'In recovery mode'
Wayne Van Wey knows the meaning of "use it, or lose it."
The longtime home builder stepped away from the business in the early 2000s but still had a handful of lots on the books, including four in Vista Pointe during the heart of the Great Recession.
As prices plummeted, Van Wey had a choice to build a modest house on speculation or see the lot slip away. He built, waited, eventually found a buyer and survived to build another house. It may not yet be the best of times, but like other surviving builders, Van Wey has turned the corner, constructing custom houses and even some dream homes.
In 2010, however, not much was moving besides foreclosures and short sales. There was little new construction and not a whole lot of chance to recoup money sunk into land.
"I had a bunch of lots in Vista Pointe that I had paid way too much money for," Van Wey said. "There was no way for me to ever recapture that money."
One lot, on the corner of Brownridge Terrace and Vista Pointe Drive, which he picked up from defunct Key West Properties for $150,000, had lost roughly half of its market value. Yet, Van Wey saw little choice but to build a modest, 2,123-square-foot house and put it on the market. The new house sold for $375,000 in May 2014.
"The only way that I ever had to recapture any of it was to start back in the construction business again, doing remodels and new houses," he said. " I still took a loss on the houses, but less of a loss than if I would have just held on to the real estate."
Between the peak of the local market in June 2006 and the bottom in 2012, Oregon lost half of its residential contractors, said Brad Bennington, executive officer of Southern Oregon Builders Association.
"We lost two-thirds of our labor market here," Bennington said. "We're still an industry in recovery. Even today, there are only four trained, skilled tradesmen for every 10 we had at the height. The builders we lost left an awful lot of blood on the ground."
Planner Craig Stone, whose office is across Brownridge Terrace from Van Wey's stop-gap project, saw building grind to a virtual halt in the surrounding neighborhood.
"Development can be a great business when times are good," said Stone, a founding partner in CSA Planning. "But it's like musical chairs, when the music stops, there are developers and builders who owe way too much money and have no ability to retire the debt. It's certainly been a tough haul for development-related businesses. Rather than just let the bank take the property, he demonstrated a certain amount of forthrightness."
Today, Van Wey is building four houses, designing four more and has two in the permit process. His clients are selling houses and are ready to move up in the market. He'll soon break ground on three Panorama Heights houses above Foothill Road.
"I really feel like we're still in a recovery mode right now. It's not the bubble that it used to be back in the old days, when everybody was a builder," he said. "The guys who are left are pretty good builders. As the market improved, I was able to recapture, or try to recapture, or take a risk to recapture some of my losses by buying additional lots in Vista Pointe and land in other areas too on the hope that I could make up for the losses I had incurred during the crash."
Profitability has come back, he said, noting gross profit before taxes is about 8 or 10 percent.
"You're still working for your money when you build houses nowadays," he said. "It's not a get-rich quick scheme."
Van Wey entered the business in 1973 without a lot of hammer-and-saw experience after buying some property in Central Point.
"It was an accident to get started in the construction business," he recalled. "I bought some land and couldn't get any bids to build things the way I wanted, so I decided I'd learn how to be a builder myself."
He did quite well for himself for the next five years before smacking into his first recession. Unlike the most recent recession, when monetary policy kept lending rates low, Van Wey was paying 21 percent interest on his bank loans.
"I made a whole bunch of money and thought I was invincible until '79 came around and the market fell on its butt, and I actually went bankrupt," Van Wey said. "From that point on, I had to learn to actually be a builder. It wasn't as easy as signing checks and directing traffic — you actually had to pour foundations, you actually had to frame houses, you had to do finish work, you had to be skilled in all those areas and recognize a good job from a bad job."
While interest rates were the clear and present danger in the late 1970s, easy loan approvals contributed to an out-of-control upward spiral in housing prices through the middle of the 2000s.
"Houses that should have sold for $400,000 were selling for $800,000," he said. "We haven't reached that now, not even close. Land is a big deal. If you want to be a builder in Medford, Oregon, you better control some land or you're not going to be in business very long," he said.
In the 1990s, Van Wey developed land in southwest Medford near the new South Medford High School, followed in 2003 and 2004 by 200-lot New Haven Estates in Central Point. Times were good — too good.
"We were selling lots out there for $35,000 and really making good money on them," he said. "Guys were turning around and selling our lots for $135,000. That for me was the writing on the wall. I liquidated my assets at that point and waited for the crash to happen."
He spent a good part of the next few years in Mexico before running short of money.
"It was hard to build houses during that time, but we were doing a lot of remodel work," Van Wey said. "The challenge is to find land to build on, lots to build on. I'm lucky because I have probably two or three years' worth of inventory to build on, but from then on out, I'm going to be scrambling just like everybody else."
Still, the unknowns are many, even for a longtime builder.
"It's a gamble," he said. "I don't even go to Vegas anymore because gambling in this business around here fixes my gambling needs right there."