October 19th, 2010
01:06 PM ET

Contractor: We could build homes if banks 'loosen up'

Contractor Paul Kinney, owner of Race Point Inc., on the site of a $3.5 million new home, says the Building Permit/Housing Starts report is misleading. Banks are not funding the permits. Most projects, like the one he's building now, are funded by foreign money.

The U.S Census Bureau and Department of Housing and Urban Development released its monthly report on housing permits and new construction and it shows the upward trend in this economic indicator continues.

The report shows single-family home building permits in September were 405,000 up 0.5 percent above over August. Single-family housing starts in September were 452,000; this is 4.4 percent over.

CNN's Jim Roope reports however that the contractors who turn building permits into buildings say these numbers are not necessarily reality because banks are still hesitant to fund permitted projects. Contractors say new homes may be getting the green light by cities, but not the greenbacks by the banks to start construction or in some cases complete construction.

Paul Kinney, owner of Race Point Incorporated, a top 500 builder of new homes, says he can get 30 permits by the middle of next week, but the banks aren’t lending money so the report is misleading.

“Remember a couple of weeks ago when they came out and said guess what the recession was over? That rumble you heard was the construction industry laughing their ‘friggin’ brains out,” said Kinney.

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Filed under: Economy • Jobs
soundoff (127 Responses)
  1. Marshall

    Sure you could. it is not like we are over built right ???? There arfe so many homes out there and nobody wants the cookie cutter McMansions anymore . They will be the rooming houses of thew future . Too expensive to heat, cool, maintain, and taxes. I wonder when builders are ever going to smarten up and build smaller, energy efficient , and cheaper homes ? Hooray for the banks for saying no until the housing mess is cleaned up and the builders get a clue as well!!!!!

    October 19, 2010 at 3:32 pm | Report abuse |
    • Masonwasp

      Builders respond to the market. When people start asking for smaller, more efficient homes, they will respond. Bank lending not only affects the McMansions, but also affordable housing, commercial renovations and building, etc.

      October 19, 2010 at 3:37 pm | Report abuse |
  2. whynotwrite

    The US economy needs more 3 1/2 million dollar houses like Hienz needs tomatoes. Any good builder could and should go into the rehab business. That is were all experts have been saying for years (for contractors) to convert to rehabs vs. new build. I know a guy who switched over completely to kitchen / bathroom remodels and is loaded with work for months to come.
    It is like the dinosaurs ..... adapt or bye bye!

    October 19, 2010 at 3:34 pm | Report abuse |
    • Rus

      What's wrong with 3 1/2 Million dollar homes? Seems to me like that would be good for local property tax revenue, which goes right to schools, not to mention what homes like this do to neighborhood property values as well.

      Seems like folks wants everyone else to downsize these days, which will then short all of the tax revenue from smaller property values as well as employment (it doesn't take as much labor to build smaller homes).

      October 19, 2010 at 3:48 pm | Report abuse |
  3. Jack

    The article fails to mention that these builders probably have multiple loans on the books with the banks for developments that they cannot turnover. They want the bank to continue to float the loans, but still lend them more money to build new homes. In addition, the government is requiring the banks to set aside higher loan loss reserves on these development & spec homes which are sitting on their books where the developer cannot sell the property. A building permit does not equal the sale of a property.

    October 19, 2010 at 3:37 pm | Report abuse |
  4. rodfromnc

    The banks are doing this so that the GOP win in the Midterm elections. They want no regulations to pursue their endless greed.
    What is 28 bankers in a bus going off a cliff? A good start!

    October 19, 2010 at 3:39 pm | Report abuse |
    • redisgreat

      If you are thinking of voting Republican in November, just remember who brought you the last recession. No regulation was their mantra. Yeah thanks for nothing. Oh and if you voted for Chris Dodd or Barney Frank then you had a big hand in it too.

      October 19, 2010 at 3:43 pm | Report abuse |
  5. Isabel

    Did any of you know that approximately 1,000 human hands touch a home during the construction process? It truly is one of the last man-made products we have. That does not account for every other person who contributes to the manufacturing of the products that are installed in homes. I am proud to say I was a homebuilder and helped to deliver the American Dream to people, but I also watched people stand in line, fighting to buy new houses a few years ago as we opened each phase, we all are responsible on some level for everything that has happened.

    It saddens me that no one seems to stop and think about the everyday families like mine who have been financially devastated by this crisis. We were not getting rich; we were just living day to day like many other people out there now we are lucky to buy a full cart of groceries.

    Find Balance, Let's get homes sold, Let's get Building back on-line, Get lending back-on line responsibly, LET'S PUT OUR FELLOW AMERICANS BACK TO WORK!!

    October 19, 2010 at 3:51 pm | Report abuse |
    • sdmco

      Here! Here!

      October 19, 2010 at 4:39 pm | Report abuse |
  6. RenaP

    Come on people – be reasonable. How do you expect the Bank Executives to make their million dollar bonuses if they go loaning out money?

    October 19, 2010 at 3:53 pm | Report abuse |
    • Seymour

      Quick lesson on how a bank works in the simplest forms.

