The Housing Bubble

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This guest post is contributed by Nicole Adams, she writes on the topic of Construction Management. She welcomes your comments at her email id: nicole.adams83@gmail.com

The great American dream of owning a home has come crashing for many of this country’s citizens with the housing bubble collapsing and leaving them without a roof over their heads and a basic bank balance. All they’re left with is a pile of debt that they have no idea how they’re going to pay off. They’ve been forced to leave behind their homes or have it foreclosed because the recession made it hard for them to keep up with payments.

Today, with the way the real estate market is, it’s hard to believe that it was just a few years ago that the housing sector was booming – homes were in great demand because mortgages were available cheaply and you did not even have to prove the ability to pay back before you were given a loan to buy a home. The demand led to investors too jumping into the market, hoping to make a quick buck by buying and selling homes quickly or flipping them after a few renovations. And because homes were selling like hotcakes, many more were being built as quickly as possible.

Now the words demand and haste don’t really go well together – ever heard the clichéd saying that Haste makes Waste? That’s what happened finally – with people eager to jump on this money-making bandwagon, quality fell by the wayside. According to this article in the New York Times, owners of sleek condos built during the first decade of this century are now up in arms against the shoddy construction that is beginning to tell through leaky windows and roofs and faulty heating/cooling units. The number of complaints is expected to rise because many more condo units were built during this period when the housing bubble hit its peak.

We can see what really happened:

* The high demand fueled builders to build more homes and condos;
* They compromised on the quality of materials used because they wanted to make a huge profit and knew that people would buy at any cost;
* With the amount of construction taking place across the country, there was a shortage of skilled manpower and quality building materials. This led to construction companies making do with just about anybody or anything to build their condos and homes, which in turn led to the demise of quality.
* Municipalities did not have the time to inspect and certify all the new homes that were popping up by the dozen.

So all in all, while there was rise in quantity, the quality of homes fell significantly during the housing bubble. Today, there are some people with no homes at all because of the recession. And then there are the others who thought they were sitting pretty only to see their homes falling apart and deteriorating by the day because of poor construction quality.

These links added by Ben Jones:

New York Magazine. “Brooklyn would look very different today without Robert Scarano. The architect of hundreds of buildings, Scarano was incredibly prolific during the aughts building boom, especially in Williamsburg. He became known as a developer’s best partner, a man who could squeeze every salable square foot onto a lot. He’s also been widely criticized for his blocky, bulky designs, creative parsing of the building code to get approval for uncommonly large projects, and working with developers who run shoddy construction sites.”

“Earlier this month, the City Department of Buildings barred Scarano from filing permits and plans because he ‘repeatedly submitted false documents in an attempt to circumvent the law.’ Suddenly, the neighbors aren’t the only ones wringing their hands: New Yorkers who’ve bought Scarano apartments—particularly those angling to sell—are grappling with his downfall.”

“One East Williamsburger who has had her ceiling replastered is fatalistic. ‘Until the leaks are fixed, I can’t worry about selling this place,’ she says. Another North Brooklyn owner says the ductwork in her apartment’s HVAC system doesn’t meet code and adds that the six-story building has no wheelchair access. Others single out ’sweaty’ windows—possibly a sign of poor insulation—and misrouted cables.”

“Attorney Adam Leitman Bailey, who represents disgruntled owners at eight Scarano projects, says some clients had bedrooms that didn’t meet city specifications and therefore were called closets. When your two-bedroom abruptly becomes reclassified as a one-bedroom, the resale value will likely be downsized as well.”

The Register Citizen in Connecticut. “A proposal to complete the second phase of the Mountain Ridge condominium complex has some downhill residents concerned about an increase in water run-off. There are currently 32 units in the development. Twenty-five years ago, there were supposed to be a total of 99 units built in two phases, but a downturn in the economy meant the project was abandoned after the first phase was completed.”

“Mike Godburn lives downhill of the condos, and though he says he ‘certainly understands’ the position the condo owners are in, ‘I only own one property, and I can’t take a chance that this could have a negative impact on it.’”

The Sun Sentinel in Florida. “Chinese drywall problems in Parkland could soon lead to even lower property values for homes in the city. The Broward Property Appraiser’s Office has received applications for property value reduction from 115 homeowners in Parkland dealing with Chinese drywall. If all the homeowners get the reduction they are looking for — 89 have already had their building value reduced 50 percent — the total value of the homes will go down more than $30 million.”

“‘This is affecting every Parkland resident,’ said John Willis, a member of the Chinese Drywall Task Force. ‘The Broward Property Appraiser’s Office reduces building value by 50 percent for homes that have Chinese drywall. The total value of the homes was $74,285,860. The value after reduction, if all applications are approved, will be $43,917,800 [so] the total loss of taxable value will be $30,368,060.’”

From WINK News in Florida. “The Cape Coral city council has agreed to an exception to its laws to help a family remove toxic drywall from their home. Richard and Larene Tullo can’t stay in their home during the reconstruction; they say the toxic fumes from chinese drywall are just too overwhelming. But sleeping soundly in their own RV outside was also against city laws.”

“‘We used to come down here on weekends and do stuff, now we’re coming down here on weekends and removing everything,’ said Richard Tullo. But his dream vacation home in Cape Coral now is his nightmare remodel project.”

“‘The entire house, all the sheetrock has to come out, all the electric has to come out,’ Tullo explained.”

