Home Building Permits Down Early In Year

February 29, 2008
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KENT COUNTY — Kent County’s home building industry is realigning in the wake of a three-year plummet in housing construction.

The top 10 builders constructed a greater proportion of the shrinking pie in 2007, as less-active general contractors pulled back, according to data from Builder Track Reports, an Ada publishing firm that follows the industry.

In 2006, Builder Track reported, Kent County’s 10 most active builders handled 24 percent of the work. In 2007, they captured 34 percent of a smaller market.

And Kent County’s new-home market has shrunk 65 percent, from 2,609 in 2004, the 21st century peak, to 911 in 2007, according to Builder Track. The one-year change, from 2006 to 2007, was down 32.6 percent, from 1,352 to 911.

Dodge Local Construction Potentials, published by McGraw-Hill, reported 1,036 single-family home building permits issued in Kent County during 2007. 

In January, 55 permits were issued in Kent County, compared to 105 in January 2007, according to Dodge. Judy Barnes, executive vice president and CEO of the Home and Building Association of Greater Grand Rapids, said she wasn’t surprised, given this winter’s above-average snowfall and below-average temperatures.

In the Ottawa-Muskegon counties market, the industry is a bit more fragmented, with the top 10 builders holding 22 percent of the home construction market in both 2006 and 2007, according to Builder Track. Remaining builders shared 55 percent of the market in 2006 and 59 percent in 2007. Homeowners taking on the task themselves accounted for 23 percent in 2006 and 19 percent in 2007.

Builders have abandoned the speculation home strategy, with competition from the high inventory of existing houses languishing on the market with dropping prices. Barnes said few “spec” houses are being built, “but a lot of custom building is going on. We have builders who are very, very busy.”

Barnes said there “was quite bit of inventory” of existing and new homes, “but the good new is, we are selling that inventory down. It is the best time to buy, right now. Prices will never be more reasonable than they are right now.”

Grand Rapids’ Eastbrook Companies, long a giant in Kent County in terms of volume, was displaced from the top spot by Portage-based Allen Edwin Co., Builder Track data shows. Eastbrook’s quantity dropped from 71 homes and a 5.2 percent market share in 2006 to 44 homes and a 4.8 percent market share in 2007. Meanwhile, Allen Edwin built 28 homes in Kent County in 2006, with a 2.1 percent share, but in 2007 roared in with 94 homes and a 10.3 percent market share.

Five years ago, Allen Edwin reassessed the market and decided that demographics showed most people in West Michigan were unable to afford the $200,000 to $300,000 homes the company was building, said Marketing Manager Jessica Wilcox. The company refocused on homes in the $100,000 to $200,000 range and moved into southern Kent County, where it found similar demographics, Wilcox said.

Based on market research, she said, the company honed in on three basic approaches: one set of buyers for whom square footage was the more important feature; another set willing to forgo square footage for design features such as hardwood floors; and the 50 percent in the middle seeking a combination of the two.

Allen Edwin has a 7,000-square-foot design center in Byron Center which displays for buyers a multitude of finish choices. The company is building in Kentwood, Wyoming, Byron Center and Zeeland. 

Legacy Homes is one of 24 builders that constructed more homes in Kent County in 2007 than in 2006, according to Builder Track data. Another 45 reported building the same number of homes in 2007 as in 2006. Most of those builders reported numbers in single figures.

“I think we’re fortunate right now to have some real attractive communities that have nature preserves around them. A lot of people are looking for that,” said Legacy President Jeff Wassenaar.

His company built 21 homes in 2006 and 31 homes in 2007. Legacy builds in the $400,000 to $600,000 range, mostly in the Forest Hills area.

A reliable roster in sales and subcontractors, fresh floor plans, and technology have combined to help Legacy meet customer desires, Wassenaar said. The company is still building spec homes.

“We’re finding that we have many people that come in from out of town that are looking for a home and don’t have time to build from scratch,” he said. “We’ve still been successful in providing those. The medical thing is real for us. We sell to a lot of doctors and other medical people coming into town, and other professionals as well, salespeople and attorneys.”

Eastbrook’s drop is the result of a combination of fewer customers and a decision to reduce inventory, said Bob Sorensen, vice president of sales and marketing.

“We’d love to build more homes every day, but the market is not as robust as it once was,” Sorensen said. “That has been a strategic move on our part.”

While Eastbrook is not a custom builder, he noted, the company last year opened a showroom, and it builds across all price points from executive homes to starters. He said that since the mid-1990s, the company has stretched into Ottawa and Muskegon counties, and is about to launch a project in Whitehall.

Other builders are trying to adjust to the tough market conditions. For example, Mike Bosgraaf, of Bosgraaf Homes in Holland, announced in January that “the collapse in the market for new homes has required Bosgraaf Homes to reevaluate its position and strategy as a volume builder. We have essentially brought to a close our volume business, and intend to focus now on a limited number of pre-sold projects in communities that are already under development. We currently have fewer than 10 new homes under construction, and our intention is to complete them as we wind our operations down.”

He continued, “As part of our restructuring, we have eliminated all of the non-sales positions in the company and relocated our offices to space more appropriate to our needs. Our plan going forward is to have our sales and marketing staff partner with Coldwell Banker to bring a higher level of reach and resources to sales efforts.”

Bosgraaf Homes built 18 houses in Ottawa County and 18 in Kent County in 2007, according to Builder Track data.

All housing construction, including single-family homes, apartments, condominiums and duplexes, amounted to 1,259 units in Kent County in 2007.

Kentwood, Byron and Gaines townships and Wyoming saw the most single-family home activity in 2007, although in all four municipalities it was less than in 2006, according to Builder Track.

“It is a bit of a difficult time for the industry. There is no doubt about that,” Barnes said. “We just need more consumer confidence.”

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