Builder Spotlight: Newmark Home's Parent Company Files Bankruptcy

By DeeinAustin™

I was in a Austin real estate market update class this week where Residential Strategies gave a year-end summary and forecast for the Austin area.

Here is what was said for the January 2008 market summary.

1. Texas isn't doing bad compared to other states, but many national builders are in trouble due to their activity in Florida, Arizona and California.

2. Dallas, Houston, and San Antonio real estate markets are overbuilt in the affordable home price ranges. Builders are doing auctions and fire sales to get rid of their sub-$150k inventory.

3. Austin continues to buck trends and will continue to do well in 2008. The downside is that national builders in Austin will still suffer because their parent companies are in trouble.

4. National builders located in Austin have already pulled back on inventory, which may cause a shortage in 2009.

WHY NEWMARK HOMES AND OTHER AUSTIN BUILDERS MAY BE IN TROUBLE

Residential Strategies is a market research firm with clients that include builders, developers, governments and other large entities.

"National Builders such as DR Horton, Standard Pacific, Newmark and Lennar may see financial trouble in 2008." -Mark Sprague, Austin Partner for Residential Strategies.

Here is Mark's reasoning...

• Since Texas, Austin and other hot markets were so selling quickly in 2005-2006, the national builders showed phenomenal profits to Wall Street. As a result, they continued to receive enormous loans to continue building.
• National home builders in Texas ramped up in 2005. They built as much as they could in 2006 to keep up with demand.
• They were on track in 2007 in Austin until the mortgage market changed, which adds to the financial pressure.

HOW WILL BUILDER BANKRUPTCIES AND FINANCIAL PROBLEMS AFFECT AUSTIN REAL ESTATE?

So how will overbuilding mistakes made in Florida, California, and Arizona affect Austin real estate? It's not as bad as you think. Most likely, the builders we listed here will be more flexible by offering greater incentives to buyers. They have already slowed further development.

Mark and other economists predict a shortage of new home inventory in 2009 and 2010 due to the sudden reduction in Austin new home starts from 2007 through 2008. Builders simply won't have enough homes for the expected increase in demand.

Interested in this topic? Read More Texas New Home Builder News...

• Statesman: Newmark Homes, LP parent company files bankruptcy.
• Texas Builders Bank on Lake real estate.
• Lennar pulls out of Reserve at Southpark Meadows.
• Houston home builders move away from starter homes.
• Austin 2008 Parade of Homes held in Rough Hollow.

Comments

[NM real estate]

I heard that a lot of new homes are vacant now because of the bubble burst. It's a shame, but you can never really count on anything in real estate.

[Jackie Bunn]

Does anybody know if Obra Homes is still in business? They are not returning calls not paying outstanding bills. Would appreciate any information.

[Dee Copeland]

Hi Jackie! I checked on the TRCC website. Under Consumer, you can check on a builder. It looks like they're still in business.

[Jeffrey Owen]

As these builders get shakier and shakier buyers should really watch who they are buying from. Stay on top the builder. Get good phase inspections. And pound them for repairs during your first year. Document.

Jeffrey Owen
Owner/Chief Home Inspector
IonHomeInspection.com
Houston, The Woodlands, Katy, Sugar Land