Builder - January 2009 - (Page 27) BMAIL 2009 prediction. Are they confusing new construction with the remodeling segment? One could make a good argument about that segment keeping most of us busy and cash flow positive for the time being. But how long will that last? Our commercial segment has been doing well, too, but the future work (with regard to bidding, etc.) has shown signs of weakness and there are more bidders than ever on each project. I would have to attribute the commercial slide to the fi nancial industry and the increased difficulty to acquire fi nancing for these projects. Its not uncommon to see lenders require a large percentage of pre-sold units before they approve the construction loans. I started to see this trend a few years ago in our area for the redevelopment projects. When we purchased our first home several years ago, you needed 20 percent down. No exceptions! What a great feeling to have. We put our hard earned money (that we took years to save) toward our largest investment. We felt privileged, not entitled. Would the housing market have flourished over the last decade if these borrowing rules were still in place? If they were still in place, however, we would not be in the predicament that we are in right now. Shame on those who felt they were entitled to BOYCE THOMPSON own a home with little to no money down, which changed the rules for borrowing well over a decade ago. In my position as a project manager for a large production builder, I was responsible for reviewing the self-reported income and assets for our prospective buyers and render a decision to sell or not sell. This builder has its own mortgage company and its guidelines for approving these prospects were extremely lenient (almost unbelievable). Its no wonder there are so many of these large builders that are suffering now. They would approve almost anyone just to sell a home and keep the cash coming in (no real money, just paper of course). Construction pros like me are to blame as well. Mostly because I did not speak up or prevent this from happening. We all benefited from this housing boom and watched our investments on land, materials, and labor get larger and larger. The housing market has not corrected itself yet. There needs to be more indictments, bankruptcies, and policy changes before we start to climb out of this deep hole that we are in. Posted on BuilderOnline.com in response to Boyce Thompson’s blog post “Economists See Light at End of Tunnel” A Unique Challenge igh-volume home H all the public buildersbuilders,a which are, face unique challenge: The more they grow (in terms of home closings), the more they put themselves at risk (due to their land pipeline requirements). Imagine being D.R. Horton a few years back with 50,000 closings and needing 150,000 lots in the pipeline— just to stay level. For these builders, it becomes an extraordinary debt requirement to achieve growth, regardless of whether it is raw land, bought lots, or a land banking model. The expectation (among shareholders and analysts) of ongoing growth for public builders ultimately sets them up for failure. RODNEY HALL Posted on BuilderOnline.com in response to Boyce Thompson’s blog post “Should Home Builders Be Public Companies?” Form and Function the TarY our article [“Hardeninghits points get,” BuilderOnline.com] that are near and dear to my heart: the choices people make as to where to build, how to build, and where to live. We have an idea in our society that we must conquer nature rather than coexist with it, and we also believe that we have the right to live wherever we wish to. As long as our policies allow citizens the freedom to build anywhere they want to, places to live, work, learn, and play will continue to be constructed in danger zones: fire, tornado, hurricane, earthquake, flood, blizzard, pollutants, etc. I don’t foresee any policy changes coming that will prevent us from (see page 29) building in these zones. W W W.BUILDERONLINE.COM http://www.zipsystem.com/bid http://www.BuilderOnline.com http://www.zipsystem.com/bid http://www.BuilderOnline.com http://www.BuilderOnline.com http://WWW.BUILDERONLINE.COM
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