A depression in the home-building market has claimed a Fishers builder and continues to hammer locally based Davis Homes
LLC--a powerhouse for years that now is facing foreclosure on about 80 home sites.
Central Indiana is faring better than many of the nation's housing markets, but better does not mean well: The local market is on pace to add just 4,500 new homes this year--a 60-percent drop from the annual average a few years ago.
Sales figures don't offer much optimism, either: In the first quarter of 2008, total units sold dropped 15 percent from a year earlier, and the average sale price fell 3 percent, to $139,000, according to the Metropolitan Indianapolis Board of Realtors.
One of the casualties is DayMarc Homes, a custom builder and remodeler that is part of locally based Williams Realty Group. DayMarc fired its staff of 12, closed its Fishers design center, and folded at the end of March.
"It was quite a shock to me, as it was to our employees," said Peter Ruffing, Day-Marc's former president. "It was not a message or a decision I was prepared for."
Every home builder is struggling, but Davis Homes is particularly bruised. The company's count of new-home permits has dropped 70 percent since 2004, and 2008 is on pace to be worse. The firm filed 15 permits in the first quarter of 2008, down from more than 80 during the same period last year. It has shed more than 170 employees since its peak in 2001, and now employs 30.
The 23-year-old company has been stung by the double whammy of low demand and lower prices that make it difficult to build at a profit, CEO Brad Davis said. He believes the market is two years into a four-year trough. He expects some recovery by 2010.
"It's fair to say the housing market is in a depression," he said. "We're just working hard every day to meet our customers' needs, but it is tough. We are primarily focused at this stage on continuing to build current homes for people and not trying to get big numbers on new-home sales, given the price in the current market."
Building a court file
Davis is facing a few lawsuits, the most prominent of which is a foreclosure action by locally based Salin Bank & Trust Co. Salin hopes to recoup a $3.1 million loan by taking back 77 single-family lots in Marion, Hancock, Hendricks and Johnson counties. The bank claims Davis failed to make timely payments on a revolving line of credit.
Brad Davis said the bank gave his company 60 days to find new loans, but the credit markets already had tightened. He offered to turn over the lots to the bank, but it opted to proceed with the foreclosure instead.
Other lawsuits Davis is facing:
Carmel-based Bay Development Corp. claims the company owes about $29,000 for management services at the local subdivisions Orchard Park and Jefferson Park and for trail construction at Hunters Crossing.
California-based Fairmont Management Co. Inc. has accused Davis of bad faith negotiation in connection with Fairmont's purchase of a 12-acre industrial property at 2702 N. Tibbs Ave. from Davis--an allegation Brad Davis calls "totally untrue". When Fairmont bought the property in October 2006, a Davis supplier and partner was leasing the space. But the supplier, North Carolina-based Stock Building Supply Inc., packed up and left a few months after Fairmont paid $3.2 million for the property.
California resident Norm Wielsch sued Davis in February. Wielsch bought a model home at 4414 Wild Pheasant Lane in Indianapolis in exchange for a lease-back agreement in which Davis was to pay $1,700 per month for 36 months. Davis stopped paying in January 2008, the suit says.
The builder DayMarc constructed about six homes a year and 10 to 20 remodels, said Ruffin, the former president. It is owned by Dave Crockett and Marc Freije, the former owners of Karma Records.
The pair also owns Williams Realty Group, a development firm known for retail and office properties--many of which are struggling in the real estate downturn.
Crockett and Freije did not return several phone messages. An office employee said the economy is to blame for Day-Marc's downfall.
The owner of locally based Shane's Landscaping and Design, Robert Delaby, said an attorney representing DayMarc offered to settle for 70 percent of the $2,000 balance he is owed, but Delaby declined. He filed suit in Hamilton County.
Indianapolis-based Carter-Lee Lumber Co. Inc. also is suing, to recover on a tab of more than $142,000 in building supplies. The April 17 suit says the purchases were part of an open-ended credit agreement.
Despite all the grim news, most market observers see reasons for optimism. Home prices here never jumped as much as they did in booming markets in California and Florida. The area's population is projected to grow slightly in the coming years. And low interest rates should continue to generate buying interest.
Steve Lains, CEO of the Builders Association of Greater Indianapolis, thinks buyers waiting for a bottom are too late.
"Yes, our numbers are down, but they're not down as much or more dramatically than other marketplaces," Lains said. "The other thing we haven't experienced is the big depreciation of home prices."
He said builders that reduce overhead and inventory and find profitable niches will survive. Lains said his members have seen more activity in model homes, which eventually should translate into more sales.
Brad Davis sure hopes so. He bought out his brothers, Rick and Mike, at the end of 2006--a year in which Davis built more than twice as many homes as it's on pace to build this year.
"I wish I bought corn futures and gold," he said, only half joking.