David Mandarich, President and Chief Operating Officer of M.D.C. Holdings and Richmond American Homes, provided an insightful look at home building in Denver, CO as well as observations on the national housing market. Mr. Mandarich feels that we have reached the bottom of the market for homes under the $1,000,000 mark. It is going to take a couple years for things to trickle up however. "Thank heavens we live in Denver!", he said. The market although improving, still has some healing to do. It appears that Bank of America, nation wide, has 800,000 homes in foreclosure and another 600,000 going into foreclosure. It is guessed that Wells Fargo may have as many as 1,200,000 homes in foreclosure or in process.
As is well known, across the country home builders have cut way back or stopped building. Over the last several months, new construction is roughly a third of what would be the norm.
It appears that Richmond American is well positioned in the home building industry with strong cash reserves and new strategies for today's market. Richmond's present day focus is on the "sweet spot" in the market which is single family detached homes. Far more often than in the past, Richmond is finishing basements and with high ceilings. This way the consumer gets their basement finish in their mortgage.
Some of the hot markets nationally are the San Francisco Bay area and Seattle, both driven by technology and intellectual capital. Virginia, being driven by the U.S. Government, has a good housing market as well. Some areas such as Las Vegas have a very heavy investor market due to such long falls of housing prices. Hedge funds are putting together groups to buy and hold as many as 300 to 500 homes.
Richmond used to be known for having a lot of standing inventory, a good thing for Realtors working with out of town buyers. Today they are not building lots and lots of spec homes. Now they are instead building homes "to order". Another change in the market for Richmond is that there seems to be a new unique currency. Eight to ten percent of people today are paying cash when purchasing a new home.
In the Denver area, Richmond American Homes has exciting new developments. One of these is the Villas at Cherry Hills. Actually the ground is in Denver, although it borders Cherry Hills Village. The location is at Quincy Avenue and Monaco. There are 53 lots and the homes will be selling in the 500's. The landscaping is maintenance free. It's a great concept and location. It is anticipated that the sellout will only take approximately eighteen months.