Dotti Weber, executive officer for the Home Builders Association of Northern Colorado in Windsor, said only 345 new housing permits had been taken out in the region as of the end of May compared to 814 in 2008, which saw a nearly 50 percent drop from 2007.
Weber, who noted that her office staff has shrunk from three to one, said the recession has been devastating for the industry. "We've lost members - we're down to about half the members we had two years ago," she said.
One of the HBA's lost members is PLS Homes Inc., an offshoot of one of the region's oldest and most respected homebuilding companies. PLS, formed by longtime local home builder Leo Schuster shortly before his death in a 2004 plane crash, has disconnected its phones, closed its Loveland office, shut down its website and suspended further activity on lots in various stages of development this spring. The company's latest 30-house planned development, Thompson Overlook in southwest Loveland, has only one partially finished home. PLS Homes spun off from Schuster's Progressive Living Structures and has worked hard to keep a local presence and personal relationship with its homeowners. Its signature designs are well-made modern Craftsmanstyle homes in compact developments, with names drawn from the Colorado landscape. Notable neighborhoods developed by the company include Le Jardin in Fort Collins, Poudre Overlook near Laporte and Eagle Ridge in Greeley.
PLS principal partners George Hart and Bill DeForge declined to be interviewed for this story, although DeForge said the closing of the firm's office did not signal the end of the company. "We just moved out of our office," DeForge said. "That's all we've done."
But Mark Librande of Remax Alliance in Loveland, who has sold many houses for PLS Homes over the years, confirmed that the company may be done. "They've pretty much ceased operations as new homebuilders," said Librande, one of the company's biggest
shareholders. "It's been a great company and we've developed some wonderful neighborhoods and I'm a little sad to see that go by the wayside."
Dire straits for many
PLS' situation is one example of the dire situation facing many of the region's homebuilders as the recession that officially reared its head in late 2007 has deepened.
The HBA's Weber said one of the biggest challenges for builders is the fact that local banks - even those with longtime builder relationships - simply aren't offering construction loans.
"They're not lending money - that really is the problem," she said. "(Builders) with a well-qualified pre-sold home can't get the construction loan to build it."
HBA President Vicki Wagner, owner of Western States Builders and a 25-year industry veteran, said she also sees bank financing as the main impediment to getting home construction going again. "I've never seen quite this situation where money's not moving," she said. "Back in the 1980s, even when (interest) rates were high, you could still get a loan." Wagner said that's been taking a heavy toll on homebuilders struggling to keep going. "Some builders are down to one person - and that's them - and they're back swinging a hammer again," she said.
Patrick Brady, president of FirstBank of Northern Colorado, said it's not that banks don't want to help loosen credit and get things moving again. "The No. 1 issue for banks is capital right now," he said. "The federal regulators say your cash cushion is ultimately what's important to us." Brady said lax regulation of bank lending in recent years led to many having too much money loaned to builders. That's preventing many banks from being able to offer them affordable financing, he said. "Builders and developers had too much easy credit, and now the credit's dried up," he said.
Some banks, like FirstBank, are still within lending limits but are holding onto a cushion for their longtime customers and avoiding pushing that limit, he said. "We'd fill up in a hurry because there's so much demand," Brady said.
Worst in nearly 40 years
Steve Spanjer, owner of Spanjer Homes in Fort Collins, said the current downturn in homebuilding is the worst he's seen. "It's the slowest home building activity I've seen in my career since 1970," he said. "It is an extraordinary time." Spanjer said the obstacles to home building's resuscitation are many. "They come from several directions - (too
much) inventory, new unsold homes, and foreclosed homes are all competing with new home starts," he said.
Other obstacles include strict new federal regulations on bank lending and appraisals. Builders need to bring more money to the table to get loans and interest rates for those loans have been raised in many cases, Spanjer noted.
As a member of the board for the National Association of Home Builders, Spanjer said homebuilders all over America are suffering. "This is happening to every builder in the country." But he said Fort Collins, especially, may come out of the doldrums sooner than many other places. "Fort Collins hasn't been devaluated like other parts of the country on property values," he said. "That's the good news."
But the bad news will likely continue for awhile. Most economic observers say the ongoing recession probably won't show significant signs of improvement for several more months, and that raises the prospect of more builders going out of business or - like Louisville-based McStain Neighborhoods in May - declaring bankruptcy to try to restructure and keep going until a turnaround happens. Brady said tight credit won't loosen until loans now on banks' books are paid off and they have some cushion to begin lending again. "Getting some loans off the books will help banks," he said. "Eventually, we'll get to a place where banks can lend again. But there's still some pain to be borne, I'm afraid, before that happens."