Robert Haas has thought more than once about leaving the homebuilding business since 2007 – the best year ever for Robert Haas Construction Co. and the year the phones stopped ringing. The 32-year veteran Columbia builder has even made a few calls to see what other options might be available.
He cut his staffing to the bone. His only employees are himself and Julia, his wife, and she doesn’t even get a paycheck anymore. And, he stopped all of his marketing efforts and shut down his website because he didn’t want to pay someone to keep it updated.
Robert – Bobby to friends and family – has even gone back to his roots, taking on remodelings and insurance restoration work.
As he has seen most of his friends leave the business and considered it himself, Bobby and Columbia housing market experts say the end of the housing recession may be in sight, but no one expects a return to pre-recession levels.
“We actually had one of our best years in 2007, then all of a sudden, there was nothing,” Bobby says. “There was no new construction.”
Julia says that the change seemed to happen overnight. “We had had so much business, we couldn’t even call everybody back. I remember I would have 40 phone calls in one day and so you were never wondering if you’re going to get work or where your work was going to come from,” she says. “It was a shocker for me when 2007 came because we received gradually fewer and fewer and fewer calls, then boom, the phone just stopped ringing.”
The boom was fueled by generous lending practices that let people buy more house than they could afford. Loans were low interest and were structured to start out with low payments that would later increase to more realistic repayment schedules. Often, homebuyers would pay the interest only on loans for a few years before having to find new financing to repay the entire balance of the loan within just a few years.
On the construction side, these easy sales brought all sorts of new “builders” into the market. “There were bankers becoming builders, there were real estate people becoming builders,” Julia says.
The housing boom was fueled by generous lending practices that let people buy more house than they could afford. Then, almost overnight, things changed. “We actually had one of our best years in 2007, then all of a sudden, there was nothing,” says Bobby Haas of Robert Haas Construction Co.
Earl McLeod, executive director of the Home Builders Association of Greater Columbia, agrees. He has seen it in his organization’s members. “There were people involved in our business who should not have been building houses,” Earl says. “If you look at the membership of the Home Builders Association, there certainly has been a consolidation at the top of the market.”
“The impact has certainly been more dramatic for what we call ‘local custom builders,’ who rely on local community banks for lines of credit,” explains Earl. “Financing to build for those builders is very tight. It’s all about being able to find capital.”
No one knew in the beginning how long or how deep the recession would be. “When it first happened, we thought maybe everybody’s just afraid or it’s just a little blip, six months, a year, maybe,” Julia says. “Then the more I started thinking about it, I was like, ‘Oh, this is going to be a five-year deal, and it’s just going to keep getting worse.’”
And it did get worse. In 2007, more than 4,800 single-family building permits were issued for Richland and Lexington counties, according to statistics from SC DASH at the University of South Carolina’s Darla Moore School of Business. That number dropped steadily through 2011, when less than half that many – 2,143 permits – were issued in both counties.
Home sales, including condominiums, in the Greater Columbia area dropped to 6,425 units in 2011 from a peak of 10,896 units in 2006, according to the South Carolina Realtors Association. And the median price of homes sold in Columbia has hovered around $140,000 since 2009, down from $145,000 in 2007.
Some builders, especially larger companies that specialize in the first-time homebuyer market, have managed to keep busy as low interest rates have helped drive business in the past year or so. But other builders, smaller companies that focused on the higher-end of the market, have had to branch out to survive. “A lot of those builders have looked into commercial building, into light remodeling and restoration work,” Earl says.
To stay in the business during the worst downturn in the housing market that anyone can remember, Bobby Haas has taken on remodeling and repair jobs. He has done remodeling – “No job is too big or too small” – and has started working with insurance companies on repairs to homes with water and fire damage.
Bobby sold a house he built as a spec at the Isle of Palms at a loss, and he still has some property he is hoping to sell in Columbia. “We’ve tried very hard not to spend unless we’ve had to,” Julia says. “Finally we started thinking, ‘Well if this isn’t going to get any better, what are we going to do, because we’ve got kids.’”
That’s when Bobby tapped into his existing customer base. “Bobby has built 300 or more houses in South Carolina,” Julia says. “We’ve had a lot of callback business and a lot of loyalty, people who we’ve built for wanting to do an addition or a renovation.”
Bobby got into the fire and water damage restoration work for insurance companies after his own home was damaged in a fire. “I had done some insurance work in the past, so we decided to try to get in with some insurance companies for fire and flood work,” Bobby explains. “We opened the door to anything that we can do.”
To that end, Bobby returned to his early days of construction in which he did much of his own carpentry and other work to cut down on labor costs. “I was interested in construction, and through my high school years, I did trim and framework,” Bobby says.
