By: Paula Gardner
Business Director
Posted: Dec 3, 2009 at 6:04 AM [Dec 3, 2009]
Jim Haeussler of Peters Building Co. stands at his subdivsion Dexter Crossing near Dexter, where he saw increased sales activity late this year.
Angela J. Cesere | AnnArbor.com
Jim Haeussler of Peters Building Co. set this year’s business projections knowing the downturn for new home construction would continue into 2009.
And for the first half of the year, he feared he wouldn’t even hit his conservative numbers.
But by fall, orders for new construction took off, creating what he and others close to the new construction market say was a welcome mini-building boom in the second half of this year.
What that means for Haeussler and his Saline-based business is “it allows us to keep our core people employed and cover our overhead, which is necessary to keep an ongoing business,” he said.
That’s important in a market where home construction is a fraction of what it was just a few years ago.
According to regional data from SEMCOG, construction totals for single family homes in Washtenaw County through October totaled 116, with 64 of those in June or later. About a dozen are by Peters Building.
Those numbers are off peak years like 2004, when 1,775 homes were built. And they’re also off from 2008, when 243 were built.
But it’s still welcome in a year when uncertainty dominated much of the state’s economy.
“(The building totals) are what we figured we’d do, but it started late in the year,” Haeussler said. “We weren’t going to make it the way it was going.”
Traction in the market during the second half of the year reflects more than activity from the federal first-time buyer tax credit, Haeussler said.
It’s also payback on some strategy shifts, like building smaller homes at lower price points.
That, he said, puts some of his new products “within reasonably close range of foreclosures that are in good condition."
“We’re trying to narrow that gap.”
Rob Ewing, a Realtor at the Charles Reinhart Co., also saw more activity in new construction in recent months.
Discounts on lots are anywhere from 25 percent to 50 percent off of recent years, he said, which is fueling a lot of the interest. So are other components of lower prices on new homes, such as supply costs - and labor.
“Builders are working on tighter margins to have the work,” Ewing said. “… There are good values to be had.”
A percentage of buyers will always want new construction, he said.
And in the last year, speculative construction became a rarity in Washtenaw County, since neither banks nor builders want to sink cash into a home with no committed buyer.
So the activity this year also signals builders and banks are holding less existing inventory - giving both the flexibility to shift gears on size and cost, like Haeussler did.
New construction is ready to benefit from what appears to be price stabilization in Ann Arbor, said Kevin Belew of Norfolk Development Co.
The city’s core neighborhoods influence sales in outlying areas, he said, due to price and availability. With neighborhoods like Burns Park experiencing fewer listings and relative price stability, buyers in outlying areas - especially west of Ann Arbor - can be more confident about buying new construction.
“All of this process is starting,” Belew said.
The building activity is also a hopeful sign for owners living in some of the communities.
In Haeussler’s Dexter Crossing, for example, six of his recent sales left 58 unbuilt lots in the 223-home neighborhood. The pace of activity won't fill the sub quickly, but it keeps it from becoming stagnant.
The sales also benefit Haeussler and other builders holding loans on land and lots. He has 240 lots in active projects in nine subdivisions in the county.
And his activity this year may hit half of the 30 sales he’d generate in what he describes as a “good year.”
That ratio beats the regional building trends.
And the prices, he said, benefit buyers.
“They’re getting a brand-new home with the warranty … for 5-10 percent over what they can buy a comparable distressed home for,” he said. “They get the home they want and the neighborhood they want.”
Paula Gardner is Business Director of AnnArbor.com, where she covers real estate and development. Contact her at (734) 623-2586 or by email. Follow her on Twitter.
Get the Ann Arbor RSS Feed
AnnArbor.com
Zwinka
Posted Dec 3 2009
I don't know where builders are getting loans. Banks sure aren't giving out loans to individuals. My spouse and I are gainfully employed and have a good combined income. Our credit is excellent, our only debt is a small amount on our original Ann Arbor home (with plenty of equity left over). Our cars are paid for. We were only able to identify two banks that will give construction loans in the state of Michigan. The one we chose to go with keeps coming up with new rules and conditions we have to satisfy, the latest of which involves paying several thousand dollars for the actual building permit - before we even have a close date to ensure we'll have the money to build. If they screw us in the end, we'll be out thousands that we spent satisying all their requests, paying for appraisals, producing a building permit before the loan close, etc. And we're dangerously close to the time of year when we will get stalled out by weather and freezing temps, and then we're really screwed.
I understand how this whining might sound in the context of an economy in which thousands are losing their home. But we've tried hard to do everything right, and seem to still be getting punished for the careless lending and spending of banks and others. Why isn't anyone telling this story? And why do developers have no trouble building more more cardboard mcmansion farms? I mean no disrespect to Jim H. as I know he is a good guy and a good builder. But the kind of subs that have turned into massive foreclosure failures and suburban wastelands are exactly that sort.
Pjohn3
Posted Dec 3 2009
I'm tired of people always blaming the banks reckless lending policies. Borrowers and realtors were equally as reckless, making unreasonable demands and often piting one bank against the other until they received the best deal (often with very little downpayment). Now things are different and it is the regulatory oversight that is directing what banks can do today. Many banks are in trouble and they need to shore up their balance sheets to survive. The pendulum has swung and it will take time for things to return.
tdw
Posted Dec 3 2009
getting the best deal? I thought that was called shopping
a2grateful
Posted Dec 5 2009
Jim Haeussler of Peters Building Co is a longtime area builder. He has an excellent track record. He and his company have survived an economy that drove others out of our state, or out of business.
.
Peters Building Co has been known for subdivision work, mostly in suburban a2, building very nice middle-class homes, over decades of time. Most of his construction is of housing of less than 2,000 square feet. Haeussler references warranty provision in the main story above. His words reflect practices of integrity that are typically not within the capability of many, less experienced builders.
.
Cardboard McMansion farms . . . reckless lending . . . suburban wastelands . . . reckless borrowers . . . reckless real estate practitioners . . . the general real estate situation in the US real estate bubble . . . those are structural US problems that NO ONE locally, has the magnitude of stature to conjure (as some wish to allege) . . . those resulted from poor and stupid US government, US business, and US citizenry policy and practice on many, many levels . . .
.
I am very glad that Peters Building Co. has survived all of that. Best of business to them in 2010!
lefty48197
Posted Dec 10 2009
As a construction worker/contractor it's nice to see some signs of life in our industry in the last few months. It's nowhere close to where we need it to be, but the glut of foreclosures is still stifling new construction. I'm happy that at least one of the medium sized local builders is able to survive in this market. I don't however shed any tears for the big box builders like Pulte, Crosswinds, etc. I hope they all go bankrupt sitting on dozens of undeveloped lots in dozens of abandoned subdivisions. Find a way to free up those lots so that small builders can have some work and the economy and industry will benefit far more than if Pulte goes back to building 1000 of their crappy new homes in Washtenaw county next year. Support your local small builders! Boycott the Walmarts and the Pultes!