      Take in deposits. To gather deposits, offer to pay interest. THis is an expense. It cost the bank money. To make money, loan the depositors money out at a rate of interest greather than what you are paying and at enough to pay for your cost. Bank lend money to make money.

      October 19, 2010 at 4:12 pm | Report abuse |
  7. The_Mick

    They could build more homes, but who would be buying? And it seems to me that the builders are trying to milk every bit out of their enterprise by building deluxe properties that cost considerably more than existing homes – so that if you want a new home, it costs and extra or more.

    October 19, 2010 at 4:00 pm | Report abuse |
  8. franknhenry@yahoo.com

    Builders / Borrowers, for the most part, don't get it. They think they are worthy. They think they have the money. What they don't consider is that most of them can't go on indefinitely while they wait for the house to sell. I saw this time and time again as a lender. They think their product is special, but in the end is no different to anyone else's product.

    October 19, 2010 at 4:02 pm | Report abuse |
  9. John

    My guess is, Mr. Kinney is not old enough to have lived through housing boom and bust cycles, having only experienced the boom. Live and learn.

    October 19, 2010 at 4:07 pm | Report abuse |
  10. shauna

    i know my situation is slightly different but even with 203k loans the $ is HARD to come by... you have to jump through hoops and pick the right number to get the funding AFTER being approved. The banks are making lending difficult on so many levels that most give up.

    October 19, 2010 at 4:11 pm | Report abuse |
    • Seymour

      On a mortgage loan the hoops you jump through are those created by government...and it seems more hoops appear every day.

      October 19, 2010 at 4:14 pm | Report abuse |
  11. Steve

    Yes banks are tightening up – because they are getting hammered from FDIC and State examinations. Not the too big to fail banks, but your local community banks. I know this after sitting in several exit interviews recently. Comments about what is happening in New York, Kansas City, and Denver. What does that have to do with financing rural America?? Lenders financing construction loans, or spec homes would be taking on more risk with the glut of existing homes on the market already, it doesn't make sense. Trying to finance a home loan over 417,000.00 limits your options as well, since these are deemed jumbo loans and are usually non-conforming, and don't qualify for FHA/VA financing. This story is from the contractors point of view, and remember the first 3 letters of contractor spell CON. He won't be concerned when the project is completed and he is out of the picture, and the bank is now sitting on a non performing assest if the borrowers fail to perform. Thats what banks need now, more toxic assests.

    October 19, 2010 at 4:15 pm | Report abuse |
    • Judy

      Thank you, Steve. FINALLY a response from someone who knows what they're talking about.

      October 19, 2010 at 5:23 pm | Report abuse |
  12. royaleman

    I am fighting right now with one of the largest banks in America where they have literally shut down the most successful project in the state that sold 50 homes in the last year. Why??? Because they can. Meanwhile we cannot start the next homes, we have 4 buyers with deposits out of a string of 5 townhomes, we have permits, and no financing. The homes under construction are not being funded either so that the contractors are acting as the funding source, rather than the bank than has a mortgage on the property. And the bank's response? First, for 90 days, no response at all. Second, sign a loan amendment that gives up all rights to sue them for failing to meet their obligations. The loan amendment also ensures that when the loan matures, it will go right back into default. It is set up for failure. This is an absolute travesty. And this is for a borrower with an unblemished history of repaying loans. Imagine someone who has other problems.

    October 19, 2010 at 4:26 pm | Report abuse |
  13. mojobutta

    Build houses? LOL... Does anyone know there are over 3,000,000 homes in foreclosure, a glut of UNSOLD houses and no buyers?. First figure out how your going to sell what nobody wants.

    October 19, 2010 at 4:26 pm | Report abuse |
    • royaleman

      If you are building in NV, FL, CA, or AZ that is the case. In the Northeast.... not so much. In fact, according to Zillow, where I live, home prices have risen the last year.

      October 19, 2010 at 4:33 pm | Report abuse |
  14. Keith

    Yes Steve you are correct. The bank examiners are putting enormous preasure on banks to limit their Commercial Real Estate loans and this does include single family housing that is still under construction. The banks want to lend money because that is how they make money. At the bank I work at we always have cutomers wanting real estate loans but we have to turn them away because we are already past the limit at which the examiners will hammer us. And by the way, these people are being pushed away from banks they have banked with for years because all banks are under the same preasure to reduce their commercial real estate loans.

    October 19, 2010 at 4:38 pm | Report abuse |
    • Seymour

      Amen, amen, amen. This is the part of the story that is not being told. The Federal and State regulators are severly limited what banks can lend on, regardless of how good the credit. Many small banks are in desperate need to lend moeny and can't because of the regulators.

      October 19, 2010 at 5:02 pm | Report abuse |
  15. Joe

    That 3.5 million dollar home is junk. Look at all that pressed wood chip board. Ill use plywood thank you.

    October 19, 2010 at 4:38 pm | Report abuse |
    • redisgreat

      True. Expensive homes are built just as poorly or in some worse than prefab mobile homes.

      October 19, 2010 at 4:42 pm | Report abuse |
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