Builder Panic


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  • Anonymous

    A builder called today to offer 5 brand new houses at a 20% discount off retail. He had them sold to an investor group who backed out at the last minute.

    About 1 1/2 hours later, I got a call from another builder with 70 houses offering a 25% discount or just take over his financing.

    Builders are feeling the pinch with the mortgage lock down.

    The worse it gets, the better the deals will be – this is going to be FUN!

    Jackie

    Jackie,
    Will the 20 or 25% discount be enough?How to sell these?Highest Bidder sale?or a no payback loan?
    Thanks!
    Ruth

    Anonymous

    Ruth,

    20-25% discount is not enough. The reality is that the 25% discount IS market value now. In 6 months it will probably be even less.

    Builders and other sellers just don’t seem to understand that they can’t get the same prices they were getting a year ago. It’s sad but true – at least in our area.

    What about Atlanta? What’s happening there?

    Jackie

    The Atlanta atmosphere is probably worse than in Texas, I suspect;You can drive street after street in almost any neighborhood and see nothing but ‘for sale’ signs everywhere. One of my lender buddies said that in Midtown Atlanta, where 60,000 new condominium units are under construction, he fully expects 60% of those to go under, either thru bankruptcy or foreclosure. I personally know of two local builders (who have been building for 20years here in the area) who’ve lost their personal homes and their businesses–yikes! these folks weren’t novices.
    I’m thinking this is ‘our generations’ depression, and it’s going to take minimum of two years to work thru all the inventory, and we’ll be lucky if the entire banking systems doesn’t collapse during that time.
    Ironically enough, land,(subdividable land) is selling to people with pockets deep enough to weather this storm.
    Sellers of single family houses still ‘don’t get it’ however, and prices have remained steady, not huge drops yet, but that will come, I expect, in the near future for those folks who HAVE to sell.
    And, those sellers who can be creative, either lease purchase or straight seller finance, definitely have an edge for getting their property sold.

    Am looking forward to tonight’s call!

    Anonymous

    Ruth,

    The water problem in Atlanta is probably hurting things too.

    I think you are being overly optimistic that the recovery will take 2 years! After the RTC mess here in Texas, it has took FIFTEEN years for most prices to get back to normal. In much of Texas, it has still has not fully recovered.

    We are in for a long long ride — full of many opportunities for those who know how to creatively structure deals ( which means do not go to the bank to get money to buy houses)

    Every little change, like an increase in interest rates, will cause a detour. Some detours help you get there faster, some will cause huge delays.

    It will be an interesting ride full of twists and turns and detours — and fortunes will be made along the way for some while fortunes will be lost for others.

    With the right education and guidance, you can stay on the right side of the road where fortunes are made…. that’s where CREWealth.com comes in.

    Jackie

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