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

Real Estate Broker/Owner with Respect Realty LLC 200311024

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.


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Kathy Mendham-Meathrel
Realty Executives Elite Ltd Brokerage - London, ON

Location, Location, Location!

Jun 11, 2010 04:19 PM #1
Susan Neal
RE/MAX Gold, Fair Oaks - Fair Oaks, CA
Fair Oaks CA & Sacramento Area Real Estate Broker

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.

Jun 11, 2010 05:27 PM #2
Bryan Watkins
LRA Real Estate Group - Mesa, AZ

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.

Jun 11, 2010 07:05 PM #3
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
"Franklin MA Homes"

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.

Jun 11, 2010 09:01 PM #4
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

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!

Jun 11, 2010 11:48 PM #5
Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

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

Jun 12, 2010 02:29 AM #6
Maria Morton
Chartwell Kansas City Realty - Kansas City, MO
Kansas City Real Estate 816-560-3758

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

Jun 12, 2010 05:26 AM #7
Cal Yoder
Keller Williams Elite - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

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.


Jun 12, 2010 09:08 AM #8
Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

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.

Jun 12, 2010 07:44 PM #9
Jim Hale
Eugene Oregon's Best Home Search Website

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.

Jun 12, 2010 08:00 PM #10
Joseph Scarpa
Green Paradigm Realty LLC - Pennsville, NJ

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

Jun 15, 2010 11:43 PM #11
Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

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.

Nov 13, 2011 09:08 AM #12
Gayle Rich-Boxman Fishhawk Lake Real Estate
John L Scott Market Center - Birkenfeld, OR
"Your Local Expert!" 503-755-2905

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.

Nov 13, 2011 09:18 AM #13
Tammie White, Broker
Franklin Homes Realty LLC - Franklin, TN
Franklin TN Homes for Sale

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.

Nov 13, 2011 09:20 AM #14
Eric Michael
Remerica Integrity, Realtors®, Northville, MI - Livonia, MI
Metro Detroit Real Estate Professional 734.564.1519

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?

Nov 13, 2011 10:40 AM #15
John McCormack
Albuquerque Homes Realty * - Albuquerque, NM, Albuquerque Homes Realty

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. 

Nov 14, 2011 09:49 AM #16
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