Doug Oles of Evergreen Custom Homes and Marty Creech of Creech Construction are owners of successful family-owned businesses in Greenville, South Carolina. Oles builds custom homes in the nationally acclaimed Cliffs Communities, which are spread throughout the Upstate of South Carolina and into western North Carolina. Creech focuses on major remodeling projects including kitchen, bath and whole-home remodels.
Greenville’s housing market has remained relatively steady in the boom and bust that have been trademarks of the past ten years in real estate. The market was recently ranked #19 in Builder Magazine’s listing of the healthiest housing markets in the U.S. With modest 3-5% appreciation throughout the early part of the decade, home prices stayed relatively affordable and thus didn’t see a major decline the past couple years as witnessed in markets with double digit annual run-ups like Florida and California.
While prices have remained fairly stable in the market, both Creech and Oles have shared some of the same pains other builders and remodelers have faced throughout the country. Below is a summary of our recent discussion.
Build Intel: How has the recession impacted your business?
Doug Oles: Our production has slowed due to lack of demand and an increase of competition. We’ve had to trim our staff and try to make it through these tough times. We are fortunate enough to have projects through these times. We also had a little foresight and were able to prepare for this downturn. Unfortunately we really do not know how long this downturn will last, and I am sure that many companies in our industry will not make it.
Marty Creech: Dramatically, it has changed people’s priorities from large-scale projects to minor projects. I’ve gone from an average job of $250,000 to $100,000 the past two years. We’ve also had some challenges working with banks that may not be local and understand this housing market has remained stable. I recently had a homeowner wait nine weeks for financing. That’s never been an issue in the past. We’ve had more competition popping up too, from new homebuilders who have entered the remodeling market. I’ve gone from four to five competitors in my market space to 10 to 20.
BI: Have there been any silver linings for you and your business during the downturn?
DO: We have been able to “take stock” in our company and our process. We have had the time to streamline and increase efficiency in regards to process and sub-contract management. Also, with the downturn, pricing on materials and labor has come down giving our clients more value for less cost, making it an excellent time to build.
MC: Yes, we have remained somewhat busy, but I’ve also been able to spend more time with my family during the downturn.
BI: The stock market / analysts have followed the home building industry religiously since the recession began. How much do you follow the housing start numbers and the performance of the big builders?
DO: I do follow these numbers and reports fairly regularly. Because we are in a specific market at a specific price range, I do not put a lot of emphasis in these numbers. It’s good to speak to clients about these things, especially when the numbers are positive, but our clients typically know that they are going to build before they start speaking with us. We do follow some analysts and economic forecasts that pertain to us regionally. Also, I feel the local home sales numbers are a good indicator for new construction in my market.
MC: I really don’t follow these reports. It has little bearing on my market.
BI: Lumber prices are on the rise due to tight supply, have you seen an impact yet with your business?
DO: We have not seen a big impact as of yet, but we are preparing for this in our bids. Obviously an increase in lumber pricing is not going to help the building industry unless you can tell a client that they should build today, because tomorrow their house will cost more. In recent history this has just caused a decrease in builder profit.
MC: Due to the size of my company, I haven’t seen a major repercussion yet. It may have jumped 5%, but on my projects, a 5% jump on the cost of lumber isn’t a huge issue. During the gas crisis about five years ago, we adjusted prices then because everyone else was adding fuel and delivery surcharges, but so far this has had little impact.
BI: What is the general mindset of your buyer right now?
DO: Today’s buyer is looking for a great deal. They know the market is down and they expect to get an excellent price on their project. Today’s buyer is justifiably more discriminating and knowledgeable of costs. These are good things. We recommend being as knowledgeable as possible about a purchase and investment at this level. Today’s buyer must be cautious and make sure they do their homework on the builder as well. Because of the down market we have seen some interesting and possible dishonorable tactics from builders trying to get an edge.
MC: I’ve had many people think that right now in this market, everything is on sale and pricing should be very aggressive. While there is some truth to that, material has really held constant or gone up, so pricing reflects that as well. I have been able to leverage the downturn with some of my laborers because they are short on work.
BI: Are you starting to see signs of a turnaround in the market?
DO: Just within the past two weeks we have started to see a slight uptick in interest. We’ve seen some action in the local sales scene as well as a few more inquiries from potential clients. We have seen some negative news recently on the national new home sales front so we will see if that has an impact on this overall fragile market.
MC: I have a lot of estimates out there. The downtown area has remained strong for me. I’m still seeing customers doing a lot of homework, pulling multiple quotes from different remodelers and builders, but I do feel like this market is heading in the right direction.
BI: Anything else you’d like to add?
DO: It is a great time to build for people who have the financial ability right now. You should be able to get a good price on most projects. The market will come back. Sometimes it’s hard to stay positive, but we must remember that markets do cycle, and this industry has had, and will have, some great years. The companies that can make it through the bad times should be set up for positive gains when we get back to a better economy.
An interesting conversation began a few days ago among a few home building industry veterans about how many International Builders’ Shows (IBS) we have attended.
Please note, the Build Intel Baltimore bureau is closed for the Holiday. That means that there won’t be any new posts until Monday. Enjoy your Thanksgiving and be kind to your belly.