Credit Seen Drying Up for Small Business
As losses mount at American banks and the pain of the credit crisis spreads from housing and finance to the broader economy, many small companies complain it is increasingly difficult to obtain loans. Tighter credit could not only help to push the U.S. into recession, but prolong the downturn as ideas for new businesses get stymied once entrepreneurs sit down with local bank managers, small business representatives warn. “From what bankers have told me, this (tougher approach to loans) is because they are under much greater scrutiny from regulators after the excesses of recent years,” said Weldon Gibson, a consultant at the Lamar University Small Business Development Center in Texas. For the past four years, Dee Smith of Charlotte, Mich. has run a small construction company that buys homes, renovates them and then sells them at a profit. Up until this spring, he flipped five or six houses a year. But when he approached his local bank in April asking for a mortgage loan covering 77% of a $175,000 home purchase, he was told the bank’s new limit was 75% and his application was rejected. “Although I have been with the same bank for many years and have run all my loans through them, I was told times have changed and they couldn’t give me the loan I wanted,” Smith said. “They got burned by the housing crisis and the rules of the game have changed.” Smith has closed his construction company until further notice, but continues to run a bed and breakfast guest house and a small consulting business that don’t require any loans. (www.uk.reuters.com)
Reuters UK (7/20/08); Nick Carey
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Housing Slump? Not With Custom Projects, Builders Say
Despite the recent downturn in real estate, some builders of custom homes in central Oregon say business is good, at least for now. Ed Busch, owner of PGC Building and Design in Bend, said he’s on track to make more money this year than he did in 2006 and 2007. Busch builds custom homes, including one listed for $1.7 million that’s part of a local Tour of Homes, but his company also does remodels, which is one reason he’s doing so well, he said. “We try to service whatever someone’s needs are, from shelves in the garage to a Tour of Homes house for $1.7 million,” Busch said. “It’s more about if someone has a need, we service it, and it seems to be working.” Busch said he has enough work to get him through next spring and he keeps hiring workers to help him, although two projects did recently fall through after the clients canceled their plans due to financial concerns. Stricter lending requirements have eaten into people’s ability to borrow money to pay for projects, said Sander Culliton, who builds custom homes and is owner of Crest Building and Design. But for those with cash, it’s not an issue. “Most of my clients are still building. They aren’t building off of construction loans; they have their own money,” Culliton said. “They have cash in the bank or the stock market.” The surprising thing for Culliton was not the real estate slowdown, which he said he knew would come, but the impact the related credit crisis has had on lending. “As a builder, especially right now, when you try to get money, the lender says, ‘Oh, you’re a builder.’ It’s like a scarlet letter,” he said. (www.bendbulletin.com)
The Bulletin (7/20/08); Andrew Moore
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As Market Slows, Some Builders See an Opportunity to Renovate the Construction Scene
“There’s no secret things are slow,” said longtime York County, Pa. builder Larry Mellott, who is president of the York County Builders Association. But Mellott insists that the housing market is “not all gloom and doom,” but merely a correction from the housing boom earlier this decade. His spin is that it is an opportunity to look at doing things differently, such as constructing smaller homes instead of the McMansions that have sprung up over the past decade. Cherry Tree Development scaled back its original plans to build three-story townhouses selling for $200,000 to $260,000. Only three of the seven built since January 2007 have been sold, and Robert Holweck, one of Cherry Tree’s principals, now has plans to build smaller two-story Cape Cod units starting at about $180,000. The more affordable homes come with all appliances, which, he said, provides more value for home buyers. So far, three are under construction and one is sold, but he said the redesign has netted “incredible interest.” “What we tried to do with this product is hit a niche market,” he said. “We have to redesign houses for today’s buyer.” Holweck said there is a glut of houses in the $250,000 range and not enough so-called workforce homes for the average buyer or retirees who want to downsize. He said the units he has underway address that need. (www.eveningsun.com)
Hanover Evening Sun (7/20/08); Patty Poist
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Shipping Containers Become Distinctive Housing on Land
Eco-friendly, affordable housing that uses as building blocks the 8-by-40-foot steel containers often left vacant at seaports has the potential to take off in the industry, said Bill Gati, a member of the American Institute of Architects Custom Residential Design Committee. Architect Peter DeMaria of DeMaria Design in Manhattan Beach, Calif., said the recycled containers, which cost between $2,000 and $3,000, are only “the tip of the iceberg” of the designs. The homes, which use anywhere from four to eight containers, can include add-ons such as solar panels, green roofs, radiant heating and other environmentally friendly or energy-efficient features, DeMaria said. David Cross, founder of SG Blocks, a company that modifies containers at 17 U.S. locations, said there are about 75 homes nationwide using shipping containers. The company, which was formed at the end of 2006, plans to modify more than 1,000 containers next year. Multifamily, multistory buildings constructed with the containers cost 20% less to build than those that use traditional materials, Cross said. The container builders are also finished 40% faster, he said. DeMaria is planning to offer his container houses starting at $150 per square foot, or $300,000 for 2,000 square feet, through Logical Homes, a Web site being launched this month to let customers purchase the homes, which arrive on location quickly and need little on-site labor, he said. Costs for a traditional custom home in Manhattan Beach run around $225 to $250 per square foot, he added. (www.usatoday.com)
USA Today (7/14/08); Katharine Lackey
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Taking Turbines for a Spin
Although they have been around for years in rural areas and isolated locations, residential wind turbines are gaining acceptance with more home owners looking to cut their electricity bills and they are spreading to the suburbs and, in some cases, even cities. Because of site requirements, wind turbines generally cannot be used by those whose homes sit on less than an acre of land. “They are definitely growing” in popularity, says Ron Stimmel of AWEA, the national trade association for the wind energy industry. Sales of turbines that generate 2 kilowatts to 10 kilowatts of electricity, the smallest category of turbine and the ones most likely to be in residential use, have been rising nearly 25% annually, he said. The high cost of electricity has been driving wind-turbine sales. Home owners in an area of high winds with a properly sited turbine can shave up to 80% of their monthly electricity bills, industry experts say. But securing those monthly savings will take a hefty upfront investment. The turbines, including installation, can run anywhere from $12,000 to $50,000, with some models even pricier. One of the more popular models on the market, Southwest Windpower’s Skystream 3.7, goes for $12,000 to $15,000 and can generate 1.9 kilowatts. In the most optimal example of a household that spends $200 a month on electricity and realizes savings of 80% from a turbine, it would take almost eight years to recover the cost of a $15,000 system that can last 20 to 30 years. (www.marketwatch.com)
MarketWatch (7/15/08); David Englander
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Fairbanks Housing Market Holds Steady
Home sales around Fairbanks, Alaska stuck close to normal this spring, according to numbers reported by the Greater Fairbanks Board of Realtors®. Home buyers purchased about as many new and existing homes in most size categories — excluding big homes with five or more bedrooms — as they did in the springs of 2006 and 2007 and more than years before that, the board reported. The average sales price for the second quarter of this year was $220,692. That was only slightly lower than last spring, although home sellers are making more concessions — such as covering increasing portions of buyers’ closing costs — that are not reflected in reported sales prices. The local housing market is somewhat saturated compared to recent years, with a seven-month supply of homes for sale right now, but that’s a decline from a 10-month supply reported three months ago. While foreclosure numbers in Fairbanks and across Alaska are up slightly, and lending standards are tighter than a couple of years ago, a housing specialist from the Alaska Housing Finance Corp. maintains that Fairbanks is doing better than most places in the country. (www.newsminer.com)
Fairbanks Daily News-Miner (7/20/08); Christopher Eshleman
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