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Spec homes return to WNC’s landscape

But Asheville builders and bankers say increased activity spans the spectrum, from “affordable” to high-end homes.

For the first time since the Great Recession, spec-home construction and lending is up in the Asheville area, some builders and bankers say.

Sparse inventory, combined with high demand for houses, caused some financial institutions about nine months ago to free up funding for spec homes.

“It’s important that the building community is able to offer new homes for people who need a move-in-ready home now,” said Brandon Bryant, president and owner of Red Tree Builders in Asheville.

A spec home is one contractors build on speculation, without a confirmed buyer. Developers typically build those types of homes only in areas where they believe a profit will occur.

“Having a healthily balance of new homes and resales balances the market for buyers,” said Bryant, the Asheville Home Builders Association first vice president and a national director for the National Association of Home Builders in Washington, D.C.

“Currently, home buyers have to grapple with the lack of inventory,” Bryant said. “Banks allowing spec loans does allow builders and developers to respond to the demand out there.”

The number of houses in Buncombe County for less than $300,000 is the lowest in roughly a decade, said Don Davies, founder of Asheville-based Realsearch, a company that analyzes real estate trends. Just 441 with an average asking price of $213,106 existed at the beginning of the month, he said.

“We opened up a little bit in the more affordable range at $350,000 and lower about six to nine months ago,” said David Kozak, Asheville Savings Bank executive vice president and chief credit officer.

“That’s what we, as a community, need for working people,” said Kozak, who added that industry analyses and market-share studies showed consumers couldn’t find homes in that price range.

He cautioned, however, that the bank green-lights loans for up to 10 spec homes at any one time.

“We’re not going hog wild on this,” Kozak said.

In other words, a few dozen spec homes coming on the region’s market is not going to solve Asheville’s ongoing affordable housing crisis.

A Nationwide report published last month concluded the Asheville metro area’s housing market has reached unsustainable levels.

The study’s authors ranked the metro area market as the nation’s sixth unhealthiest because of the widening gap between the region’s housing prices and wage levels, said David Berson, Nationwide senior vice president and chief economist.

Finite buildable land is another reason housing costs continue to climb, said Jamie Dose, president of Old Northstate Building Co. in Swannanoa. Because what land is available exists in a mountainous region with rivers, contractors must grapple with complex situations like steep slopes and flood plains, Dose said.

“The dynamics of the (Appalachian) mountains make it a very complex situation,” he said. “People can get more for land because there’s not much of it.”

Dose and his company work with Asheville Savings Bank exclusively, he said.

Old Northstate was the first builder the bank restarted spec-home lending with, Dose said Asheville Savings officials told him. Other companies now are obtaining such loans from the bank.

Dose predicted spec-home lending practices would “continue to expand” across the community because “we’re going to have to have the release of capital to meet the demand.”

The higher-end market for spec-home construction lending freed up even earlier, said Robert Sulaski, a principal and cofounder of Sulaski & Tinsley Homes.

That Asheville-based design-and-build company constructs homes ranging from roughly $475,000 to $1.8 million, said Sulaski, whose company helped develop Biltmore Park.

“Within the last eight to 12 months — the bulk of which are between $650,000 and $900,000,” Sulaski said, describing when the spec-home loan environment shifted.

“We’re consistently building 12 to 14 spec homes,” he said. The buyers “come from other cities.”

Sulaski acknowledged those residences don’t fit into the affordable category, but he said the people who purchase them are a boon to the local economy nonetheless.

They often are small-business owners who “instantly reinvest” in the community, he said.

They bring parts of their businesses to town, buy cars and other products from Asheville-area companies, and bring in revenue by attracting friends who spend money on expensive hotel rooms and restaurants, Sulaski said.

Richard Whitney, president of Whitney Commercial Real Estate in Asheville, concurred.

“That’s exactly my position,” Whitney said. “The money’s coming in.”

Consumer confidence continues to rise, he said. “I don’t suspect problems for years.”

Plus, more people are buying houses, said Peter Best, senior vice president and head of Capital Bank’s Asheville commercial team.

“We’re doing more lending in the speculative market because we’re really centered on the rebound in the housing market,” Best said. “But we’re looking for partners, not whales. We’re not going for home runs. We’re looking for builders with whom we can build relationships.”


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