Monday, November 5, 2007

Note to builders: Please stop

2 years ago I was shopping for a house. We looked into a brand new subdivision in a the suburbs that was being built by KB. We found one we liked, worked it all out, put down a deposit, and "designed" it at the KB Store. It was not fun. If you've never done it before, selecting the options for your house at the KB Store is kind of like being the only customer in a Best Buy on Christmas Eve with 25 rabid commission-paid employees.

Who knew it could cost $600 extra to have a certain color of brick.

After further research, a miserable experience, and additional exploration of the area, we decided to bail out. We walked away because we decided buying a brand new cheap KB house surrounded by other cheap KB houses that all looked the same probably wasn't a good idea. It was the best decision ever.

I drove into that neighborhood to see how it was doing. Not surprisingly, "my" house already looks like a garbage dump and is for sale. Fifty bucks says its a foreclosure. Half of the other homes are also for sale, or "For Lease". If KBs apparent "take the money and run" strategy wasn't bad enough, they're still building houses. I have no doubt we'll be reading about KB and other home builders complaining at the loss of profits soon, and seeing some CEOs resign with multi million dollar severance packages.

Until then, they'll continue to build cheap houses, take more shortcuts on top of the shortcuts they already take, and flood the market with matchstick homes that will fall apart in 10 years, if not the day you move in. No one will want to live there, no one will buy them. These suburbs will be the new slums, taking on the ambiance now reserved for backwards rural trailer parks. At best, the land will be worth more than the house and they'll just be demolished, to be replaced by newer cheaper versions. Throw-away homes, bought and discarded like cheap plastic toys from Walmart. And in the wake of it all, families with foreclosures and bankruptcies.

If you ask me, subprime defaults are only the tip of the iceberg of what is to come in the US real estate market.

2 comments:

Mike, Nicki, and Josh said...

I think that most major markets are finally at the point where the buyers are hard to find. Eventually, when KB's numbers come out and they realize that the demand isn't keeping up with the supply, they'll stop building.

As consumers, we have the responsibility to stop buying overpriced crappy homes too, instead of trying to buy in to make a quick buck on a flip.

The government's also responsible for continuing to allow low (and lower) rates for loans.

We're all guilty. Eventually, I just hope all the parties will let the market take care of itself, so that I can be there with cash in hand to buy some foreclosures for pennies on the dollar.

Nivek said...

I was talking to a building inspector who told me about some builders he knew who were so desperate to unload houses they were knocking as much as $100k off of $400k houses and still making a profit. I asked the building inspector if he thought the houses were worth it and he said he'd never buy one. He said sub-standard building is rampant and that he'd rather buy a 20 year-old house than a brand-new one.