A changing landscape

   In 2003, seven national and regional homebuilders constructed a little less than half of all single-family homes in the Colorado Springs area.
Last year, the same companies' share of the Springs market slipped to less than a quarter of the area's new homes.

   Today, one of those companies is building mostly townhomes. Another hasn't pulled any single-family building permits this year. A third apparently has halted local homebuilding.

   As the Pikes Peak region's single-family-housing slump deepens, some national and regional builders have scaled back, shifted direction or closed up shop.

   The fallout from their change in strategy is a mixed bag for the community - lower prices for local buyers in the short term, and increased land-buying opportunities for local companies, some builders say.

   Meanwhile, downsizing by national and regional builders has renewed hard feelings on the part of some longtime Springs-based companies, who don't like what they call their bigger rivals' hardball tactics and willingness to walk away when times get tough. It's the same thing some of the larger builders did during the area's last real estate downturn 20 years ago, local companies say.

   "We resent the sales we've lost over the years to the nationals, the almost carpetbagging effect they've had," said Mark Watson, president of New Generation Homes in Fountain and a longtime family-owned builder. "They steal our ‘subs' (subcontractors), take our customers from us and they're not going to be here to support the market and the city over the years."

   In their defense, national and larger builders have a different way of operating, said Bobby Ingels, board president of the Housing and Building Association of Colorado Springs and a local developer who operates his own company. National and regional builders have greater overhead costs to support and when sales slow, it's not surprising they reduce production, Ingels said.

   "Local guys certainly have done some scaling back and in some cases have had to lay some people off," Ingels said. "They (local builders) don't have the option of closing the branch office because the branch is the main."

   The bitterness has its roots in the way deep-pocketed national and regional builders move into a market and purchase large numbers of homesites, said George Hess, president of Springs-based Vantage Homes and former HBA board president.

   "They made it more difficult and more expensive for local guys to play," Hess said. "They made it more difficult for local guys to buy lots. They dump a lot of ‘spec' inventory (homes without buyers) on the market."

   And big guys who leave or scale back operations make it tough for their customers to get problems resolved - a level of service that some local builders take pride in, said New Generation's Watson.

   But because some national and regional builders are scaling back, buyers might find lower prices as those companies try to unload homes. That's good for buyers, but puts pressure on local builders.

   "Generally, when a national pulls out, they will really reduce prices and cut deep, deep discounts to unload their inventory," said Randy Deming, chief operating officer of Springs builder Campbell Homes. "That hurts us. If we get into that sort of marketplace, everybody goes from door to door and asks for the same deep, deep discount."

   Don't expect wholesale price cuts by local builders and remaining national builders, however, said Ingels. The cost for land and construction materials isn't getting cheaper, he said.

   Downsizing on the part of some national and regional builders has given a builder such as Challenger Homes of Colorado Springs a chance to buy land that wasn't available before.

   Three years ago, Challenger wanted to buy lots from a local land developer, but the developer would sell only if Challenger bought at least 40 home sites, said company President Brian Bahr.

   Now, Challenger has contracted to buy 300 to 500 single-family lots on the city's north side and in northern El Paso County, which were previously controlled by Richmond-American Homes of Denver, Bahr said. Richmond-American remains a major player in the Springs market, although its local homebuilding has dropped slightly over the past five years.

   "Those (lots) wouldn't have been there in other markets," Bahr said.

   Richmond-American, which has been among the most active builders in the Springs in recent years as measured by the percentage of single-family building permits it pulls, declined comment. Last year, Richmond-American's percentage of single-family building permits fell to 10.3 percent from 12.3 percent in 2003, according to the Regional Building Department.

   Lennar Corp., based in Florida, didn't return phone calls, while Tousa Inc., also with headquarters in Florida, declined comment. Lennar has built homes in the Springs under its name and the U.S. Home brand, while Tousa builds in the Springs as Engle Homes. Texas-based D.R. Horton, which has done business as Melody Homes in the Springs, also didn't call back.

   National builders are facing the same problems as local companies.

   A meltdown of the nation's mortgage industry has led to thousands of foreclosures in the Colorado Springs area and millions around the country. Lenders are putting foreclosed homes back on the market at a discount, creating stiff competition for the newhome industry.

   Also, the downturn in the national economy has many potential buyers sitting on the sidelines, waiting until they're more secure in their jobs before they decide to purchase a home.

   Some publicly held national and regional builders, therefore, must decide where to invest their resources and which cities offer the best profit potential.

