50-plus companies show interest in taking Portland wireless

Tuesday, September 27, 2005
The Oregonian

Fed chief optimistic about homeowners surviving price drops

WASHINGTON -- While the high-flying housing market still holds risks, especially for the financially stretched, most homeowners are in a fairly good position to weather a shock if prices drop, Federal Reserve Chairman Alan Greenspan said Monday.

"The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said in remarks delivered via satellite to a banking conference in Palm Desert, Calif.

Greenspan, who has repeatedly warned about the potential perils if the housing market were to suddenly go south, also made clear that several factors -- risky mortgages and speculative activity in particular -- warrant close scrutiny.

The quicker turnover of second homes, such as for investment or vacation purposes, appears to be feeding the surge in house prices, Greenspan said.

Greenspan's latest thoughts on the housing market came after the National Association of Realtors reported that sales of previously owned homes in August posted their second-highest level on record. Home prices, meanwhile, increased by the largest amount in 26 years.

Builder thrives within boundaries

Arbor homes dominate as urban-growth limits keep national developers at bay
Thursday, September 01, 2005
JONATHAN BRINCKMAN
The Oregonian

Portland-area developers traditionally complain about the region's urban growth boundary, a land control system intended to hem in new construction and protect forests and farms from urban sprawl.

Not Dennis Sackoff and Wally Remmers, co-owners of West Hills Development, which does business as Arbor Custom Homes. The two say the boundary has given them a competitive advantage by making land acquisition here too difficult and costly for national developers.

"The urban growth boundary for us has really been our friend," Sackoff said. "The perception in the country has been that this is a difficult place to do business. It kept the major builders out of the market."

Adds Remmers: "We are just so much more nimble than they are, and our risk tolerance is much higher than theirs," referring to national builders.

The pair now dominate the Salem/Portland/Vancouver home building market, with permits for 634 homes issued so far this year, according to the Construction Monitor, a Utah company that tracks construction across the West. That's 194 more than the 440 home permits issued to the company's nearest competitor, D.R. Horton of Fort Worth, Texas.

It's been a phenomenal housing streak -- West Hills Development has built 4,904 homes since it was incorporated in 1995. But what happens if interest rates rise and home construction slows?

"It's not a question of if, it's when," said David Oringdulph, owner of Matrix Development of Tigard, the parent company of Legend Homes. "We're prepared. We're slowing down." Oringdulph adds that the urban growth boundary has hurt consumers, causing the ratio of home prices to average income in the Portland area to be among the highest in the nation.

Sackoff and Remmers say they aren't worried about the possibility of a slowdown and plan to accelerate. Last year their company closed on 789 homes and grossed $186 million, Sackoff said. This year he expects to close on about 900 homes for a gross revenue of $230 million. Both say the urban growth boundary will protect them. By limiting the number of homes that have been built in the market, they say, the boundary has protected the region from a housing glut that would translate into a sharp market downturn if demand faltered.

"Builders have a tendency to overbuild," Remmers said. "But the fact that we have an urban growth boundary limits the supply of housing."

Also, said Remmers, the region is much more economically diverse than it was in the early 1980s, the time of the last big housing downturn. It's no longer dependent on just a handful of industries. "The dynamics of the market have entirely changed," he said. "We'll probably never see a low point like we saw in the past."

Sackoff and Remmers teamed up in 1986. Sackoff, a small custom builder in St. Helens, met Remmers, a Portland Realtor, at a family barbecue. Remmers is a first cousin of Sackoff's wife, Mary. Sackoff is a Portland State University graduate who once owned a pizzeria in St. Helens; and Remmers is an Oregon State University graduate who played defensive guard for the school football team.

At first the two moved slowly. Sackoff drew income from his wife's job as a special education teacher in St. Helens while his wife did double-duty as the builder's bookkeeper. Remmers kept selling real estate. The two built a handful of houses a year, two in 1986, 15 in 1987 and 25 in 1988. By 1996, the pair were up to 82 houses a year.

Things exploded in 1997. That year the pair built 202 houses. The impetus, said Sackoff, was the arrival of national builders on the Portland scene.

"He and I had been building for about 10 years, and we were doing 50, 60 houses a year, grossing 10, 12 million bucks," Sackoff said. "We were making pretty good money, an OK living."

Then, he said, national builders, including Dallas, Texas-based Centex Corp. and California-based Ryland Group, began sniffing around Portland. Those companies, each publicly traded, had huge amounts of capital -- nationwide, Centex sold 32,896 homes in 2004 and had revenue of $12.1 billion; Ryland sold 15,101 homes across the country in 2004 and had revenue of $4 billion.

Sackoff said he figured he and his partner would be relegated to second-tier.

"We looked at them and thought that was the death knell for the local builder," Sackoff said. "We figured we are just going to end up being relegated to the small niche builder in West Hills, building stilt houses or something."

Instead, said Sackoff, the national companies largely avoided bidding wars for high-priced Washington County properties and began focusing on less-expensive east side properties. And Sackoff said, he and his partner got aggressive about buying land on the west side and building homes. They also moved away from building custom homes -- designed for each client -- to lower-cost production homes, which are built according to a template before being sold.

"We put together a plan. We were going to sell to young families," Sackoff said.

Their new formula -- aggressive land buying orchestrated by Remmers, production building orchestrated by Sackoff -- worked well. One of the innovations was "bonus space," unfinished rooms in houses that sold for $129,000 or less that buyers could complete themselves.

"We built houses that were affordable, but we put a lot of the things that people put in more expensive houses," Sackoff said. "We understood perceived value. And so we were able to translate that into a product that was readily acceptable."

Sackoff and Remmers found another way to increase market share and decrease sales prices in the low-cost home market: They cut lot sizes. The pair realized that by putting pocket parks and other public spaces in their developments they could give homeowners open space even while cutting lot size.

"They have struck upon a niche," said Mark Brown, who as land development manager for Washington County oversees the issuance of county building permits. "These smaller lot developments have become the mainstay here."

Of the 1,400 single-home building permits issued in Washington County in 2004, the largest number -- 546 -- were issued to West Hills Development.

David Bragdon, president of Metro, a government that coordinates land-use planning across 25 Portland-area jurisdictions, thinks West Hills Development is on the right track.

"They have been pioneers in integrating public space in the their developments and have shown adaptability in terms of changing household size" he said. "They are agile."

Competitors respect the company. "For Arbor's market, they are absolutely dominant," said Randy Sebastian, owner and founder of Lake Oswego-based Renaissance Development Co., which specializes in building $400,000 or more production homes. "For me, it's is nice to see the market leader be a locally owned company that is not controlled by Wall Street."