Boise Home Builders Face Tough Times
Builders build homes to make a profit.
There’s no point whatsoever for a builder to take a chance on building a spec home and ending up subsidizing the sale at closing, or even worse, losing their spec home in foreclosure after investing tens of thousands of dollars and months of effort building the home.
Builders in the Boise real estate market face many challenges these days, including:
Competition From Resale Properties
How can a builder compete with a resale home seller with equity to negotiate who has been transferred, lost their job, or is getting a divorce?
Competition From Foreclosures/Short Sales
How can a builder compete with a lender who’s selling foreclosed properties at a substantial discount to the builder’s brand-new home?
Difficulty Obtaining Construction Financing
Construction lenders are skittish about making construction loans these days. The terms for those loans make it difficult, if not impossible, for a builder to qualify for construction financing in many (most?) instances.
Which is why we see very few builders building spec homes in the Boise area at this time.
During better times, we had numerous quality builders (like Flaherty, Tahoe, Marrs, Price, Mayer, etc.) building dozens of homes each year in the Treasure Valley.
Now, we have just a few builders treading carefully and avoiding risk.
Many of our former respected builders have either gone out of business or moved to the sidelines awaiting better times.
July 26th, 2010 Posted in Inside Real Estate
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By Build Idaho on Jul 27, 2010
Phil,
In 2005 there were over 700 builders in Ada County alone and last year that # dropped by almost 80%! The problem is we still have too many builders. I say that based on viability. Last year out of 160 builders, only 38 were viable. That is based on my number- I say that if your company did not build 4 homes, you do not have a viable company.
While the market has dozens of one-sy two-sy builders, very few are making it in new construction alone. The market back then was based on nearly ten thousand permits but a normal year is about 2 thousand building permits and this year we are tracking only 1,400.
Being a builder can be profitable but in today’s new world, the risk is greater, the amount of capital to stay in the game is higher and builders can longer wait for clients to come to the door. Proactive builders will be the ones that survive, one’s who understand what consumers want, have a marketing plan and are aggressive.
Trey