Home sales don't compare to sluggish pace of 1980s
Home sales don't compare to sluggish pace of 1980s

Home builder Caleb McCaleb said he's received some "crazy offers” — insultingly low bids — on his homes lately.

Builder Jason Schuff pointed to advertising in which some builders boldly promised as much as $10,000 off on a 2,000-square-foot house.

"It kills everybody else in the area and in the market. It's frustrating,” said Schuff, a builder with Vesta Homes.

Pricing oddities weren't the only concern young builders brought to the "Wise Guy Seminar” featuring a panel of builders who survived the 1980s oil and real estate bust recently staged by the Central Oklahoma Home Builders Association. The event drew more than 100 builders and others to the association headquarters.

"I think, by today's turnout, this event couldn't have come at a better time,” said moderator Jeff Click, who owns Jeff Click Homes.

Oklahoma home values continued to increase throughout 2007, though sales slowed. Meanwhile, national housing statistics have been bleak for months and in some major cities, home values have dropped significantly.

Chuck Robinson, who owns Chuck Robinson Homes, said builders who entered the business after 1995 have only seen good days.

"They are scratching their heads, saying, ‘What is going on?' This is normal business as usual. People have to accept that if they get in the building business. It's a high-risk business,” Robinson said.

Click said the panel was comprised of "straight shooters” who made it through the 1980s crash.

Not everybody did.

"Probably only 30 percent of builders survived,” said Jim McWhirter, owner of Gemini Homes and Gemini Realtors in Choctaw and president of the builders group. "We struggled the whole time. I put a tool belt on and went to work with crews. There was no way I was going to roll over and die.”

McWhirter said he happened to be headed to Penn Square Bank to pick up a once-in- a-lifetime check when it closed its doors in June 1982, the first bank failure in Oklahoma since the Great Depression, signaling the end of the oil boom.

"Boy, it was bad timing,” he said.

As the Oklahoma economy foundered through the 1980s, people stopped buying "spec” homes, those built in speculation that someone will buy them.

"People were tossing their custom homes back at you too. I had people just walk,” McWhirter said.

During the dark 1980s, Robinson said, "Seventeen of my friends took bankruptcy. Those weren't fun times. The thing is the banks were going broke too.”

He had several suggestions for his fellow builders.

"There's no substitute for cash in the bank: $100,000 in the bank and $400,000 debt is better than $100,000 debt and no money in the bank,” he said.

In times of struggle, look for "holes in the market,” he said.

In the 1980s, "I built seven or eight smaller homes in west Edmond. I couldn't give one away,” Robinson said. Then he switched gears and built two larger homes on wooded lots in the Chimney Hill addition in east Edmond, and they sold immediately.

"I made enough to pay interest on the stuff across town that I still couldn't sell,” Robinson said.

Several of the "wise guy” builders advised creating good relationships with both bankers and suppliers.

"Take your banker to lunch tomorrow,” said Mark Dale, owner of Carriage Homes, which builds homes ranging from $800,000 to $3 million.

Dale said he spent part of the 1980s completing more than 50 homes that other builders had been forced to abandon in various stages of completion.

"I didn't make a lot of money, but I survived and kept my name out there,” he said.

Like most of the builders, Dale pointed out that today's situation is nothing like the 1980s.

"We are nowhere in this stage in our economy, but there are a few stories out there where lenders have taken back a couple of houses,” he said.

If times get hard, Dale suggested to builders that they lay off staff members or trim their own salary, rather than waiting to pay suppliers.

"We are all in this together. The last thing we want is for all our suppliers and subcontractors to go down,” Dale said.

McCaleb said he started working in the business in Norman in the 1980s, when six of the eight banks had gone bankrupt. Today's challenges don't compare to the difficulties then, he said.

Nonetheless, he said, "We've had some crazy offers in the last week, like $70,000 off a home listed for $500,000. The offer was below the cost of the house. Our margins in Oklahoma City are typically 10 percent or less. I was real open with the lady and I said ‘I will show you the hard costs.' ”

Her response was: "I'll find some builder who will have to take it.”

In the 1980s, McCaleb said, "We'd have some crazy stuff. This is the first time this has happened recently.”

Todd Isaac, the 32-year-old owner of Towne East Homes, which builds mainly in eastern Oklahoma County, was a child in the 1980s. His father, Jim, was building then.

Isaac said he sold 18 homes last year, ranging from $150,000 to $300,000. So far this year, he said, he's already sold five — two customs and three in gated "active adult” communities.

"My spec market is slower, but it's not out of the ordinary,” he said. "My father went through the 80s, so it's been strongly reinforced what can happen. He had a lot of friends and associates go under. I've heard the stories. Trust me.”

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