Are Builders Partially to Blame for the Real Estate Crisis?

Real Estate Agent with Homebuyer Representation, Inc. DRE# 5467433

home under constructionCan you blame builders for getting sucked into the hype?

When you are taking orders for homes as fast as you can build them, why not decide to build a ton of "spec" homes?

Still, builders should have seen an end coming at some point, and those who did, planned accordingly and had an exit strategy. (Always a good idea: Have an exit strategy.)

I also don't fault builders directly for building spacious homes with lots of "extras" and amenities.

After all, this is where some of the most profit is made, and buyers were buying up their homes just the same!

To show I can be somewhat fair, I know a number of builders who might have been just as happy building and selling more "starter" sized homes. Moderate homes.

Why didn't they?

Well, planning and zoning departments in some cities started to set minimums in order to maximize tax revenues. For example, where you may have been able to build an 800 or 1000 square foot home without a garage years ago on a tiny lot, some cities now require a minimum lot size of 8,000 or 10,000 square feet. They also require a minimum "finished" square feet of 1300 sf. (On most homes in Utah, this would mean a 2600 sf home if it were a rambler/ranch, or an 1850 sf home if it were a 2 story). Oh yeah, and now all homes (in some communities) are required to have a 2 car garage and RV parking... There goes your "starter" home option!

And, why should they have built smaller when the Buyers were able to "afford" the larger, more luxurious home?

Again, the fault doesn't lie with the builders alone. That was their business. But, they likely didn't ever say to a Buyer: You know, you might want to be more conservative here. No. They likely didn't do that very often.

Remember: The agents at the Model Home work for the Builder, NOT the Buyer.

Surely some blame is left to be placed on the agents who allowed or encouraged buyers to overextend and/or overpay to buy homes over the past few years.

Last year we saw builders including all kinds of "incentives" or bonuses to Buyers in order to not have to reduce the price of the home. This year, in Utah, although some builders have suffered, those who scaled back early enough are still able to compete and make a living building homes, just not at the level they used to. Strangely enough, some builders are still offering "incentives" but among some of them, those incentives are getting smaller or are even non-existent. Some have determined that simply pricing the home at a fair value is the best solution to their predicament, and many times they are right.


If you are planning to buy a new home in the Salt Lake City area and want a true agent who will look out for your best interests, make sure you hire an Exclusive Buyers Agent! Make sure you get an Agent on YOUR side of the transaction!

If you have excellent credit and will be buying a $250,000-$750,000 home in the next 30-60 days and would like an agent who will work exclusively for you, call us at (801) 969-8989 or contact us via the link on this page.

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©2008 Homebuyer Representation, Inc. - Salt Lake City, UT

Exclusive Buyers Agents (EBA) - All Rights Reserved


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Respect Realty LLC
Respect Realty LLC - Milwaukie, OR
Brokers - Oregon / SW Washington Real Estate

Here we had another problem and it wasn't the builders fault! We had people put earnest money down on these homes and the builders started to build, then when the buyer's home didn't sell by the time the house was done, they ended up walking because they weren't getting what they were planning from the sale of their home. This left the builders with lots of homes that were built, but no buyer for them.

We did have areas that had the same problem you describe, but for so many years these homes were being bought as fast as they could build them. I really can't blame them for building when people were buying, but when it started to slow down, I think they probably should have done the same.

Todd Clark, Helping Families Home -

Oct 04, 2008 05:15 AM #1
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Benjamin Clark

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