Local Banks tightening up

[Tundra]

I spoke with two different contractors this week, that both have a long track record building large spec homes and do not use the same bank as each other ,both guys were turned down on their newest projects these would have been 800k + construction loans, which as little as 6 months ago would have been no problem, both guys were told by their bankers they'd rather see them in the 350-400 range, the problem is were they build that isn't the price range that can be built , this is just two guys, I'm hoping it's not a starting trend......

[Canoe]

Ok I'll add to this... A realtor friend of mine that sells new construction only says that anything in the 100s or 200s sells quickly. The 300s and 400s are setting on the markets an average amount if time. 500+ is slow. It seems like the banks know the market.

[oklip955]

And you forgot to add, $1,000,000+ forget it, won't sell.

[Chadanth]

$417k is a conforming mortgage, and is much easier to get, so that that's often a threshold. Probably lots of people afraid to take on the risk of a mortgage they can't make with one income right now. This is what happens in a downturn.

[jn1780]

Haven't seen nothing yet. The bankruptcies are still coming. Even if oil rebounds the oil companies are not likely to hire people back at the same rates they were being paid before. My employer has hired several former energy workers lately and I can tell you they are being paid substantially less than they were before.

[Tundra]

$417k is a conforming mortgage, and is much easier to get, so that that's often a threshold. Probably lots of people afraid to take on the risk of a mortgage they can't make with one income right now. This is what happens in a downturn.

Right, but this puts these guys out of business , unless a custom comes along they are now going to be sitting without any inventory. It's almost impossible for a guy that builds in the 800k price range to drop down and build small, they don't have the subs to do it, nor are they in the developments that offer them.... Construction is one of the largest employers in this state, way bigger than Oil....we cannot afford for construction to slow down. We were extremely fortunate in 2008-09 because of oil around here to have not felt the down turn like the rest of the nation....

[Chadanth]

Right, but this puts these guys out of business , unless a custom comes along they are now going to be sitting without any inventory. It's almost impossible for a guy that builds in the 800k price range to drop down and build small, they don't have the subs to do it, nor are they in the developments that offer them.... Construction is one of the largest employers in this state, way bigger than Oil....we cannot afford for construction to slow down. We were extremely fortunate in 2008-09 because of oil around here to have not felt the down turn like the rest of the nation....

That's probably very true. Plus, with the layoffs, and the lack of net hiring, there's probably not much inflow to the OKC area, so demand is probably down at all price levels. Gonna be tough for a bit, I'm afraid.

[u50254082]

The people who are buying (or were buying) $500K+ homes --- what do they do?

[Tundra]

The people who are buying (or were buying) $500K+ homes --- what do they do?

All sorts, doctors , lawyers, engineers, trust fund babies, businessmen and women , Oileys ......

[oklip955]

And don't forget retirees or people who can work from home that are moving here to get away from the high taxes in other parts of the country. I've run into a few of them in Edmond. Mostly people from California or Chicago area.

[stile99]

I'm still trying to decide how I feel about this. On the one hand, yeah. Construction slowing down on top of everything else would be bad. On the other hand, if your job is seriously "build million-dollar McMansions" and you can't/won't change that in this economy...really not much I can do to help you. If a realtor tells you 100-200K sells fast, 300-400K sells, but not as fast, and 500K isn't moving, then insisting on building at 800K and looking for excuses as to why you can't possibly adapt is just suicide. I read an article the other day that was basically AT&T telling workers adapt...or else. If your skills are in POTS and laying copper wire, you have two choices. Learn the skills AT&T needs from you today, or AT&T doesn't need you, goodbye. Deliberately holding onto something the market doesn't want will not end well.

[onthestrip]

I'm still trying to decide how I feel about this. On the one hand, yeah. Construction slowing down on top of everything else would be bad. On the other hand, if your job is seriously "build million-dollar McMansions" and you can't/won't change that in this economy...really not much I can do to help you. If a realtor tells you 100-200K sells fast, 300-400K sells, but not as fast, and 500K isn't moving, then insisting on building at 800K and looking for excuses as to why you can't possibly adapt is just suicide. I read an article the other day that was basically AT&T telling workers adapt...or else. If your skills are in POTS and laying copper wire, you have two choices. Learn the skills AT&T needs from you today, or AT&T doesn't need you, goodbye. Deliberately holding onto something the market doesn't want will not end well.

