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MailTribune.com
  • If you build it ...

    ... will they come? Even developers are having a hard time deciding whether to offer new inventory or wait until the market rebounds
  • In this sluggish economy, some developers are laying low, waiting for the market to recover. But others are betting the market won't drop much further and continue to build, offering attractive prices for customers ready to buy now.
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  • In this sluggish economy, some developers are laying low, waiting for the market to recover. But others are betting the market won't drop much further and continue to build, offering attractive prices for customers ready to buy now.
    Karic Roberge of Whittle Construction has been forging ahead since the beginning of the year on his Sienna Hill development in Eagle Point. He has built 19 homes so far and sold 18 of them.
    "They're priced right and are nice homes on nice lots," he says. "I try to be pretty aggressive on the price and on home service, from beginning to end.
    "People realize the market can't go down much lower than it is now. Most of the time, when they (buyers) come to me, they know what they want and know they can't find better."
    His buyers tend to be from out of state and are moving here to work or retire. They're ready to buy now because they know the interest rate might go up, he says.
    Bret Moore of W.L. Moore Construction in Central Point has several developments incubating on the drawing board in town and in Medford. "But it wouldn't do any good to put lots out there that I couldn't sell or only at a greatly reduced price," he says.
    What to do?
    "Hang onto the land and wait it out," Moore advises. "It'll be next year before things pick up. It doesn't look to be too exciting this year. When things do turn around, we'll be in good shape."
    Louis Mahar of Mahar Brothers Construction in Medford is building Summerfield and Stonegate developments off North Phoenix Road. "We've sold a couple," Mahar says. "It's been pretty much dead the last six months. We're being cautious and conservative and keeping the product out there."
    Brad Bennington of Bennington Construction in Phoenix said few developers in the area are active, and "most are trying to hang onto the land they've acquired."
    "If you bought land at $2 million two years ago, you'd be lucky if it's worth $1.4 million today," Bennington says. "A lot of people think developers ride around in Cadillacs and eat steak, but that's not what's happening."
    Two years ago, Bennington says, lenders would lend 75 percent of the cost of the land and the developer would have to cover the other 25 percent. The developer also is responsible for the debt service, which on a $2 million property adds up to $3,000 a month. And that's not counting the cost of planning and development.
    "The whole project has eroded "¦ so what made sense 24 months ago doesn't make sense anymore and lenders have tightened up to loaning only 65 percent, so you'd be real lucky to find someone who'd pay $1.4 million on what you paid $2 million for — and real lucky to find a buyer at $1.4 million," says Bennington, who just finished some commercial projects. "So it's a game of how long can you hold on?"
    But down times don't last forever. This region, says Bennington, is doing much better than the Sacramento area — "the foreclosure capital of the West" — and he and other developers look to an upturn taking hold in about nine months.
    Meanwhile, the market offers some affordable properties, but the inventory has to shrink a good deal and the financial market has to stabilize, Bennington says, noting that "lending policies control what we do."
    At Wells Fargo in Medford, Dave Sprague says lending on stated income is a thing of the past and there are precious few 100 percent loans.
    "It's more like the 90s now," says Sprague. He said the lending industry is doing well with repeat, local customers, many of whom are going to build no matter what and have planned for it.
    "We don't see a lot of people from California. They're not able to sell or they want to wait till a more favorable market," says Sprague.
    As for the local market, he notes, "everyone is waiting for the bottom to hit and personally, I think we are at the bottom and will see an upturn in the spring and summer of '09."
    John Darling is a freelance writer living in Ashland. E-mail him at jdarling@jeffnet.org.
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