Tuesday, June 10, 2008

Street of Dreams Revisited

A few months ago I pointed out the 2007 Street of Dreams was a total bust. I reported that only one of the six homes sold but it sounds like that one fell through too.

From the Oregonian:

"The timing was probably about the worst ever," said builder Ray Derby, a Street of Dreams veteran who is still trying to sell his $1.9 million home. "We just hit a bad market."
The idle homes show what can happen to builders who test the market's limits of luxury, price and location at what turns out to be the crest of a historic boom. When the market slowed, in this case, the builders got stuck holding homes that turned out to be pricier and tonier than the rural Clackamas County market could support.
The 2007 Street of Dreams' troubles reminded builders of the 2001 show. That year, the show opened in Hillsboro just as the dot-com economy busted, leading to sluggish sales. Derby said he needed about 18 months to sell his 2001 show home.
With last year's bad timing and an out-there location, broker Craig Reger, who tried to sell one of the show homes, called the 2007 show's conditions "a formula for disaster."

Without a buyer, upkeep falls on Foushee and his work crews.
"It's not fun," Foushee said.
Foushee, a golfer, mows the putting green out back. His crews drain the front-yard pond to sweep out algae. Walking next to the wine cellar, Foushee spots dust gathering on the walnut wood floor. "I gotta get guys in here to clean this up," he said.
The house is still outfitted with $460,000 worth of furniture from the show. "The couch alone," Foushee says, "was $38,000." He wouldn't say exactly what his loan payment is, but Foushee said builders for homes in that price range typically must cover a $8,000 to $12,000 monthly payment.
Foushee first advertised the house for $3.2 million.
He's now listing it at $2.9 million, and he just wants to get the house off the books. "I'd take less than that," Foushee said. "I'll take a loss, and it's fine."

Myth busted. How many times have we heard, ‘Prices can’t go any lower because we are approaching the builder’s cost base.’ Buyers determine what the home is worth not sellers.
Just as the 2007 show ended and the housing market started to slide, Greg Heinze learned he'd be the lead developer for the following year.
By then, it was clear to anyone that the housing market was headed for trouble.
Heinze, a Street of Dreams veteran, said he and the Home Builders Association of Metropolitan Portland needed enough builders to attract about 80,000 visitors.
But he said they had to look hard to find interested builders.
Some builders already had too many homes to sell. Others found that lenders required more upfront cash equity than they could handle.
They talked briefly about canceling the 2008 show, Heinze said. Organizers for the Seattle version of the Street of Dreams canceled this year's show, but the group's statement didn't specify why.
In Portland, Heinze and the builders association decided to go ahead.
Heinze, though, remains confident. He scans his half-built 6,400-square-foot Street of Dreams home on Mount Scott's peak above the coursing traffic of Interstate 205. He points to the view and a downtown skyline that shines through the blue-gray sky. Around him, a framing crew hoists a beam into place, a circular saw whirrs and a nail-gun's compressor growls.
Heinze said he did a few things differently to build his house at a lower cost this year. He went with a truss roof built off-site and a steel foundation to reduce construction schedule and interest costs.
During the 2006 housing boom, Heinze said he might have asked $2.25 million.
Now, he's thinking less than $2 million.
"It's primarily market driven," he said. "You're absolutely insane to go over $3 million. You're pretty crazy to go over $2 million."