Smaller U.S. homebuilders see signs people are ready to start buying again
March 16, 2012
– Charles Ruma is suddenly busy. His company, Virginia Homes, is getting five to 10 visits from prospective homebuyers each weekend. During the last three years, he was lucky to get five in a month.
Through the housing crisis, the challenges of big regional and national homebuilders such as Beazer Homes USA Inc. and Toll Brothers Inc. were widely broadcast. But the devastation in the industry also was acute for many private homebuilders and other small businesses that are part of the housing industry. Ruma is one of many smaller homebuilders now seeing early signs that the housing industry is recovering.
“It’s very encouraging to see traffic coming out,” Ruma says. Between the houses that the central Ohio builder signed contracts on in the second half of 2011 and the homes it expects to sell between now and July, he estimates that the company will have 21 closings this year. That would be Virginia Homes’ best performance since 2009 when it sold 12 homes. The company sold just six in 2010 and seven last year.
The collapse of the housing market in 2007 pushed many small builders out of business. The National Association of Home Builders went from 220,000 members in 2006 to its current 140,000. Now, a strengthening job market is encouraging prospective buyers to get back into the market. The improvement this year has been dramatic for some builders.
Stonecrest Homes, an Atlanta-based builder, sold 18 houses in January and February, up from two in the first two months of 2011, according to Jim Chapman, the company’s chief financial officer. The Atlanta area was one of the hardest hit by the housing market crash.
Even builders who aren’t selling more homes yet say they are noticing more interest from potential homebuyers.
“They seem very serious about buying,” says Sean Junker, president of Providence Homes in Jacksonville, Fla. Some of his sales staff has been showing the same home as many as four times a day — a welcome change from last year’s pace of about once a day.
But it’s way too early to declare the housing crisis over. The Commerce Department said 304,000 new homes were sold in 2011, the lowest on records that go back to 1963. Sales also fell in January. However, the overall housing market is getting better — sales of previously occupied homes have been rising.
While builders are upbeat about the improving market, they are mindful of the challenges they face.
“We’re just starting to see the pent-up demand come out again, says Jeff Benach, whose Lexington Homes builds properties in the Chicago area. “If you have a home to sell you’re not going to buy (a new home) unless you have that home sold, so it’s spotty. There’s been a slight uptick in sales, but there’s also a heavy foreclosure market.”
Patrick Driscoll, a contractor who does home remodeling on the coast of New Hampshire, says business in his industry is also inconsistent. “People with money have been able to do projects,” he says. For other homeowners, “the thought of putting money into the home and not getting it back (when they sell) is pretty scary.”
Central Reclamation, a demolition and construction contractor in Los Angeles, is working continuously again after getting new jobs only every two to three months for the past 2 ½ to three years. But owner Ron Fox isn’t breathing easy just yet. He worries that business will be good for six months, and then “we’ll go through another 2 ½ years of what we just went through.”
Still, builders and contractors have reason to be cautiously optimistic. In addition to demolition, Central Reclamation, has a growing business in in drilling into hillsides so houses can be built there. Builders are taking advantage of any land they can find in sought-after neighborhoods — even if it means boring into rough terrain to put up a house.
“We’ve already done (as much work) this year as what we did the whole of last year,” Fox says.
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