Banks Foreclose on Builders With Perfect Records

[Joseph Burkeson, CMI]

Banks Foreclose on Builders With Perfect Records
Source: New York Times

TEMPE, Ariz. — Dave Brown, one of this city’s best-known home builders, had kept his head above water through the housing downturn, not missing a single interest payment on his loans.

Though Dave Brown's home-building firm had not missed a payment during the housing downturn, one of his banks suddenly demanded millions of dollars in additional collateral.

So he was confounded a few months back when one of his banks, spooked by the decline in his company’s revenue, suddenly demanded millions of dollars in additional collateral to continue carrying loans on his projects.

He was unable to come up with the money, and in October, JPMorgan Chase foreclosed on five of his developments. Shortly thereafter, Brown Family Communities, 33 years in the business, decided to shut its doors.

“They treated me like a deadbeat who missed his car payment,” said an embittered Mr. Brown, 76. “They wanted their money now.”

After riding high on one of the greatest housing booms in American history, the nation’s home builders today face a devastating reversal of fortune.

Although the housing crisis is nearly two years old, many banks had refrained from cracking down on small home builders.

Read more: http://www.nytimes.com/2009/01/20/business/economy/20bu...

[Jeffrey R. Pope]

Relax. The sky is not falling. . .

[Doug Edwards]

Are you sure? It's all over the News.

http://www.youtube.com/watch?v=AgKYZ...eature=related

[Dennis g. Fackler]

As bad and unfair as that seems it is part of the construction buisness ! Do you really think it cops's $200.000 to build a home ? The average profit margin is around 50 % of actual sales price so being prepared for the worst is the best solution.

[jwarner]

I would love that profit margin. Ever built a house?

[Larry D. Kage]

Originally Posted by dfackler

The average profit margin is around 50 % of actual sales price...

I don't know who you get your info from but that would never fly around here for the last 30 years or more.

[Joseph Burkeson, CMI]

House prices will continue to fall until the average price is no more than three times the average wage, and you can just imagine what the average wage will be when this financial crisis is over.

[Tim Spargo]

Originally Posted by jwarner

I would love that profit margin. Ever built a house?

Really...

I know exactly what you mean. I stopped building new several years ago as it was getting tight then.

Guys could build additions for $70 sf and new for less than that.. I can make more money on Tenant Improvements and remodels..