“I think one of the reasons he has survived is that he does a lot of the work himself,” Julia says. “He has worked really hard in construction. And he knows how to do anything.”
When he has used subcontractors, Bobby usually has gone to the same people he has worked with over his 32 year career. A lot of times, those workers have reduced their prices as well, to stay in business.
All of that perseverance may finally be paying off as the numbers show improvement in the housing market.
“This past year was a major turning point for housing in South Carolina, because we saw all the major indicators move upwards,” says Joey Von Nessen, research economist at U.S.C.’s Moore School. Improvements were seen in house prices, home sales, housing starts and construction employment. “All of that bodes well for the housing market going forward.”
Single-family building permits in Richland and Lexington counties dropped to 2,143 in 2011 from 4,800 in 2007. Home sales dropped to 6,425 units in 2011 from a peak of 10,896 units in 2006. And the median price of homes sold has hovered around $140,000 since 2009, down from $145,000 in 2007.
Among South Carolina’s big three cities, Charleston has seen the most improvement in housing and Greenville is second.
“Columbia has seen growth, just not at the level as the other two,” Joey says. Greenville and Charleston have a larger manufacturing base than Columbia and have seen significant employment growth in that sector, while Columbia’s economy is based more on government employment, which is continuing to experience cutbacks.
Home sales in Columbia were up 15 percent last year to more than 7,500 units, according to the South Carolina Realtors Association, and single-family building permits in Richland and Lexington counties outpaced 2011 with 2,346 permits issued through the first 11 months of 2012.
“This past year certainly was an improvement over 2011, but if you look at 2011, that was a very bad year,” Earl McLeod says. “I am expecting it to be better in 2013, but I don’t expect it to get back to 2007 in my lifetime. We’re expecting the new normal to be somewhere closely associated with 2002 to 2003.”
One key to bringing folks back into the housing market is a return to appreciating values, Joey says. “The housing market is building some momentum. That will help get some potential homebuyers off the fence. If you think about it from a personal standpoint, why would you want to buy a home if you think it will depreciate in the short run? So now that prices have bottomed out and are rising again, potential homebuyers are saying, ‘Yes, I can see clearly that house prices are going up, so this is something that I want to invest in.’”
He adds, “Now that they are seeing that those assets aren’t eroding, they are getting off the fence.”
For Bobby Haas, the proof is in the new contract he has to build his first house from the ground up in four years. “The phone is ringing more,” he says. “We’ve had more opportunities to do estimates.”
Because there have been so few new houses built in the past five years, especially in the high-end market, that means the market has absorbed the inventory that was out there. “There’s no new inventory out there,” he says. “So eventually people are going to want a new house.”
According to the South Carolina Realtors Association, total housing inventory statewide – homes available for sale in South Carolina – dropped by 13 percent in 2012, setting up 2013 to be a year of improving prices for home sales and increasing the need for new construction. Already, sellers are getting about 95 percent of their asking price in sales.
Still, folks aren’t eager to build a new home costing upwards of $1 million. “What I see happening, the phone calls that we are getting, people are wanting to stay at $350,000 to $500,000 just as it was before the boom. That’s where the market was,” Julia says. “I think people are returning there; they are afraid to build these big houses, and banks aren’t loaning the money.”
And, Julia says, people are bargain shopping even at the top of today’s market. “Before, we were building homes at $500,000 and up. Now buyers want them under $450,000, but they want the same house. And that’s impossible,” Julia says.
Bobby adds that foreclosures and short sales – homes sold for less than the amount owed on the original mortgage usually with the agreement of the lender – of the past few years have dropped people’s expectations of what they should pay per square foot. And, he says, while that might work for existing homes, he cannot build the same home that cost $500,000 five years ago for $450,000 today.
“This past year was a major turning point for housing in South Carolina, because we saw all the major indicators move upwards,” says Joey Von Nessen, research economist at U.S.C.’s Moore School. Improvements were seen in house prices, home sales, housing starts and construction employment, which bodes well for the housing market going forward.
The new home contract and the increased number of phone calls have brought a sense of relief to Julia and Bobby Haas. They still keep up with the latest trends in luxury homebuilding through the Southern Living Custom Builder Program. There are only eight South Carolina builders in that program, which offers training on new products and designs in exchange for being listed as a Southern Living builder.
Although Bobby looked at other opportunities in the past four years, he never actually applied for another job. Julia says that she offered to get a job outside construction so he could go back to school to find a new profession. “But he told me, ‘I just love what I do, and I’m just going to trust God to find some way to keep doing it. This is all I want to do.’”