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New home sales are up, but you still have to pay attention to where you build

Oregon has seen some recent activity in new home construction that to say the least is encouraging, but in order to make a profit and no go bankrupt like so many builders have in the past 2 years you need to be smart!

Know your numbers is the first thing I can suggest and second is know the area and what is going on in that area. About three years ago a well known builder in the Portland area started a subdivision up in the Clackamas County area of Oregon. Great views, large houses and sales were going great when he started.

New Home Constructions (Listing Agent)

But, when the housing bust arrived, he was stuck with many houses and lots that couldn’t sell. These houses were selling in the upper $400,000 price range. But when the first phase was being finished they only had about 25 homes built and out of those 25, 22 sold. Not too bad, but the problem was the bust had arrived and those last 3 homes sat there for another 2 years with many, many price reductions.

There were approximately 75 lots still undeveloped and no sign of them going anywhere. About 4 months ago, the bank that financed the construction of the original 25 homes was now foreclosing on the remaining 3 homes in the subdivision and 4 others in the subdivision were being sold on short sale. All these homes are now listed between $300,000 and $325,000 and still not moving!

So, what does a builder start last Monday? Yep, they started construction on 6 new homes! Now, I understand new construction sales are up, but how do you expect to sell homes in an unfinished subdivision that already has 3 brand new bank owned homes in it, that have been on the market 2 ½  years and have had over a $150,000 reduction in price over those 2 ½ years and still can’t sell.

I would love to represent a builder as sales are starting to increase in the new home market, but at the same time, I would like to know who gave this builder the advice to start building here. Would you lie to a builder just to get listings? As far as I’m concerned, helping someone to get in to bankruptcy court is not the way to longevity in this business.

Todd Clark (Principal Broker)
eXp Realty LLC
Comment balloon 16 commentsTodd Clark • November 13 2011 03:25PM


Location, Location, Location!

Posted by Kathy Mendham-Meathrel (Realty Executives Elite Ltd Brokerage) over 10 years ago

You're so right, Todd.  And in Elk Grove, south of Sacramento) there were a few large tracts that went unfinished when the economy dumped.  Half-finished homes sat next to ones that were occupied, and promised features that got the first buyers to purchase were never completed. 

The builder went broke and abandoned the project.  I felt so bad for those first homeowners in that neighborhood. I don't know how I could recommend that anyone buy there right now, but building more in that tract right now may be risky too.

Posted by Susan Neal, Fair Oaks CA & Sacramento Area Real Estate Broker (RE/MAX Gold, Fair Oaks) over 10 years ago

Todd, it is nice to hear that sales are up in your part of the country. It needs to spread like a virus to the rest of our part of the world. Nice post.

Posted by Bryan Watkins (LRA Real Estate Group) over 10 years ago

Todd....once your new construction starts selling, that's a great indication that the market in your area is coming back.....we have four subdivisions and one more coming on soon(contract is signed).....they are all selling well and our resale inventory is selling faster now.....when the market had tanked, many of my builders were financially prepared to pick up other parcels and I made sure to discourage that.....and it's fortunate for them that I did.....that's why they stay with me and refer me to other builder friends of's sinful to give bad direction to a builder.

Posted by Barbara Todaro, Previously Affiliated with The Todaro Team (RE/MAX Executive Realty - Retired ) over 10 years ago

Todd, do builders only want to hear what they want to hear?  It may be the case sometimes or just that the brain cells aren't functioning at the moment...  I have a development I'm marketing near a university that is prime land but for what the builder needs to get for the homes at present it's not worth his while to build & he's just sitting on the project.  Now he's one who did his homework with me but also with his CPA!

Posted by Ginny Gorman, Homes for Sale in Southern RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) over 10 years ago

Good advice Todd...I agree...location is important and you certainly have to do your homework on the largest purchase/investment of your life!

Posted by Kristin Johnston - REALTOR®, Giving Back With Each Home Sold! (RE/MAX Realty Center ) over 10 years ago

Todd, helping someone into bankruptcy would tend to shorten the relationship - not what we're going for.

Posted by Maria Morton, Kansas City Real Estate 816-560-3758 (Platinum Realty) over 10 years ago

It is the only way to build a successful long term business - giving good advice, which is honest and open. We have a fiduciary responsibility to our clients, not to just build our business on the backs of others.


Posted by Cal Yoder, Homes For Sale in Lancaster PA - 717.413.0744 (Keller Williams Elite) over 10 years ago

It really is a shame that an agent didn't advise them that this was a bad plan! I do have a feeling in about a year, I will see these be foreclosed on as well or at least in a short sale situation. I can't see them being able to build for less than three brand new bank owned properties are selling for.

Posted by Todd Clark, Principle Broker Oregon (eXp Realty LLC) over 10 years ago

Are they building homes similer to those in their first phase or are they downscaling their concept?  If the same, that's not a grat plan for the builder as you say.  If the new homes are a cut below the first phase, that might be a really rotten trick on the owners of the existing homes.

Posted by Jim Hale, Eugene Oregon's Best Home Search Website (ACTIONAGENTS.NET) over 10 years ago

We don't bother with a new homes construction builder unless they pledge to build [third party certified] green.

Posted by Joseph Scarpa (Green Paradigm Realty LLC) over 10 years ago

Hey Todd.  I bet the other home owners in that subdivision aren't real happy with the prices of the remaining homes.  It is sad, but this happens sometimes expecially with smaller builders.

Posted by Belinda Spillman, Colorado Living! (Aspen Lane Real Estate Colorful Colorado) almost 9 years ago

Todd, what Barbara had to say is what more realtors in the genre need to do. Be smart, be protective, be HONEST. With Oregon's high rate of unemployment, I am not sure new building construction is going to be supported.

Posted by Gayle Rich-Boxman Fishhawk Lake Real Estate, "Your Local Expert!" 503-755-2905 (John L Scott Market Center) almost 9 years ago

While new construction sales in Franklin TN seem to be up, there are nearby neighborhoods that are still experiencing difficulty. One neighborhood in particular, hasn't had any sales except foreclosures in 3 years. The neighborhood was suppose to have 1,200 homes and stalled after 15 home sales. That developer has pulled out and there those homes sit. It is going to be a long time before someone comes in and fully develops that area. I hope the current home owners don't have to sell for any reason.

Posted by Tammie White, Broker, Franklin TN Homes for Sale (Franklin Homes Realty LLC) almost 9 years ago

Todd, if the current new construction homes were already selling, I guess it'd be a good idea to start building again. But with the current inventory, including bank owned homes, why start now?

Posted by Eric Michael, Metro Detroit Real Estate Professional 734.564.1519 (Remerica Integrity, Realtors®, Northville, MI) almost 9 years ago

Believe it or not I'm seeing a slight increase in new home construction in the Albuquerque and Rio Rancho NM areas.   I agree with #17 why with such good inventory?  But then again who cares as long as things are moving in a positive direction. 

Posted by John McCormack, CRS, Honesty, Integrity, Results, Experienced. HIRE Me! (Albuquerque Homes Realty) almost 9 years ago

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