Friday Update May 14, 2021
Oh snap 408 homes on the market today! Over 400 for the first time in a while so I guess the inventory crunch is solved. Just kidding, this market is absolutely awful for buyers and if you're a buyer under 350k it's (almost) impossible. For comparison last year at this time when we thought things couldn't get much tighter we had 851 homes active on the PPMLS. This is the first time in my 8 years of selling real estate that I say to buyers "it doesn't matter" when they ask me my opinion on price of houses. Because my opinion is irrelevant as there is always a more desperate buyer with a more desperate agent who together will gladly put together ridiculous offers 10-15% over list with their parents savings as an appraisal gap. I have a really difficult time intentionally placing buyers under water and then hoping for the best. I would honestly rather not sell real estate than fuck people over like this, but hey, agents got leases on their Lexuses to pay so get your money boo boo.
Today I'm gonna rant about builders and I might just shit on a couple in the process. Let the bridges you burn illuminate your path I say. Let's start with a bit of history that I wasn't around for back in the good old days of 2008ish.
National builders like Richmond had the if you build it they will come mentality which worked for a while. And then the market started to tank while builders were sitting heavy on inventory. Doing significant price reductions on their specs would have the effect of driving down values across the community which would mess up appraisals, so instead of doing that they would still try to sell houses for full price and then just pay the Realtors a huge commission out of it. Like instead of say 6-10k they would pay like 30-40k just to dump these houses. The agent would then live it up while knowingly putting their buyer a minimum of that commission amount under water. Some of those agents are still in the business and that's all I can really say without violating ethics rules. Then the market fully tanked and some of these national builders left our market. And a bunch of people foreclosed on those new builds.
Builder #1 I'm gonna talk about is DR Horton. I have some clients that I consider friends that were looking to buy their first house. Their parents have owned real estate and held rentals for a while and are just overall super neat and financially literate people. They have instilled the same in their daughter who together with her husband wants to create some financial stability for their future by owning real estate as both an inflation hedge and a source of rental income. If you've read my blog you know how much I love this whole concept.
We go to DR Horton late last year like maybe August and go under contract on a house. To the builder's credit their process is incredibly streamlined where the buyer just chooses the model that they want and one of two trim packages. Literally everything else is already picked out down to the lot and paint colors. This is a smart way for the builder to control costs and provide a uniform product for a great price, at least in theory.
Construction kicked off quickly and moved along to close on time. The only issue is that the house was not ready for closing and their superintendents were hanging shower doors and trying to finish all types of detail work while the buyers were signing their final paper work. I would have liked to delay closing so that the house was right but as you know when people are moving out of a place there are usually other people moving into it, and so the pressure of doing stuff on time becomes very real. Builders know this, and they exploit it.
Long story short the house sprung a bunch of leaks within the first 2 days of my folks moving into it, the builder treated it like an inconvenience to them to fix the issues that somehow made it past their quality control, and then lollygagged on building a fence for almost 2 months. We politely followed up weekly about the fence, like hey the buyers have a baby and a dog can we get that fence please, everyone else has theirs, can we get ours? Those requests were ignored until I told the builder I'd build the fence myself, bill them $100/linear foot, and put liens on every house under construction until they pay me. That concept got through to them, the fence got built that week, and now I'll never take another client to DR Horton. It's not that building houses is easy especially in the circumstances we're in today, it's just that not being total assholes is fairly easy and customer service should not be ditched just because demand outpaces supply.
Regardless of that whole rant above the clients walked into probably 60-70k in equity the day of closing just because of how stupid this market has gotten.
Now I have a house under contract and in this instance I won't mention the name of the builder because this issue is unresolved. This particular builder sold a bunch of lots at the end of 2020 to a bunch of excited buyers. Then lumber pricing went up close to 90% in 4 months. Not the builder's fault. Not the buyer's fault. Guess who is facing the prospect of being homeless though? Not the builder.
So now we have a bunch of foundations and work has stopped. 5 months from the time the contract was signed yours truly receives an email just saying that construction has stopped, you can get a full refund, you can wait for lumber to drop, or you can pay an extra $30,000 and we will get right on building your house. Pretty frustrating when you put this in context of families with small children needing a place to live, counting on having a place to live, and then finding out the builder isn't going to deliver on their contract. I'll get deeper into this rant once we reach some sort of resolution on it but just know that apparently now not honoring your contract is seen as a decent option for builders.
Yesterday I got an email from another local builder announcing essentially an auction on 3 new builds they're putting up. Starting price is X and you guys have 3 days to bring your highest and best offer to us. I think this email went to every agent in the city so that should be fun for buyers.
This highest and best model is becoming kind of the norm now with new construction. And while I completely understand how the disruptions in the supply chains are making builders' lives difficult its honestly nothing more that greed to run your businesses this way. It's short sighted and quite honestly 100% dickheaded. It's one thing for private sellers to be this greedy and selfish, but when your company that has been building a reputation for years does the same what does that say about the leadership? Short sighted and poorly thought out guys, extremely stupid in the long run to treat people this way. But hey, just file bankruptcy later, change your name to something super patriotic and start over with a brand new sales crew that you hire directly from Applebee's.
All of that being said if you're thinking about selling a house I am so excited to help I'll literally show up with not only a smile but 100s of sales of experience. I'll then paint an extremely realistic picture for you and after that likely exceed those expectations on the actual sale. And if you want to buy a house just know that yes I absolutely do care, and genuinely want to help you, but what I'm able to do depends entirely on your financial situation and I hate saying that, but it's true.