up in a second. E.G. One house appraised for $1.8mm, but is marked down to $1.2mm. Another appraised for $500k, and is marked down to $350k. And $500k will get you a VERY nice house in a suburb of Dallas that’d probably go for $3-5mm in Florida!
This is quite an exciting time if you are a buyer!!!
The custom builders in my area slowed down for a little bit, but they are now out there moving dirt and putting in utilities.
I haven’t seen any foundations poured, but they are ready to go in the spring. You don’t pour concrete in the winter, anyway.
The builders had some excess inventory, and they were offering incentives, but no one dropped any prices.
I’m seeing a couple of places where earth is being moved that will have to have million dollar houses because of the location. There are also a couple of destination resorts going in where houses will be multi-million dollar homes, and nobody is slowing down on the construction in those.
There is more activity in expensive areas than in middle class areas. Although, I have seen some site proparation in locations where it wouldn’t make any sense to build anything but middle class homes.
I took a trip to Houston about five weeks ago looking at some property to purchase there. Prices are coming down, however not to the extent that you just described. Are the customs in the better neighborhoods or are they customs in “better neighborhood wanna be’s”?
Could these be pre-foreclosure dumps or due you think it is due to over inflated prices?
You are correct when you state that a 500k Home is a lot of home in Texas. Living in Hawaii a 400k SFH is a remove and replace.
These are defintely “better neighborhood wanna be” locations. The land in a normal market sells for $70 to $125k in 1/2 to 1 acre lots, which for a suburb in Dallas is expensive, and is usually almost out in the country on the edge of a newer upper-middle class city (e.g. Frisco, Coppell or Sunnyvale). These areas are all annexed and usually have fairly strict zoning and/or HOA restrictions, so you don’t have to worry about Joe Bob & his trailer moving in down the street. =)
Here are a few of many interest articles I found on the subject. If you go to http://news.google.com and search you’ll find tons more. I would not want to be a custom home builder now!! I hate to spread any negative news, since I’m such a positive guy, but this is a fact of life.
Times will be bad for some REI guys. But for others its the opportunity of a lifetime…!
I was talking to my local banker yesterday afternoon regarding a builder that I referred to them and she mentioned that business among the smaller custom builders is picking up again. Most of them just switched their model from building specs to building homes where the owners brought their own financing to the deal. Now that the spring market will be here shortly many builders are trying to get houses started and ready to sell. I believe the best place to look for deals is with the medium sized builder. I know of a couple that are stuck with houses on the ground, but have to keep building because they don’t want to have to lay people off and lose their building crews. The sub-prime meltdown left a lot of these guys with a large glut of houses.
Those are some interesting articles. I think the people you need to speak to are the loss mitigation departments at the small local banks that are holding the paper on these builders. I spoke with another local bank friend of mine and we were discussing a deal for 9 residential lots in a growing suburb of south Dallas. The builder is 60 days behind on his quarterly interest payment of $6400 and his next one is coming up in 30 days. Not looking good. So when he bought these lots two years ago he paid 35K a piece for them and that was because he bought nine of them (they were valued at 42K). I set-up the financing of the deal so I am familiar with the numbers of the original transaction. The bank will accept a short sale offer of 23K per lot now. That is 55% of original sale price.
Now you see what I am talking about. I always say that it costs the same to be poor every where in the USA. In every town in the USA you can find hamburger meat for 99 cents a pound, you can find a 10 pound bag of rice for a dollar and some place to live for $300/month. The real trick is where it is cheap to be rich. In Houston it is cheap to be rich. You can get a mansion for $300k all things being equal if you are in California where $800k buys you a fixer upper they don’t pay you more to do the jobs there than they do to do the same jobs here. The difference is that an engineer here can live like a rock star and there you live like a janitor. So if we are doing this stuff so that we can be rich, you got a much lower bar to get over here than there. All money is not the same, a million New York dollars is not a million Houston dollars.
An engineer living like a rockstar…you have to love Texas! LOL
Another thing that amazes me is that I recall in the mid-1990’s one could buy a beachfront (on the seawall) condo that’s 2BR (~1000 sq feet) for around $40k in Galveston. $40k!!! And the place was decent too - not superbly fancy, but by no means trashy - just average and nice.
one of the builders here in Sacramento sold his company for only $500 (yes 500 bucks) and is in default on 30+million in loans. Now he’s being sued, and the 500 dollar sale is being criminally investigated for fraud.
“I always say that it costs the same to be poor every where in the USA. The real trick is where it is cheap to be rich.” - mann… that is one of the most profound statements I have heard or read in some time, i must say that i will be adding that to a book i am presently writing in my mind! - thanks (credit forthcoming)
I think a large part of this depends on where you are nationally, in Houston many of the small custom guys are doing pretty good as the demographic for their market are still buying homes because rates are low and their stock and retirement portfolios for the most part are doing good (plenty of oil & tech stuff) The semi-custom market $200-$350k market in many cases is seeing some blood run IMO but a lot of that market was using the No Money Down financing to purchase so those are the wanna-be’s mentioned earlier…
This is not to say that there aren’t guys going out of business here because there are plenty but for those positioned well and who had real business plans and solid businesses they seem to be doing fine! In fact, i was speaking to a good friend who solely builds high end homes; he is about to start construction of 6 homes all 3500 sq. ft up to 8000 sq. ft in a suburb of Houston where there is no shortage of high end buyers…
I have a family member buying a custom house and the builder lowered the base price of the home 4 times in 2 months for 100,000.00 reduction total by the end of 2007. This was in Florida which I think is a great place to live cheap and be rich. Nice weather, lots to do, nice parks and beaches.
I think people are moving South for many reasons not just to retire. I predict a boom in the South for realtors in the next 10 years. Alot of business are relocating here it’s cheaper and hence we see growth with employment also which brings the masses wanting a home.