Home Builders Also Losing Homes to Foreclosure
Astoria Homes, a private home building company has fallen prey to the housing market slump. The local company has been forced to fire 17 employees just last week.
Now, it only has 17 employees on its roll, a mere tenth of its entire workforce in 2005-2006, and Astoria Homes President Tom McCormick says that the company has no other choice but to go into hibernation until the market recovers.
According to McCormick, lenders refused to grant the company a loan extension which would allow them to continue building. This caused 30 homes to foreclose, ten of which are upgraded models.
McCormick says that Astoria Homes had no way to secure financing since many banks refused to grant them loans, while some banks have been seized by the Federal Deposit Insurance Corporation. The company has experienced a huge decrease in sales – from 627 in 2006, going down to 320 in 2007, and even further down to 192 in 2008. This means an average of less than 10 houses per month. McCormick says Astoria is not bankrupt however, and still plans to continue house construction in five neighborhoods in Las Vegas.
There have been signs of a worsening situation as builders in Las Vegas struggled against sliding prices due to Las Vegas foreclosures. Last December, 65 percent of existing homes that were sold were bank-owned. This pushed median price to $157, 250. In comparison , the median price for new homes was $240,880 in the same month. However, home builders say that it was already impossible to further lower down price due to land costs. Some companies in Nevada have also shut down because of rising Nevada foreclosures.
According to analyst Dennis Smith, also the president of Home Builders Research, builders have not shut down to keep people employed, but now there is no other choice since there has been a lack of profit. Many more private home builders are expected to follow suit since they have less capital than large public builders.
