Monday, February 23, 2009

The Homebuilder Blues

Surprisingly, one of the most popular posts on this blog is “Altieri Homeless.” I wrote this post last July and it is still generating comments, including one today.

Over on realtor Pat Hibans blog there is a spirited discussion taking place as to whether Dale Thompson Builders is out of business or not.

Clearly these are trying times for some local homebuilders. Banks are tightening and, in some cases, revoking builders credit lines. Some of this was obviously necessary. Lax lending standards and the story of Samuel Burrows, Jr. and his home building project in Ellicott City were the subject of this piece about Suburban Federal Savings by Robert Little and Andrea K. Walker from the front page of The Sun yesterday.

“Court papers say that in April 2005, Burrow was constructing "a palatial, seven bedroom residential home on over five acres of property with amenities including a movie theater, recording studio, gym, and media room." Suburban agreed to refinance his existing $872,000 mortgage and give him $389,000 more to finish building.”

He listed his occupation as “minister” with a monthly income of $30,000 in the loan application. I don’t know about you but that seems like a pretty big house for a minister, except perhaps a pope. He never made a payment to Suburban.

So while many are directing their vitriol at the builders, it appears that, in some cases at least their bankers may be just as culpable for throwing money at them.


Anonymous said...

wordbones, you have your facts wrong: he listed his *monthly* income at $30,000, not his annual.

Not modest means; in fact, the complete opposite - i don't know of any church in the baltimore area that can afford that type of salary...


wordbones said...

Anon 7:11,

Good catch. Thanks.
I've now made the appropriate corrections.


Anonymous said...

Absolutely the banks have responsibility in this.

So, what do we do? Give herion to the drug addict by giving money to irresponsible lenders who irresponsibly lent money to irresponsible borrowers.

I've had no problem getting a business loan 3x what I applied for during this mess, *AND* I've tried to hire 3 different local companies for work but they don't show up!

If it weren't my tax dollars I'd be laughing. :(

PZGURU said...

I don't understand why people are mad at builders. The builders don't have anything to do with getting a loan/mortgage or not getting a loan/mortgage.

I also don't put all of the blame on bankers (although they do get a huge chunk of it). I do put blame on certain people in Congress who essentially forced banks into approving questionable mortgages in the name of expanding home ownership to everyone under the sun. This wasa basically a social engineering experiment that went very wrong and shows that capitalism is NOT the problem; government officials interfering in the capitalist process IS the problem.

I also think a small amount of blame goes on the consumers. Yes, the consumers. Why were so many people so anxious and willing to pay ridiculous prices for houses? Did people think that "buying high" was a good strategy? Did people forget how to negotiate, or better yet, to say "NO" to a deal that just doesn't seem right. The consumers were dreaming of possible big profits and got carried away. Prospecting without having any real understanding of the real estate market was their downfall. Look at how many foreclosures, especially condos in resort towns, are from prospectors who went out and bought 3, 4, or 5 condos/houses thinking they would double their money in 3 or 4 years? So greed is just as much a vice for consumers as it is for bankers, realtors, etc.