Drive through newer residential areas in Marysville and witness what happens when buyers stop buying houses and developers keep developing.
Empty lots line roads and the edges of cul-de-sacs. Many have sidewalks, utilities and roads, but no houses.
It’s not pretty, said Kristy Johns, an elementary school teacher who lives down the street from a 71-home development in Marysville that was put on hold during the winter months. Tarps cover large mounds of dirt. “No trespassing” signs line the beginning of a path where she liked to walk her dog.
The supply of buildable lots and new homes ready to be sold in Snohomish County has ballooned to nearly a three-year supply, according to New Home Trends, a real estate research and consulting firm.
That means headaches for developers who bought land at sky-high prices a few years ago and now can’t sell it. It means builders are applying the brakes on new-home construction and off-loading what they’ve already built. Experts don’t believe it’s any more than a breather in what will continue to be a steady market over the long term.
The building pace has slowed down at Alpine Ridge, a development in Marysville with 36 homes planned. During the height of the housing boom, the builder of this subdivision built homes “as fast as we could humanly go,” said Clint Schlotfeldt, a real estate agent specializing in marketing new-construction developments. He remembers a 52-acre subdivision selling out in six weeks. Now, the builder he represents has scaled down production to meet “a normal market,” and about three homes sell here a month.
Still, it’s an “uncomfortable situation” for builders, especially those who became accustomed to a hot market, said Scott Morris, president of Legacy Homes Northwest, a builder based in Lake Stevens.
“It’s been tough,” he said. “We’ve had to lay off quite a few people. It affects everyone from the guy that digs the holes to the guy that does the carpet. They’ve felt the slowdown.”
Morris said he believes this is a return to a normal market, not a downturn, and he expects the market to pick up in the next several months. Interest rates are good, prices have flattened and the local economy is strong, he said. The national media may be playing a doom-and-gloom song, but the local housing market looks good for the foreseeable future, Morris said.
In the meantime, his company is cautiously moving forward on several developments.
“The trend looks like the market is coming back,” he said. “Everyone slowed production to almost nothing. We’re going to create a shortage if we’re not careful.”
Snohomish County records show just how much building has slowed. The county maintains records on how many lots are approved to build on and when those lots are actually built on. At the height of the real estate boom, the lots were built on almost as soon as they were approved by the county. In 2005, some builders began to put off building on those approved lots. And that gap has widened steadily for the past three years, said Tom Rowe, division manager for Planning and Development Services at the county. In 2005, 1,941 lots were approved and 1,752 were built on. In 2007, 1,893 were approved but only 725 were built on.
“It’s no surprise that sales have fallen off,” Rowe said. “Builders are trying to sell their inventory before they apply for new starts.”
Developers who purchased all the lots they could grab a few years ago are in trouble right now, said Mike Pattison, government affairs manager for the Master Builders Association. Some are weathering it by sitting on the land, and others are having fire sales, he said.
The developers in a pickle got caught up in bidding wars that artificially forced the price of buildable land up a few years ago, said John Wahl, who works with builders and developers at Pacific Northwest Title. It takes one to two years to develop a piece of land, so many are now sitting on finished lots, not able to sell to builders. He said the price of lots dropped 25 percent in Everett and southward, and more than 30 percent north of Everett.
It’s also gotten harder for some builders to find financing for new projects. Lenders have tightened restrictions on builders, Wahl said.
“March and April are going to be the months that tell us how this year is going to play out,” he said. “If we see good sales activity, we could see that momentum carry us through the year. Everyone is hoping 2009 is going to be better.”
Many of the experts interviewed for this story said there are signs the local housing market should pick up speed soon: buyers are making multiple offers on some properties, particularly those closest to urban centers.
With so many builders trying to sell off their stock, it may be the moment for reluctant homebuyers to buy that new house, the Master Builders Association’s Pattison said. Buyers often make decisions based on emotion, and the uncertainty surrounding the national economy and interest rates is causing some to hold back. The economy is too good for that to last long, he said.
“If you are on the fence, you should be making a decision to jump in,” Pattison said.
It may seem like there’s a tremendous amount of vacant land and unsold new homes in the county, but that’s going to be short-lived, said Todd Britsch, president of New Home Trends. Landowners got an inflated sense of what their land was worth during the boom and they’re unlikely to sell that land to builders at today’s prices. Britsch suspects landowners will hold onto their land, which may reduce the supply of buildable land in the next few years.
“That will drive price points higher and higher again,” he said. “And the housing circle will begin again in three to four years.”
Reporter Debra Smith: 425-339-3197 or dsmith@heraldnet.com.
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