Scripps News on Florida. “Within the first six months of buying their new Vero Lake Estates home in 2007, the air conditioning unit in Bradley and Alyse Simons home mysteriously stopped working. Shortly after that, the couple began to experience nosebleeds, stinging in their eyes and sensed a foul odor in their single-family home. They soon started coughing up blood and noticed certain fixtures in the home were showing signs of corrosion.”

“‘We lived without air conditioning for six months because (repair companies) would try to repair it and replace the parts, but it never got fixed,’ Bradley Simons said. ‘They replaced five different parts and the coils, twice.’”

“Dozens are taking their builders and drywall manufacturers to court. Some, like the Simons, are simply walking away from homes, risking foreclosure, while some homeowners are considering paying for expensive repair procedures that promise to fix the drywall problems and salvage the home. Dreams the newly married Simons had of raising a family in the home quickly turned into a nightmare when they confirmed their new $170,000 Mercedes Homes residence was built with Chinese drywall. ”

“‘I called Mercedes Homes as soon as I found out and asked for help, but they said they were in bankruptcy and weren’t liable for anything,’ said Bradley Simons. ‘It was pretty upsetting because we only lived in the home for a year.’”

The Daily Press in Virginia. “Local politicians are lobbying for President Barack Obama to visit area homes affected by toxic Chinese drywall while the president is here for his Hampton University commencement address on May 9. State Del. Glenn Oder, R- Newport News, and local resident Eric Bailey are part of a state task force that’s working on solutions to the Chinese drywall issue. Homeowners have complained that gases emanating from the drywall cause numerous health problems that force them from their homes. Meanwhile, they still have to pay their mortgage. The gases have also corroded metal and wiring in many homes with Chinese drywall. The drywall was mostly used during the mid-2000s housing boom, when there was a shortage of building materials.”

“Bailey, whose Hollymeade home is affected by Chinese drywall, said he was discouraged by the meeting. ‘I don’t think it went well at all,’ said Bailey. ‘We heard a lot of ‘We can’t do this’ and ‘We can’t do that.’”

The Arizona Daily Star. “When Richard Hanson drew up the design for his $45,261 resort-style pool, he envisioned a horseshoe-shaped masterpiece, complete with a swim-up bar. What he got came up far short of what he expected - and of what the Arizona Registrar of Contractors said he had a right to expect.”

“Although the pool looks good from a distance, it’s plagued with problems that make it almost unusable. Hanson was protected. By using a state licensed contractor, he is eligible to collect from a special fund for victims of shoddy work. But nearly three years after filing his initial complaint he has yet to receive any money - nor is he likely to anytime soon - because the fund is all but broke. And he’s just one of more than 700 Arizonans waiting to recover from that fund.”

“Hanson’s pool sits in disrepair, rust gathering on the bottom ‘like measles spots,’ the vents and plaster stained and corroded. The swim-up bar is ‘drastically off-center,’and an underwater abutment can scrape or bruise swimmers, Hanson says.”

“The water in the pool may look pretty, but that’s ‘very deceptive,’ he adds. Because of problems with a non-chlorine system he bought from Whitewater, ‘they told me to put 53 gallons of muriatic acid and 104 pounds of calcium in the pool,’ says Hanson. ‘I have some very serious pH problems.’”

“Rachel Hopkins and her husband custom-designed their dream home in 2005, only to find that a stucco-like substance used on the exterior was giving way in 2007. Hopkins filed an initial complaint with the registrar in June 2007. But by the time her investigation was complete, it was 2009 and her contractor had had both his commercial and residential licenses revoked. ‘We have cracks on the corners of our windows,’ said Hopkins. ‘There’s a parapet that’s cracked on the top of the house.’”

The News Tribune in Illinois. “Chris Luke and partner Brad Brueckner of DeKalb have begun building 10 spec homes in the Illinois Valley. While other developers have been reported as saying the local housing market is saturated with new homes, reducing the need for more construction, Luke believes the problem isn’t the amount of homes available but the type of homes.”

“When moving to the area Luke ran into a problem he thinks is common for people his age. The homes in his price range were old and new homes were too expensive. To address this issue, Brueckner & Luke Builders are planning to price the five homes they’re building in the $150,000-$200,000 range to reach home buyers looking for a quality first home or an easy step up from their starter home.”

“Along with building some homes in a price range younger shoppers can afford, Brueckner and Luke plan to build homes that are sized for families to actually live in, unlike the oversized homes that were selling before the housing bubble burst. We push big kitchens and family rooms,’ Luke said, noting he believes the housing trend is going toward focusing on the rooms people use most often, rather than building living rooms that rarely, if ever, get used.”

“He wants to bring the energy efficiency benefits of green building innovations to the area. He said some new technologies could lower energy bills by up to 25 percent. ‘We view indoor air quality and energy efficiencies as more important than flashy items,’ Luke said.”

“That means less focus on granite countertops and more eco- and potentially wallet-friendly technologies, such as recycled cellulose insulation, air exchangers and high efficiency HVAC systems. To make sure those steps are effective, Luke said they perform blower door tests to determine how airtight a home is and infrared tests to find any breakdowns in insulation before homeowners move in. Luke foresees these energy efficiency testing steps as becoming market norms in a few years and plans to stay ahead of the curve.”

“‘We believe in the structure of our homes,’ Luke said. ‘You can always change light fixtures or carpets but you can’t go back and build a tighter home.’”