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Homebuilders feel economic pinch

Posted January 8, 2009
Updated March 9, 2009

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— Two years ago, Trey Gaylord said, his family's home-construction company built more than 25 homes. Now, the Gaylords have no homes under construction and hold seven unsold houses.

Gaylord, of Richard Gaylord Home, Inc., said the economy has affected how the company has priced the unsold homes, too.

“We know the market is down, and we have tried to be real careful about pricing things correctly,” Gaylord said.

Housing market suffers amid economic downturn Housing market suffers amid economic downturn

One home, with a marble entryway, spacious kitchen and office, could have sold for up to $875,000 in a good market, Gaylord said. Now, the home is priced at $750,000

“What is common across all income spectrums is fear,” North Carolina State University economist Mike Walden said Thursday.

Walden said consumers have lost roughly 11 percent of their wealth so far in the current economic downturn.

“Who has the most wealth to lose? That tends to be high-income people,” Walden said.

Homebuilders say they believe people are interested in buying new homes, but they don't because they are worried about the economy.

Some homebuilders say government incentives could make a difference. They say tax credits and low mortgage rates could get Americans spending again on real estate.

Walden said he believes incentives could be a move President-elect Barack Obama is ready to make.

“I think you could make a strong argument the housing market has to recover first before the broader economy recovers,’ Walden said.

Walden said a turn in consumer confidence and spending is the quickest way to turn the economy around.

Consumer spending accounts for about two-thirds of the U.S. economy.

54 Comments

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  • Carguy Jan 12, 2009

    Lots of ignorant comments here.

    Dep of Labor statistics show that each new single family home built creates almost 4 new jobs for the economy. This builder directly employed fifteen or twenty people and indirectly helped pay the salaries of hundreds (subs, suppliers, insurance, banks, mortgage lenders, etc.).

    For the record, sales in all price points have drastically declined in the past year. Gaylord shouldn't be singled out because he builds in this price point. Plenty of entry-level builders are on the rocks now, too.

    Hating people because they're successful is a particularly petty way to think and is, in fact, un-American.

    I hope this builder makes it through the recession and goes on to make millions of dollars. I hope he builds himself an even bigger mansion--because if he does, he will have contributed infinitely more to the economy than those who sit around whining about how much more their neighbor has than they do.

  • wrx44 Jan 9, 2009

    Justin T....good post. You are right...nothing against Gaylord construction at all. They just have to realize that is is hard to get empathy for any type of bailout if they are living a life that few people can afford.

    I think the Homebuilders Association/Lobby actually does their members more harm then good, as they fight safety regulation, and any efforts for the building industry to share in infrastructure costs. And those stances then influence the public against builders...as we can see in many of these posts.

  • mondo Jan 9, 2009

    if people wuld just go green we wuldn't have this problems

  • bs101fly Jan 9, 2009

    bummer, so they'll have to dip into their millions of profit they've got hidden away to pay less taxes on.
    we're ALL dealing with it!

  • Justin T. Jan 9, 2009

    wrx44 - excellent point and understanding a few posts back about the homebuilders association. They are doing even worse things than you mention... they also fight any improvements in the building codes to keep costs low, many times at the expense of safety.

    I also believe that this local builder is a benefit to our community. Let's not beat up a small business because most of us can't afford the product.

    That said - there is absolutely no way I would support any subsidies for homebuilders or even incentives to homeowners unless they are in financial need.

  • wrx44 Jan 9, 2009

    This has nothing to do with Class envy, so quit changing the issue. I could afford to buy a Gaylord home, but like another poster mentioned, I live below my means.

    The Gaylords could be fine people, but if you are living in a $1.3 million dollar inside the beltline home, don't come asking for government assistance. The builders should have saved so you could weather the downturn like the rest of us!...or sell your $1 million home and live in the $500k home slums.

    I completely understand that the market to most extent, not all...drives home buying.

    That doesn't change the fact that the taxpayers should not keep paying for the infrastructure to support the subdivisions...the builders don't want to pay any, and fight tooth and nail to keep it that way.

    Now they want $100 billion for their industry?...Forget it.

    They have made their bed and irritated plenty of buyers and consumers in the home market. The American taxpayer is tired of lining builders wallets with our tax money!

  • java323 Jan 9, 2009

    Everyone knew this housing bubble was going to come crashing down eventually - even if NC wasn't part of the bubble like Calif, Florida and Nevada - the price of housing in those areas were way over-inflated and now millions of people are up-side-down on their mortgages and foreclosing - the govt should have stepped in years ago and stopped these lenders then. Now look at the economic situation - the whole housing sector was built up on a lie and now the entire country is paying the price. Lenders don't want to lend to anyone - companies from all sectors are now suffering and cutting jobs. Now will come another round of foreclosures because of the high unemployment and our govt is digging itself deeper in the hole while the creators of this mess get off scot-free with a bailout.

  • ncguy Jan 9, 2009

    The house for 860,00 reduced to 750,000- Oh gee thanks that is still out of the ball park for 98% of the people in this world.

    How about building some homes that regular Americans can afford. Why you won't? Oh I see, your exhorbitant profit margin will go down to a realistic number. If these builders would build home in the 150,000 - 200,000 range they would probably be selling homes. I am just amazed that when I see most new home subdivision they are for the wealthy. I am like how many millionaires are there?

    I talked to someone in the business and he said there are enough high end homes finished to last 2 years in a good market.

    As for hiring non Americans to build these homes - I can't fault them- I would do the same and so would you.

  • briannelson76 Jan 9, 2009

    MJW - I couldn't agree more. Most of these comments I have read could be helped by a basic lesson in Economics 101 at your local business school. Builders don't magically create a market - rather they answer demand in the market by producing a product the market accepts. For the last 3 years I have personally had the privilege of representing Richard Gaylord Homes in a neighborhood they were building in as part of a custom builder team. Their product is superior to most in the market and anyone reading this should feel honored to be living in a home constructed by them. They are not the enemy here - just a LOCAL EMPLOYER who happened to comment on the state of the housing market. The stimulus acts in Washington have thus far done nothing to restore confidence to the market - and thus many feel something should be done to help that cause. Plain and simple.

  • icmfal Jan 9, 2009

    Oh please. One would think after years of overcharging for houses, hiring only cheap labor, and building homes as cheaply as possible - they could not save some money?

    Let me see if I can find a tear to shed for them. No.. I sure cannot fine one

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