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.
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)