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The mid 1960s - 1974 -The early 1980s - The S&L scandal of the early '90s - The tech collapse in 2000. But the current bust is "more extreme than the other slumps in the past 50 years," says area builder Arthur Rutenberg.
By JAMES THORNER, Times Staff Writer
Published February 21, 2008
[Mike Pease | Times]
Arthur Rutenberg rattles off the dates of housing slumps like a historian rattles off the reigns of medieval popes.
One struck in the mid 1960s and another in 1974. Then came the squeeze of the early '80s and the savings and loan fiasco of the early '90s. He even vouches for a real estate dip after the stock market wilted in 2000.
But the current slump, the start of which Rutenberg plants precisely in November 2005, is like no other he's seen.
"This has been more extreme than the other slumps in the past 50 years. But that's because the preceding upturn was more extreme," the 80-year-old chairman of Arthur Rutenberg Homes says.
A legendary name in the housing business, co-founder of mega-builder U.S. Home, Rutenberg doesn't accept criticism that builders brought the bust on themselves by fattening their balance sheets with sales to investors.
Many investors hid their intentions while buying new homes, Rutenberg said, and mortgage lenders fed the beast with risky loans. The result: Overbuilding that's pumped up supply and a banking contraction that's deflated demand.
"I wouldn't blame the builders. Builders will sell to a willing buyer," says Rutenberg, about 20 percent of whose homes sold to investors during the housing peak. "There's nothing unethical, immoral or illegal about selling to an investor."
Rutenberg's building company, centered on Ulmerton Road near Clearwater, consists of 32 franchises operating mostly in Florida. The privately held firm reports slimmer profits, but seems to have weathered the crisis better than many builders.
With an average sales price of about $900,000, Rutenberg's homes are generally reserved for people who don't have to worry about overdrawing the ATM. Since 2005, sales are off about 29 percent. Compared with the 615 homes his franchisees completed in 2005, the company finished 425 last year.
Rutenberg came to Florida in 1953 and started selling two-bedroom homes in Clearwater for less than $10,000 a pop. His first project, Skycrest, was built on a former gladiolus farm. Such focus on value is no longer possible today with about a quarter of a home's price tied to what he calls "government friction" - zoning, taxes, inspections and fees.
"Today we can't buy a building permit for what we sold those first homes for," Rutenberg says.
Arthur and brother Charles Rutenberg merged their independent building companies into a smallish New Jersey builder in 1969 to found U.S. Home. Rutenberg served as president before reasserting his independence, culminating in the 1980 founding of Arthur Rutenberg Homes.
Rutenberg vows to use the current lean period to bang his company into better shape. While the building business is increasingly dominated by big players like Pulte and Lennar, the high-priced custom-home segment remains fragmented among smaller companies. Competitors include Hannah Bartoletta, Costanza, Nohl Crest and Mark Rutenberg Homes he's Arthur's nephew.
The falling cost of supplies and contractors has made his task easier. While concrete remains expensive, the price of most everything else, including steel, drywall and lumber, is lower. In the increasingly take-it-or-leave-it environment, contractors can no longer ratchet up rates.
To stay profitable without cutting quality, Rutenberg is trimming space, including taking down ceilings a tad. You wouldn't know it from the luxurious 5,700-square-foot "Alicante" model in which Rutenberg holds court in Lutz's Ladera community.
Bankruptcies are becoming the talk of the industry, led by the recent Chapter 11 filings of Tousa and Levitt & Son. Rutenberg distinguishes between two kinds of bankruptcies: cash "crunches," which are correctable with time, and business collapse, which tends to be irreparable.
"It's quite possible to come out of these things very well," he says.
Rutenberg retains a top role in his company, though he's letting two 40-somethings handle day-to-day headaches. Two years ago, he appointed David Hanrahan and Alan Weiner as co-CEOs.
Said Rutenberg: "My title is Aged Chairman with Unlimited Meddling Rights."
James Thorner can be reached at email@example.com or (813) 226-3313. Read his (Un)Real Estate blog at blogs.tampabay.com/realestate.
1953: Trained as a chemical engineer in Chicago, Rutenberg, a new father of two, heads to Clearwater. His first non-air-conditioned models sold for $9,900.
1969: He and brother Charles merge their two companies into a small publicly traded New Jersey builder to form U.S. Home.
1970: After quintupling the size of the company as president of U.S. Home, Rutenberg ventures out on his own again.
1978: Rutenberg restarts a building company in Clearwater, initially taking the name Van Horn Homes. Two years later he changes the name to Arthur Rutenberg Homes.
2005: Rutenberg appoints two men to succeed him as "co-CEOs." As company chairman, he retains the right to meddle.
[Last modified February 20, 2008, 22:58:04]