Ya, or also put more of their own money into the next home and not need to borrow as much. Or shop it around to other banks.

[u50254082]

...then insisting on building at 800K and looking for excuses as to why you can't possibly adapt is just suicide...

It's greed. And I'm not saying that like some misinformed entitlement minded millennial. Luxury homes give BIG margin to builders, which is why it's becoming damn near impossible to buy a home in the $150K-250K range in certain cities because the "coasters" are moving into the heartland and plopping down $450K+ for homes. (I also blame the coasters for driving up the price of real estate, but what'r you gonna do right)

I'm sure many will disagree, but we're quite fortunate here in OK that home ownership has a low barrier of entry. In other metro areas, you're going to be living in an apartment or with roommates for a much longer time.

[adaniel]

In a market where the vast majority of new homes sell for 300K or less, is new scrutiny on a 800K loan a big deal? It may very well be a response to rising interest rates as much as it is a slowing in the local economy. I usually try to steer away from an everything is fine narrative but the handful of friends I know that work in real estate are reporting sales no worse than flat. Of course none work in uber upscale areas and one mentioned a slowdown in the Edmond entry level executive market (think $300-500K).

OKC avoids getting too hot and cold. Other oil dominated markets like Midland and especially Houston got way overheated and are now experiencing a pretty sharp correction, although even there sales are not plunging.

[Ozmondo]

I'm still trying to decide how I feel about this. On the one hand, yeah. Construction slowing down on top of everything else would be bad. On the other hand, if your job is seriously "build million-dollar McMansions" and you can't/won't change that in this economy...really not much I can do to help you. If a realtor tells you 100-200K sells fast, 300-400K sells, but not as fast, and 500K isn't moving, then insisting on building at 800K and looking for excuses as to why you can't possibly adapt is just suicide. I read an article the other day that was basically AT&T telling workers adapt...or else. If your skills are in POTS and laying copper wire, you have two choices. Learn the skills AT&T needs from you today, or AT&T doesn't need you, goodbye. Deliberately holding onto something the market doesn't want will not end well.

I would imagine a business would see the downturn and instead of continuing to build 400-500K houses that don't sell start building the 100-200K ones to get you buy until things get better, Just seems like smart business to me.

[Bill Robertson]

Maybe I'm way off but I assume a builder building $800k spec homes started smaller and worked their way to that level. At least that's how it worked when I was in construction for a living. I'm They know how to and can build smaller homes. If they don't want to downsize they should be prepared to foot more of their own bill.

[Rover]

It's greed. And I'm not saying that like some misinformed entitlement minded millennial. Luxury homes give BIG margin to builders, which is why it's becoming damn near impossible to buy a home in the $150K-250K range in certain cities because the "coasters" are moving into the heartland and plopping down $450K+ for homes. (I also blame the coasters for driving up the price of real estate, but what'r you gonna do right)

I'm sure many will disagree, but we're quite fortunate here in OK that home ownership has a low barrier of entry. In other metro areas, you're going to be living in an apartment or with roommates for a much longer time.

Greed? Seriously?

You greatly oversimplify the economics, both on the supply and demand side.

[Zuplar]

This is not the case at the bank I work at.

[Tundra]

Maybe I'm way off but I assume a builder building $800k spec homes started smaller and worked their way to that level. At least that's how it worked when I was in construction for a living. I'm They know how to and can build smaller homes. If they don't want to downsize they should be prepared to foot more of their own bill.

Its not that they can't, but its a lot harder than one thinks. developers don't just sell lots to who ever wants them they usually lock them down to a select group up front when they have lot draws , so one you have to find where to build that smaller house, and two you'll have to find new sub contractors that work on that size of home, and three its not going to happen, especially in hot areas nobody is going to give up lots to the new guy........

