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Letter to the editor

Builders' advice on surviving the slump

Four local home builders offer their thoughts on the horrendous housing market - and what it will take to get out of this mess.

By Judy Stark, Times Homes and Garden Editor
Published October 6, 2007

Everybody knows the housing industry has taken a nosedive. The business that bolstered the national economy for the last few years has tanked. Builders in Florida - like their counterparts across the country - are losing money in the millions. Sales and prices are down, foreclosures are up.

Everybody's got a theory about why, from Fed chair Ben Bernanke to your neighbor, who's desperately trying to sell a house. It's the subprime mortgage meltdown. It's the speculators and flippers. It's the oversupply of unsold homes. It's the frightened buyers who won't make a move. It's the media, who never say anything positive.

Some home builders around the Tampa Bay area were invited to say what they'd do to fix this mess. How did we fall so far so fast from the glory days of three or four years ago? What should their fellow builders and potential buyers do? Here's their take.

As told to Times homes and garden editor Judy Stark

DOUG TRIPP

President, Tripp Trademark Homes, Lutz
Price range: $170,000 to $450,000
Sales: 140 closed sales in 2006; expecting 110 this year
In business: Eight years

A lot of people I know are really scared. They're afraid they'll buy and then prices will drop more. So they're shopping a lot more, but what I find is not that we're losing them to other builders, but that they don't want to make a decision and they drop out of the market.

But it's still absolutely possible for 95 percent of people to get mortgages. Today, if you have good credit and no money, or money but marginal credit, you can get a loan. You can't get a loan if you have the double whammy of bad credit and no money.

A lot of builders are sitting on lots they acquired in 2004 and 2005 at the top of the market. We need to get the prices leveled off. As a collective group, builders need to cut down on the amount of inventory.

People come in and tell us what they need: I need you to pay my closing costs plus a year's worth of the maintenance fee, or I need a 2 percent contribution toward closing. It does become a balancing act for us. But we're not going to go below cost. Why would I continue to put homes in the ground and come to the closing table with money myself?

I feel terrible about the number of people, between builders and trades, that have lost their jobs. They have no hope of getting a job in the next two years. I don't know anybody hiring.

CHARLEY HANNAH

Co-founder, Hannah-Bartoletta Homes, Tampa
Price range: $600,000 to $2- to $3-million
Sales: Down 60 percent from the peak a fewyears ago
In business: 19 years

We can't hide from the fact there's an oversupply. We've got to drive ourselves and our industry back to reality.

Investors wrecked this market. I should have done more to restrict sales to investors. If I had it to do again, I'd know that saying "no investors" isn't sufficient. I did see clauses in other people's contracts I wish I had emulated: The builder has the right to buy the house back in the first year, or a percentage of the sales price will be paid to the builder so a flipper can't get rich quick.

Now is the best time to buy a home. Don't be afraid to go out there and make offers. If you want to be taken seriously, make a serious offer. Put a check behind it. Write the contract and say, "I'm ready to close at this price." We'll make counteroffers. We'll make big-boy decisions. There's too much inventory out there and we'll sharpen our pencil on any inventory you can see. That's as blunt and blatant as I can be.

SCOTT SHIMBERG

President and CEO, Hyde Park Builders, Tampa
Price range: $350,000 to $1.5-million
Sales: Down 50 percent over last year
In business: Since 1987

This is a wake-up call for our industry to sit back and think about what we want to come to market with rather than just be on autopilot. The current opportunity is to competitively differentiate: Focus on green building, affordable housing, innovative locations, unique floor plans. What sells in a market when there's so much of the same thing out there is something that's different.

The true demand was lost when people were buying homes they didn't plan to live in, when investors and flippers were so much of the marketplace. When things were going fast and furious, builders were thinking, "Let's create a commodity." Now the demand is there for something unique.

We're in a situation that's not going to happen again in a long time. If you're waiting for the bottom, we're at it. Potential buyers are going to look back and say, "I wish I had done something then." Now is that then. The unique product is out there but sometimes it gets lost in a media frenzy and a pessimistic attitude in the marketplace.

We're going through a market blip that is a bigger wave than we thought when we sailed out into the ocean. We'll be getting out of it soon and moving on. We need to learn from what we went through.

DAVID PELLETZ

Tampa Bay president, Standard Pacific Homes, Tampa
Price range: From the $130s to the $700s
Sales: Standard Pacific's deliveries in Florida are down 53 percent from a year ago. In its second-quarter report the company attributed most of that decline to the Tampa division.
In business: Since 1989 as Westfield Homes, which was acquired in 2002 by Standard Pacific.

Obviously there's no quick fix. This is the first time we've had a housing slump when we've had job growth and reasonably solid economic conditions. It's unique. No one has seen this type of situation, so it's hard to make predictions or know how to react.

We as builders need to find ways to make housing affordable to people really living and working around Tampa Bay. This market has always been a lower-priced housing market with jobs that aren't the highest paying and homes that don't take two incomes to afford. We need to work with our trade partners and product reps to reduce the cost of housing.

We've got to educate consumers that there's truly, truly not a better time to buy. Prices are low, mortgage rates are low. People with reasonable credit don't feel they can get a mortgage and that's not true.

Builders have lots of home sites that they have to move. Time is going to be the biggest factor, working through the excess inventory. It's very challenging to time the bottom of the market, whether it's the stock market or real estate. Most people keep saying things will get better in six months, and then six months from now they say, "Six months from now." If job growth and the economy stay where they are, it feels like the upswing could start in the third quarter of 2008, but that's just a prediction. I've got no crystal ball.

Judy Stark can be reached at 727 893-8446 or stark@sptimes.com.

[Last modified October 5, 2007, 11:02:12]