Facing a rising ride of inventory and an ice-cold market, local homebuilders say they?ve shifted their business approach, cutting back on speculative, sell-it-later building projects and enticing buyers with free add-ons to new homes and aid on closing costs.
“Every single deal that?s out there you?ve got to work a lot harder for, like you did in the old days,” said Bill Luther, founder and CEO of Gemcraft Homes, based in Forest Hill. “We?ve concentrated on getting sales on a one-on-one basis. When homebuyerscome in, we?ve found they?re looking for value.”
Local builders are averaging 10 months of excess inventory, far above the “healthy” level of four months most usually carry, said John Kortecamp, executive vice president of the Home Builders Association of Maryland.
Kortecamp said the first sign of a downturn came in 2005, when sales slowed during the holidays as they traditionally do, something he said wasn?t happening during the real estate boom.
“It?s pretty dramatic; it?s not like anything we?ve seen in downturns of the past few decades,” Kortecamp said. “It?s a pretty sharp decline.”
Lou Baker, president of Pulte Homes? Maryland division and of the Home Builders Association, said his company has worked its inventory down to a “single-digit” number of open units in the region.
But facing fewer orders and declining sales, last month Pulte announced it would cut 55 local jobs, 20 percent of its Maryland and Washington, D.C., work force, and consolidate the two divisions.
“I think the builders have reacted in terms of their pricing,” Baker said. “[Between] that and starting fewer spec houses, they?ve gotten a handle on their inventory.”
Luther said his company has had to fold three of its six divisions since the housing crunch started and has “downsized in a big way,” though he declined to cite specific numbers of jobs cut. However, he said the company?s inventory stands at 80 homes, several months? worth of inventory, and said Gemcraft sold 50 homes in January, ahead of its goal of 35.
“I think that everyone?s done pretty much all the belt-tightening they can do,” Luther said. “When everyone?s done everything, you just have to wait for the market to come back.”
