Developer Bob Johnson found it hard to borrow money for his latest project, but that's not stopping him from developing a 100-lot subdivision in south Richland.
He's using his own money for his Branting-ham Heights project because he has strong faith in the resilience of the local economy and real estate market.
"I started the business during the worst of times in 1984," said Johnson, president of Kennewick-based Johnson Group. Since then, he's built many homes, offices and storage spaces in the Tri-Cities.
In 2007, Johnson said, he built two spec commercial buildings on Gage Boulevard for about $3.5 million each, but he wouldn't undertake a similar project today because banks won't consider it. He said banks are being extra cautious about loaning money, and are not interested in projects that aren't preleased or presold.
But Tri-City real estate professionals overall say they're optimistic about the area economy.
Eric Pearson, president and CEO of Community First Bank, agreed that banks are taking a closer look at loan applications, whether from builders or homebuyers.
"They are looking at the borrower more than the property," Pearson said, but added that his bank has approved a few spec loans, which are for homes that are not already sold.
Still, the Tri-Cities remains one of the better performing and most stable real estate markets in the country, Pearson said.
Commercial real estate loans are the most challenging, Pearson said. He said that's because commercial real estate can lose value fast when rental incomes drop, so banks are more reluctant to make such loans.
The residential market, in contrast, remains stable because people always need a place to live, Pearson said. Tri-City home prices have remained inexpensive and have appreciated gradually over the years, so he's optimistic about the future.
That's why Kyle LaPierre is about to invest $700,000 to develop a residential property in the Tri-Cities, his company's first such project in eight years. But his family company, LaPierre Enterprises, which has been in the construction and development business for 50 years, is building only one spec home and remains focused on custom-built homes for clients.
"I saw the writing on the wall and moved away from building specs many years ago," he said.
LaPierre, who has a $1 million line of credit with Banner Bank, said he has only one commercial project on his hands, a remodeling and building expansion for a doctor.
Jeff Losey, executive officer of the Home Builders Association of Tri-Cities, said the Tri-Cities is not immune to the national economy but continues to hold its own because of a strong local economy based on Hanford and agriculture.
The number of building permits issued for single-family homes increased from 814 in August 2009 to 1,157 last month, Losey said. That's a 42 percent increase.
The latest permit numbers also are an increase of 26 percent from August 2008 and up 2 percent from August 2007, Losey said, adding, "We are still in very good shape" because interest rates are low and construction costs are competitive.
But real estate professionals are concerned about the future, particularly how federal policies and the national economic mood may affect housing, said Paul Roy, sales manager and associate broker at Coldwell Banker Tomlinson in Kennewick.
Coldwell owns 1,000 lots in the Tri-Cities, mostly quarter-acre residential properties, but is not looking to buy more, he said.
At present the home market is balanced with about six months of inventory available for sale, Roy said. There were 1,098 homes on the market at the end of August, according to the Tri-City Association of Realtors.
Home sales fell from 448 in June after the expiration of the federal homebuyer tax credit to 223 in August, according to the Tri-City Association of Realtors. But the total number of homes sold year to date last month was 2,294, compared with 2,065 in August 2009.
Roy pointed out the market is still doing better than it did last year, and by year-end he expects home sales will be up 20 percent compared with last year.
About 143 of the homes sold last month in the Tri-Cities were priced below $200,000, according to an estimate from Windermere Real Estate. At least six homes also were sold that were in the $450,000 and up price range, indicating some movement in a market segment that has been slow. Also, the median home price increased from a little more than $170,000 in August 2009 to almost $180,000 last month, said the local Realtors association. The median home price was about $177,000 in June.
Bryan Andersen, who pours concrete for home foundations, said home construction has picked up in the last few weeks all over the Tri-Cities. Andersen, who works for as many as 11 builders, said the most popular homes range from 1,700 square feet to 2,200 square feet and cost under $250,000.
Andersen also said about seven Oregon builders are working on projects in the area and came here because the area is growing. Builders have had to be more flexible to go after business in a competitive environment, he said, which also means lower prices and profit margins.
Andersen, who has been working in the Tri-Cities since 1999, said he thinks the market will continue to grow. But the spec market is really tight because banks are not lending as liberally as they did a few years ago, he said.
Don Pratt, president of Don Pratt Construction, which specializes in expensive homes, agrees. Money is available for buyers with strong credit and assured incomes, said Pratt, who's just completed an office building for a Richland doctor and is building a half-dozen custom homes.
Sales of high-end homes costing $400,000 or more will continue to be slow, he said. That's partly because some potential buyers looking to move into a better home are unable to sell their existing homes.
Pratt, who's been in business for more than 30 years, also said banks have raised the bar for potential borrowers. Buyers need a high credit score and must be able to put down at least 20 percent of the cost, he said.
Qualified commercial borrowers do have access to credit, said Doug Bayne, Banner Bank's vice president and director of marketing. He said his bank will finance owner-occupied commercial projects. That means, for instance, that professionals like doctors and attorneys have a better chance of qualifying for a commercial development loan if they will be occupying the building, he said.
Brett Jorgenson, senior vice president of lending at Gesa Credit Union, said Gesa has loaned money for a small number of speculative projects but is being cautious.
"We always had money available for builders," he said, "but we can only give construction/development loans up to 15 percent of our net worth," he said.
Gesa looks at builders' track records, their financial strength and experience in the industry before approving a loan request, said Jorgenson, adding the credit union has had no defaults in construction loans in the last two years.
