Clark County homebuilders regroup
As housing market improves ever so slowly, local builders recount how they adapted to survive the recession
Sunday, September 16, 2012
Homebuilding, an industry nearly left dead during the recession, appears to be reawakening in Clark County, as measured by a rise in permits to build single-family houses.
But homebuilders who survived the worst of the downturn say the comeback hasn't been easy.
Just as homeowners got caught underwater with houses worth less than the amount owed on the mortgage, many homebuilders got caught with land and inventory they could no longer afford. In three years of sharp decline — from 2008 to 2011, when permit totals and homebuilding revenue were cut in half — numerous Clark County-based single-family-home contractors left the business or went bankrupt.
Though still cautious, those who've managed to hang on say they did it with strategies that included joining forces, beefing up energy standards and adjusting their home designs and prices to compete in the changing market. Others turned to remodeling and worked to earn real estate licenses so they could sell their own product.
The departure from the old ways is beginning to pay off, said Jon Girod, a Vancouver builder who reached deep to pay off his debt early in the downturn and changed his entire business model to appeal to today's more discriminating buyers.
Girod has recently hired three more employees for his Vancouver-based company, Quail Homes, which has gone from a staff of three to a staff of eight. He said the company is on track to build more than 30 houses this year, up from less than 20 homes per year at the depth of the downturn.
"I think next year we'll be producing enough income to see a profit," Girod said. "It's finally coming together."
He isn't the only local builder slowly seeing hard work and perseverance pay off. Home sales are up and single-family housing starts have risen by 63.8 percent this year in unincorporated parts of Clark County. Builders in the sector pulled 380 permits to build houses from January through August, up from 232 permits during the same period last year.
Despite these early indicators of renewed activity, homebuilders are bracing themselves for increasing challenges. Those include fewer remaining ready-to-build lots in desirable areas, rising material costs and an almost nonexistent project financing climate that has opened the market up to national homebuilding companies with the financial clout to buy up the county's remaining home lots.
National builders, such as Miami-based Lennar and Fort Worth, Texas-based D.R. Horton, have been able to enter Washington state's (and Clark County's) market by buying up lots sold by lending institutions for a fraction of the original price, said Glenn Crellin, associate director of research at the Runstad Center for Real Estate Studies, based at the University of Washington in Seattle.
"The biggest challenge to smaller builders is financing, financing, financing," Crellin said. "Access to money right now is the be-all and end-all to construction."
It's an obstacle some builders say they are starting to overcome thanks to mounting interest in custom homes, which allow companies to build one house based on an advance sale to a buyer. The model differs greatly from the boom period when companies were building speculative houses without a buyer's contract.
But builders say interest in these new products, coupled with a tight supply of new homes and general improvement in home sales, are feeding hopes they've survived the worst of the painful and drawn-out slump.
Here are a few of their stories:
Soaring Eagle Homes
As a small builder, Soaring Eagle Homes has barely gotten its head above water, said Matthew Clarkson, co-owner of the Camas-based company he helped found in 1994.
Having just finished building a custom home in Ridgefield this year, Clarkson, 49, said his company has come a long way in digging itself out of the deep hole of the speculative housing market. In late 2007, home sales plunged just after the small company sold its highest priced house for $750,000, Clarkson said.
By 2008, he was "doing anything and everything" to survive, he said. His company's work went from building high-end houses to performing odd remodeling jobs, such as installing windows, refinishing basements and installing covered patios.
"I repositioned my company to be a resource for Realtors," Clarkson said. The tactic helped bring in word-of-mouth business from real estate agents who were busy trying to sell off foreclosed houses in need of repair and finish work.
Today, Clarkson counts himself among a small group of surviving builders who are cautiously optimistic.
"We've just been hunkering down in the trenches," he said, adding that Soaring Eagle Homes has just recently begun to reinvest in marketing its custom homebuilding services.
"We said, 'hey, it's time to brush up the website,'" Clarkson said. "We feel like we're coming out of it, but it doesn't quite feel like a new beginning just yet."
Vancouver-based builder Aaron Helmes, 35, went from homebuilding to home-remodeling during the downturn. Helmes, who was a co-owner of the now-defunct Rockford Homes, said it was sheer determination and experience that helped him survive.
He and a business partner, Jeff Wriston, are now building single-family homes once again under their newly formed company, Kingston Homes, said Helmes, a third-generation homebuilder.
"You learn from working summers and spring vacations," said Helmes, who launched his first home construction business in 1999.
His business climbed steadily through the housing boom, then hit rock bottom in 2008.
"I don't think anyone expected things to fall off the cliff like it did," said Helmes, who turned to remodeling and managed to scrape enough capital together to purchase housing lots that by then were selling for about one-third of the price they had fetched at the height of the market.
His new company is now marketing homes priced between $180,000 and $400,000 in subdivisions in Vancouver, Hazel Dell and Washougal.
Helmes, who earned his real estate license during the downturn in order to sell his own products, said he is more optimistic than ever about signs the market is improving.
"We're definitely in a better position than we've been in the last three years," he said.
A trip to the gas station in 2008 sparked the idea for a remake of Vancouver-based Quail Homes, said its owner, Jon Girod, who decided the new buyers' market called for a fresh product to appeal to now cost-conscious consumers.
"I thought, 'I can build homes that use less energy,'" he recalled.
The inspiration led to a $250,000 makeover of Quail Homes, in which key personnel received certified training in green-building techniques. Girod, who has launched an entirely new marketing campaign focused on energy-efficient building, is showcasing his first Earth Advantage-certified "platinum-rated" house in the Camellia subdivision in Battle Ground.
The 3,400-square-foot home's heating, cooling and hot water are supplied by ground-source heat pumps, a system that combines with building techniques to save 80 percent in energy costs, Girod said.
"I really spent a lot of money to do this," said Girod, who worked with his main material suppliers to remodel his business.
He became a licensed real estate broker in order to be on the front lines, selling his new custom-designed houses, which Girod said must appeal to today's more discriminating buyers.
"People want to be engaged and involved," said Girod, who estimates he is working 11-hour days, six-and-a-half days a week.
He tries to treat every potential buyer like royalty, said Girod, who still has fresh memories of the housing downturn.
"I was building 80 homes a year and then, the lights were turned off," he said. "Now I think of this business as a startup because we're starting all over again."