With the real estate market on a slow rebound, local home builders remain hopeful that a reprieve is just over the horizon. While some residential builders are trying to keep busy with new projects, most no longer build spec homes, and some have diversified into commercial construction and/or remodeling.
The real estate market took a dramatic turn last year from the boom seen two or three years earlier, when the market was hot and sellers were receiving multiple offers. Local industry experts said the economy, population growth and other factors have not changed in Kitsap County, but the local market has been impacted by nationwide fears due to troubles in the subprime mortgage market, a rise in foreclosures, and continuous bad news about banks and mortgage companies in trouble.
“There is the fear of the month, or the fear of the day — there is always a new problem,” said Art Castle, executive vice preside of Homebuilders Association of Kitsap County . “The psychology of the marketplace has impacted buyers, and they don’t buy because they have these fears.”
There have been 40 percent fewer homes built in Kitsap this year compared to last, according to Castle, and not only is there less new inventory, but existing new homes are sitting on the market for a long time. That means builders are paying thousands of dollars in interest every month, money they are unlikely to recoup; many have had to lower the home prices, just like other home sellers, in order to have more compelling deals. “Some are willing to take prices very low so they’ll sell,” Castle said.
Brian Uhler, who owns Pacific Bay Homes and is involved with Pioneer Builders, a company founded by his father, Tim Uhler, said they’ve built about six new homes this year between the two companies. By comparison, during the hot market of 2005, they built 20. Pioneer Builders no longer builds speculative homes, though it still has a few left on the market.
“We try to foresee these times and ways to see us through,” Uhler said. But, as a company that builds custom homes in areas like Port Orchard, Pioneer Builders and others took a double hit when the market became saturated with lower priced homes built by national builders Quadrant Homes and DR Horton. “We are still seeing the shock of DR Horton and Quadrant Homes,” he said.
Gordon Rush, founder of Rush Custom Homes Inc., said the speculative market is the toughest right now, but there is still demand for high-end custom homes. “It’s actually a great time to build high-end custom homes,” he said, because the high-end homes are not impacted as much by the slowing real estate market.
Derek Reijnen, whose Bainbridge Island business, The Reijnen Co., also builds high-end custom homes, said baby boomers are especially active in the new home market currently, and many people are investing into their home for pleasure instead of taking expensive vacations. “Many people are deciding to cocoon,” he said. “People are looking at making an investment into their homes.”
Rush said the downturn of the economy is made worse by other factors, like always-changing regulations that make permitting more expensive.
“It’s a difficult time to be in the industry. There are lots of opportunities but if you add the banking restrictions and the permitting regulations along with the economy, this could be the most difficult time I recall in my career.”
Reijnen said it’s a difficult time both for younger companies trying to survive and for new companies to start up. “These are the times to winnow out some companies. Companies that have been around longest and have a good reputation tend to survive,” he said. “In my experience, about seven to eight years this happens. That seems to be the construction cycle.”
Castle said it’s hard to tell when the market bottoms out — just like with a recession, you know it once it passes — and he noted buyers can find some very good deals right now — but that won’t last long. And once the excess inventory goes down, the real estate market will move toward being more balanced, he said.