He's using his own money for his Branting-ham Heights project because he has strong faith in the resilience of the local economy and real estate market.
"I started the business during the worst of times in 1984," said Johnson, president of Kennewick-based Johnson Group. Since then, he's built many homes, offices and storage spaces in the Tri-Cities.
In 2007, Johnson said, he built two spec commercial buildings on Gage Boulevard for about $3.5 million each, but he wouldn't undertake a similar project today because banks won't consider it. He said banks are being extra cautious about loaning money, and are not interested in projects that aren't preleased or presold.
But Tri-City real estate professionals overall say they're optimistic about the area economy.
Eric Pearson, president and CEO of Community First Bank, agreed that banks are taking a closer look at loan applications, whether from builders or homebuyers.
"They are looking at the borrower more than the property," Pearson said, but added that his bank has approved a few spec loans, which are for homes that are not already sold.
Still, the Tri-Cities remains one of the better performing and most stable real estate markets in the country, Pearson said.
Commercial real estate loans are the most challenging, Pearson said. He said that's because commercial real estate can lose value fast when rental incomes drop, so banks are more reluctant to make such loans.
The residential market, in contrast, remains stable because people always need a place to live, Pearson said. Tri-City home prices have remained inexpensive and have appreciated gradually over the years, so he's optimistic about the future.
That's why Kyle LaPierre is about to invest $700,000 to develop a residential property in the Tri-Cities, his company's first such project in eight years. But his family company, LaPierre Enterprises, which has been in the construction and development business for 50 years, is building only one spec home and remains focused on custom-built homes for clients.
"I saw the writing on the wall and moved away from building specs many years ago," he said.
LaPierre, who has a $1 million line of credit with Banner Bank, said he has only one commercial project on his hands, a remodeling and building expansion for a doctor.
Jeff Losey, executive officer of the Home Builders Association of Tri-Cities, said the Tri-Cities is not immune to the national economy but continues to hold its own because of a strong local economy based on Hanford and agriculture.
The number of building permits issued for single-family homes increased from 814 in August 2009 to 1,157 last month, Losey said. That's a 42 percent increase.
The latest permit numbers also are an increase of 26 percent from August 2008 and up 2 percent from August 2007, Losey said, adding, "We are still in very good shape" because interest rates are low and construction costs are competitive.
But real estate professionals are concerned about the future, particularly how federal policies and the national economic mood may affect housing, said Paul Roy, sales manager and associate broker at Coldwell Banker Tomlinson in Kennewick.
Coldwell owns 1,000 lots in the Tri-Cities, mostly quarter-acre residential properties, but is not looking to buy more, he said.
At present the home market is balanced with about six months of inventory available for sale, Roy said. There were 1,098 homes on the market at the end of August, according to the Tri-City Association of Realtors.
Home sales fell from 448 in June after the expiration of the federal homebuyer tax credit to 223 in August, according to the Tri-City Association of Realtors. But the total number of homes sold year to date last month was 2,294, compared with 2,065 in August 2009.
Roy pointed out the market is still doing better than it did last year, and by year-end he expects home sales will be up 20 percent compared with last year.
About 143 of the homes sold last month in the Tri-Cities were priced below $200,000, according to an estimate from Windermere Real Estate. At least six homes also were sold that were in the $450,000 and up price range, indicating some movement in a market segment that has been slow. Also, the median home price increased from a little more than $170,000 in August 2009 to almost $180,000 last month, said the local Realtors association. The median home price was about $177,000 in June.
Bryan Andersen, who pours concrete for home foundations, said home construction has picked up in the last few weeks all over the Tri-Cities. Andersen, who works for as many as 11 builders, said the most popular homes range from 1,700 square feet to 2,200 square feet and cost under $250,000.
Andersen also said about seven Oregon builders are working on projects in the area and came here because the area is growing. Builders have had to be more flexible to go after business in a competitive environment, he said, which also means lower prices and profit margins.
Andersen, who has been working in the Tri-Cities since 1999, said he thinks the market will continue to grow. But the spec market is really tight because banks are not lending as liberally as they did a few years ago, he said.
Don Pratt, president of Don Pratt Construction, which specializes in expensive homes, agrees. Money is available for buyers with strong credit and assured incomes, said Pratt, who's just completed an office building for a Richland doctor and is building a half-dozen custom homes.
Sales of high-end homes costing $400,000 or more will continue to be slow, he said. That's partly because some potential buyers looking to move into a better home are unable to sell their existing homes.
Pratt, who's been in business for more than 30 years, also said banks have raised the bar for potential borrowers. Buyers need a high credit score and must be able to put down at least 20 percent of the cost, he said.
Qualified commercial borrowers do have access to credit, said Doug Bayne, Banner Bank's vice president and director of marketing. He said his bank will finance owner-occupied commercial projects. That means, for instance, that professionals like doctors and attorneys have a better chance of qualifying for a commercial development loan if they will be occupying the building, he said.
Brett Jorgenson, senior vice president of lending at Gesa Credit Union, said Gesa has loaned money for a small number of speculative projects but is being cautious.
"We always had money available for builders," he said, "but we can only give construction/development loans up to 15 percent of our net worth," he said.
Gesa looks at builders' track records, their financial strength and experience in the industry before approving a loan request, said Jorgenson, adding the credit union has had no defaults in construction loans in the last two years.
Read more: http://www.tri-cityherald.com/2010/09/19/1174979/construction-remains-strong-in.html#ixzz18OrhFi1c
No comments:
Post a Comment