   Lennar hasn't pulled any single-family building permits this year, and local builders say the company has stopped constructing homes in the Springs. Five years ago, its market share was 6.1 percent, compared with just under 1 percent in 2007.

   Engle Homes also hasn't pulled any permits this year, although it's unknown if the company is still building in the Springs because it declined comment. D.R. Horton has pulled 16 singlefamily home permits so far in 2008, compared with nearly 300 five years ago.

   Michigan-based Pulte Homes, a publicly held company that had about 12 percent of the Springs' singlefamily market in 2003, fell to 2 percent in 2007. In 2008, Pulte, which builds mainly entry-level homes, has pulled four single-family building permits, according to Pikes Peak Regional Building Department records.

   But Matt Mandino, Pulte's Colorado division president, said the company is not leaving the Springs. For now, Pulte has shifted its Springs strategy to townhomes because of buyer demand - townhomes are more affordable for many people - and profit potential. Pulte is one of the Springs' most active townhome builders, according to Regional Building Department records.

   "We figure out where to invest," Mandino said. "I'd rather invest in townhomes in the Springs. It's a business decision. It is where we think we can get the greatest return."

   When it comes to local builders' frustration with national companies, Mandino said, "we have made a significant investment in Colorado Springs over the past few years and many of our Colorado-division employees live in the Springs, including me."

   California-based John Laing Homes remains active in single-family-home construction in the Springs; it had a market share of 5.9 percent in 2003 and 5.2 percent last year.

   John Laing remains bullish on the Springs; it builds in some of the area's higherprofile areas, such as Wolf Ranch on the Springs' northeast side and the Banning Lewis Ranch on the east, said Charlie Roter, Laing's vice president of sales and marketing for Colorado.

   John Laing doesn't plan to alter its business plan, even as some competitors change theirs, Roter said. John Laing sells pricier homes to first-, second- and third-time move-up buyers who prefer the company's stylish architecture and other amenities.

   "We're just going to ride the market as it goes," Roter said.

   Even as some national and regional builders scale back or pull out, however, a few others have entered the Springs market.

   Denver-based Oakwood Homes, which targets entrylevel buyers, came to the Springs area a few years ago and accounted for nearly 5 percent of all singlefamily building permits in 2007.

   Greeley-based Journey Homes also had about 5 percent of the market last year, while Capital Pacific Homes of California - part of the corporation that owns the Banning Lewis Ranch - pulled 1.1 percent of local building permits in 2007.

   Of the national and regional builders who are downsizing, Campbell's Deming said he's not sorry to see them go or cut back. But, he said, he knows the large companies will come back when the market turns around.

   "They'll be back," Deming said. "And that's why a lot of them are not completely pulling out. They want to maintain a presence here."

CONTACT THE WRITER: 636-0228 or rich.laden@gazette.com

AT A GLANCE

A sampling of national and regional homebuilders and percentages of single-family-home building permits they've pulled in recent years in Colorado Springs and El Paso County:

Beazer Homes: Atlanta-based builder has been more active in the Colorado Springs' townhome market than the single-family-home market.

2003: 0.2 percent.

2005: 1.3 percent.

2007: 1.4 percent

D.R. Horton: The nation's largest builder of singlefamily homes, the Texas-based company has built locally under the Melody Homes name.

2003: 6.7 percent.

2005: 2.5 percent.

2007: 2.9 percent

Engle Homes: One of several homebuilding divisions of Florida-based TOUSA Homes, the builder has been a minor player in the single-family-home market.

2003: 0.7 percent.

2005: 1.9 percent.

2007: 0.9 percent

John Laing Homes: California-based builder has maintained a solid presence in the Pikes Peak region's single-family-home market.

2003: 5.9 percent.

2005: 8.1 percent.

2007: 5.2 percent

Lennar Corp.: Miami-based company was one of the largest national builders to set up shop in the Springs, previously built under the U.S. Home name.

2003: 6.1 percent.

2005: 8.9 percent.

2007: 0.9 percent

Pulte Homes: Michigan-based builder left the Springs market in the 1980s, returned and was one of the biggest players until it shifted to townhomes.

2003: 12.1 percent.

2005: 8.6 percent.

2007: 2 percent

Richmond-American Homes: Denver-based builder continues to be one of the area's most active builders:

2003: 12.3 percent.

2005: 10.2 percent.

2007: 10.3 percent

   SOURCE: Pikes Peak Regional Building Department; Gazette research