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Kitsap homebuilders still on shaky foundations
Considering the downturn in residential home building over past years, Steve Brett counts himself lucky.
As president of D Lane Homes in Bremerton, his construction business has been slow since the onset of the recession in 2008. Compared to the peak in activity between 2005 and 2008 — when he built more than 20 homes and sold them at the top of the market — he has worked on less than 10 homes since then, building them smaller.
He feels lucky to still be in business.
“It’s been slow,” Brett said. “We’re not crying, we’ll be fine. We’re one of the few that’s going to make it on the other side.”
Bremerton and Kitsap County’s new home construction rates are at a fraction of what they used to be before the housing bubble burst in 2008. In addition to damaging contracting and building businesses, leading to growing unemployment of construction workers, the housing crisis has drained tax contributions to county and city governments, as well, and caused construction-related businesses, such as Parker Lumber in Bremerton, to fold. As a result, local builders are changing the way they do business in order to stay afloat.
Nonetheless, big housing projects are still plugging ahead in the midst of the weak housing market, including the seven-house Chico Beach Cottages project on Chico Way and East Park in East Bremerton.
Because of the changes in the economy, Brett said buyers are looking for different qualities in homes and he must adjust his speculative homes — new homes built without a buyer — accordingly.
“We’re very careful about building houses that we think the public wants,” Brett said, adding that there is a higher demand for rambler-style houses instead of the multi-story homes that were popular just a few years ago.
Troy Olson, of TNT Home Builders in Port Orchard, said the drop in bank lending for home buyers has forced him to make his business leaner. At the beginning of 2009, he had contracts to work on 12 new homes and remodels, but only one of those contracts got financing to be completed.
“It’s very difficult to prepare for that,” Olson said.
The drop in new housing construction is reflected in the number of new single family residence permits requested in Kitsap County and Bremerton. After its peak in 2003, when 1,023 new single family residence permits were requested in Kitsap County, that number has steadily declined almost every year, reaching 205 in 2010. Bremerton’s single family residential building permit requests peaked in 2007, with 101 permit requests. So far this year, that number is 34.
Mainly, most housing construction in the county is remodels, said Art Castle, executive vice president of the Homebuilders Association of Kitsap County.
As a result of the downturn, Olson has cut spending on advertising, instead doing more face-to-face networking with potential customers, and has cut his bids on projects, aiming to earn a living wage instead of a fat profit.
Last year was the slowest time for Olson’s business, but has since seen work pick up - he is working on building 10 new homes this year in Kitsap, Mason and Jefferson counties. However, he doesn’t see the mid-decade building peak happening again, regardless of how much the industry may recover in the coming years.
“We’ll never see a large volume of construction like we had 2002 to 2006,” Olson said, adding that banks won’t give loans as freely as they used to. “Lending was too loose.”
OUT OF WORK
Ed Kissam of Poulsbo was pushed out of the industry altogether. After 20 years as a contractor - more than 10 of those years in Kitsap - Kissam decided to switch focus last year when work became scarce. Instead of trying to find his own work after jobs dwindled, he decided to help other unemployed or underemployed construction workers find work.
A little more than a year ago, Kissam started Your Building Resources, a for-profit website that helps contractors advertise their businesses and find clients and helps homeowners find businesses who specialize in the projects they are seeking to have done. In May, he started a non-profit organization, We Will Help You, to link jobless contractors seeking work with homeowners.
The need for such an organization is demonstrated by the numbers.
New unemployment claims from Kitsap County construction workers have fluctuated between 38 and 360 per month between February 2004 and December 2008, according to figures provided by the state Employment Security Department.
The numbers held in that range until January 2009, when that number shot to 1,092 and has bounced between 350 and 600 in the following months.
“Some have gone bankrupt, a lot can’t get bank loans anymore,” Kissam said of the county’s out-of-work contractors. “They’ve either had to sit for awhile and let their wives work or they have to take a lot less paying jobs.”
He hosted an open house in Hansville in September to help contractors network with home owners and held another one in Poulsbo on Wednesday. Next month, he hopes to hold more open houses in Silverdale and Bremerton.
Kissam said his work for We Will Help You has connected him with several other contractors like himself who have turned away from the construction industry out of frustration.
“There are some that just cannot handle it anymore and have just hung up their license,” he said. “They were angry. It affects their whole life.”
Despite the challenges he’s faced in recent years, he has no regrets about ending his construction career.
“I’d rather be doing this,” Kissam said. “I do love construction and I am building my house right now, but I’ll leave other people to homeowners that are needing the work done.”
FEEDING THE ECONOMY
The decline in new housing not only hurts local contractors, but drains county and city governments, as well, said Art Castle, executive vice president of the Homebuilders Association of Kitsap County.
The last time Kitsap housing construction’s effect on the economy was studied, in 2001, Kitsap’s new homes generated $100 million worth of income in sales tax and real estate excise taxes for cities in Kitsap County and Washington, Castle said. He estimates that figure is down to $30 or 40 million now.
Even if construction rates do return to the peak levels seen three to five years ago, city and county income from that construction will be 25 to 35 percent less than what it used to be because of the lower value of homes, Castle said.
“It’s one of the reasons why local governments continue to suffer,” he said.
Local businesses have suffered, as well, including Bremerton-based Parker Lumber - where Brett used to buy lumber - which folded earlier this year after 87 years in business.
In the midst of the housing depression, the Cottage Company, building seven new homes in a one-acre space on Chico Way, sees itself as giving the local economy a boost when the construction industry needs it most.
“You’ve got a lot of construction workers out there sitting at home and watching TV,” said Linda Pruitt, owner of the Cottage Company.
Her company enlisted the services of Fairbank Construction from Bainbridge Island and uses several other Kitsap businesses for labor and materials, including roofing from Seabeck-based Davis Exteriors, foundations from Forefront Property Services in Bremerton and civil engineering services from MAP Ltd. in Silverdale. The crew regularly gets baked goods and lunch from Monica’s Waterfront Bakery in Silverdale, as well, Pruitt added.
Two of the seven homes in the project have already been sold for the asking price. Houses are being sold for $549,000 to $660,000, aimed at white-collar professionals who might be sizing down from larger homes. The houses range from 1,450 to 1,750 square feet.
It is the first development in the county to be built in the county’s new “urban low” zone, which allows four to nine homes per acre. This higher-density development reflects a shift in focus away from the one-acre-per-house preference in Silverdale to a housing design that better accommodates population growth, Pruitt said.
MOVING FORWARD IN EAST PARK
East Park, located in the area of Schley Boulevard in East Bremerton, is one of the largest residential development projects in the city. Developers envision a community of 400 houses, ranging from one to four bedrooms, but the pace of construction is slower than originally planned because of the low demand of new homes and tighter lending practices.
“The sales haven’t been what they once were,” said Don Holz, plat manager at East Park.
Since East Park broke ground a year ago, 17 houses have been built and 12 have been sold and occupied. The original plan was to build 75 to 90 houses per year, but next year, builders may only reach about half of that number, expecting about 40 new houses in 2011.
Developers still plan to reach the 400-house total for that neighborhood - it will just take longer to reach that goal, Holz said.
Despite the steady declines in new construction, Brett said the housing industry has bottomed out and senses he’ll see business pick up in the coming years.
“I kind of see the signs,” he said. “I feel like there’s less animosity toward buying new construction. People are starting to open up their pocket books a bit more. It’s small changes, it’s baby steps.”