New home construction plunged to an all time low in December. The Commerce Department says 2008 was the worst year for builders since 1959. This latest economic jolt comes after several years of a slowing real estate market in Northeast Ohio. As part of our ongoing series, Stories from the Line, ideastream®'s Mhari Saito talks with local builders about how they are coping with the economic crunch.
On a cold snowy day, a worker drills a for sale sign into the front of Ken Lurie's Rysar building on Cleveland's Chester Avenue. Inside, the receptionist at the front desk has been replaced with a telephone and a list of extensions for a guest to call. Lurie was once one of Cleveland's biggest builders of new homes. Over the last year and a half, Lurie has lost $4 million and cut his staff of 45 to four people.
Ken Lurie: We're stuck and we have over 100 houses that we have to figure out what to do with. The banks could take them back. But the banks know we would do a better job of disposing and selling what we have and finishing whats not complete.
Local homebuilders have been struggling to keep their heads above water since the local home market cooled in 2006. Joe Race says in three years, membership at his organization, the Cleveland Home Builders Association, dropped from 750 builders to between 500 and 600 companies. Race says builders are staying afloat by taking odd jobs from remodeling to side businesses.
Joe Race: I've heard of a guy who has just started a pizza shop too..and it's a testament to our members' will and strength that they're willing to do whatever it takes to not only survive but be prepared for when the times get good again.
Some are in a better position to hang on than others. In Bainbridge, workers ready the walls of an indoor pool at a custom home construction site. Builder Dino Palmieri says the 18,000 square foot mansion should be finished later this year. Palmieri works with the million dollar plus buyer, usually business owners and doctors from the region's medical centers. He says while his annual revenue has stayed level, he has seen a dip in the number of committed projects for his company.
Dino Palmieri: There is a lot of competition right now. So you have to be very sharp in terms of design, sharp with the client and explain better to the customer what they are getting for their money because they have lots more options.
Builders struggling to find buyers faced even more challenges when the credit crunch hit. So says Jeff Budzowski a local builder and the president of the Cleveland Home Builders Association. Not only did home loans dry up for buyers, but some banks called in loans to builders already struggling with cash flow problems. But even a year ago, Budzowski says he thought the market would turn.
Jeff Budzowski: A lot of us thought, well this may be short term, we'll get through maybe this is five or six months, maybe a year. We really had no idea that this would last as long as it did. And now we see what the situation is and it really is going to take Congress to enact something to get us out of this.
National and local Home Builders Associations are lobbying Washington for lower interest rates on mortgages and tax credits for home buyers. Lenders have already dropped 30-year mortgage rates to below five percent but it hasn't exactly caused a stampede back into the market. Most builders aren't waiting for Washington to keep their doors open. Take Cleveland's Ken Lurie. He is looking back to his early days as a rehabber for ideas on how to save his company.
Ken Lurie: What it is to survive now is its back in the car. its rolling up my sleeves. and its looking at houses it going back to exactly where I started. Except now I have 17 years of experience.
Lurie is considering a rent-to-own program for first time buyers in once foreclosed Cleveland properties he would rehab. But he's still working out the details on how to get homeowners financing.