[Chadanth]

Maybe build less $800k houses until the market recovers?

[DowntownMan]

Maybe build less $800k houses until the market recovers?

Luckily some of our local owned builders have neighborhoods ranging from the 150s to the 500s so that they have options and can focus on the lower end right now.

My builder hasn't seemed to slow down much. There are 9 houses in progress right now and they have 4 they are starting. They are still building spec houses and selling them easily. This is in the 180-200 range though.

They luckily got into this price range about a year ago which will help them out for when their higher end homes aren't selling.

[BBatesokc]

The great thing about $150k-$200k homes is that - as a buyer - the mortgage is about what I'd pay for rent anyway. This moves them a lot faster for buyers and sellers.

That said, when we started looking in Edmond a few years ago, I was shocked how $350K+ was the norm in many areas - and some of those neighborhoods were nothing special and neither were the floor plans.

To me, I buy what I know I will always be able to afford because rent would be about the same anyway - so why sell.

[DowntownMan]

The great thing about $150k-$200k homes is that - as a buyer - the mortgage is about what I'd pay for rent anyway. This moves them a lot faster for buyers and sellers.

That said, when we started looking in Edmond a few years ago, I was shocked how $350K+ was the norm in many areas - and some of those neighborhoods were nothing special and neither were the floor plans.

To me, I buy what I know I will always be able to afford because rent would be about the same anyway - so why sell.

That's why I bought my house. I had been renting an apartment with a garage for 3.5 years since I got out of college and rent was roughly 1k. I had been saving like crazy because I knew I didn't want to rent forever. So I just had a new home built that is very efficient so my payment and utilities for twice the space at about what I was paying renting. Now I get to start building the equity in my own home at age 25.

[White Peacock]

The great thing about $150k-$200k homes is that - as a buyer - the mortgage is about what I'd pay for rent anyway. This moves them a lot faster for buyers and sellers.

That said, when we started looking in Edmond a few years ago, I was shocked how $350K+ was the norm in many areas - and some of those neighborhoods were nothing special and neither were the floor plans.

To me, I buy what I know I will always be able to afford because rent would be about the same anyway - so why sell.

I bought my house for $90k; rent on the same house would probably be about $400/month more than what I'm paying for mortgage/insurance/taxes, and it's a reasonable ~1575 square feet, with a den and an office with built-in library shelves (the chief selling point for me), as well as a 550sf detached garage. The catch? Not in a hip part of town, so I'm not having to pay the hipster tax premium. It's well worth the trade-off, since it's not like I'm beyond a quick commute to all the places I like to go in the city, and I can afford to do these things because I didn't overpay on a house.


Skwillz: regarding your "coasters" comment, that's a process that's referred to by Oregonians as Californication. Californians have migrated en masse to Oregon in waves for a few decades now, since Portland is traditionally the most affordable major city on the West Coast, and every time a new wave comes in, things tend to go to Hell in Oregon (especially Portland). It's kind of at critical mass in PDX right now, in terms of the housing and real estate market. Rent is skyrocketing, going up on a consistent basis, and buying a house is near impossible for the Portland natives now with Californians selling their million dollar homes and throwing more cash at Portland listings, often sight unseen, to create bidding wars that can push the sale price of a place to tens, or even hundreds of thousands more than the original list price.

Something similar has happened/is happening in Denver, Austin, and I suspect it's starting to happen here. We'll see if that momentum continues with the economic downturn the state has taken. An oil bust may be a blessing in disguise if it reduces our attractiveness to the droves of imports that have the potential to drive the locals out of the housing market.

[oklip955]

Nope, I think we have the land so builders will build. I don't see an end to homes in the upper 100 or the 200K range. If the ones with $1M there are lots for them to choose from or have custom built. I don't see a problem except with land prices going way up. There will still be affordable areas such as Mustang, Yukon and Piedmont areas. Edmond well it has been and will be high but there are areas in Edmond one can find a decent home for under 200K.