Owner-builders outpace traditional companies on permits

by Alaska Journal of Commerce
(http://www.alaskajournal.com)

For the first half of 2015, Hultquist Homes has captured the No. 1 spot for the most single family permits with 21. Spinell Homes ranks No. 2 with 15. Both of these two top ranked builders also build duplexes and multi-family units in Anchorage.

Spinell has a significant presence in Eagle River and the Mat-Su Valley, while Hultquist Homes focuses their building in Anchorage and the Seattle area. However, both of these builders are outnumbered by the owner/builder category which has 27 permits for the first six months.

Who are owner/builders? Usually, they are someone who is affiliated in some way with the construction trades. They may be a home designer, engineer, sheet-rocker, electrician, etc., or just some industrious individual who’s trying to shave a buck or two off a new home.

Frequently, they may already own a lot and are capable of securing financing for their construction and home mortgage with a local lender. Mortgage brokers do not finance owner builders, but full service banks like Wells Fargo, First National Bank Alaska and Northrim may finance owner builders if they have confidence in their abilities and are deemed credit worthy.

The fact that this category outranks Anchorage top builders with a residential endorsement is an interesting phenomenon that started about two years ago. It may be due, in part, to the shrinking number of home builders and their lack of adequate interim construction financing for multiple units and projects

Home construction financing on a speculative basis and residential land development financing are considered the most time consuming and riskiest borrowing any lender can do.

General contractors are licensed, bonded and insured. Depending upon their bonding capabilities they can build hospitals, convention centers, libraries, etc. General contractors with a residential endorsement are the homebuilders, although they also qualify for commercial construction.

The residential endorsement is a rigorous program of education and testing that is applicable to all builders on a statewide basis. It insures the quality of construction to the consumer. The owner/builder has no bond, no insurance and no endorsements. They would, however, be subject to the same Municipality of Anchorage inspections if building in Anchorage.

The hopeful anticipated savings of an owner/builder is the mark-up for administration, cost of sale and profit. National statistics report that a homebuilder’s profit falls somewhere in the 6 percent to 8 percent range. The profit, of course, is even less after corporate taxes.

What an owner/builder hopes to save can easily be lost by construction delays and a higher cost from subcontractors who are going to first take care of the builders who provide them with the most business on an annual basis.

As a result, many owner/builders are faced with additional interest charges on their loans. The longer it takes to build a home the more it will cost.

Other builders with residential endorsements include Troy Davis with 14 permits in Eagle River. Long-time builder John Hagmeier has 7 permits in the first half of 2015. Crown Pointe, who generally builds in the $1 million plus range, has 5 permits as does Merit Homes and the Petersen Group, who also builds townhomes and condominiums.

Newcomer, Trevi Builders from Fairbanks, now building in Anchorage, has four permits. Twenty-eight other builders have 3 permits or less. Altogether, there were 141 building permits issued for the first half of 2015 and 54 duplex permits.

Spinell Homes led the pack of duplex builders with 16 units, followed by the Petersen Group with 6. TCB, building in Galatea subdivision, off Lake Otis, also had 6 units. Hultquist Homes permitted 4 units, Six M Cedar 4 units, and owner/builder 4 units.

In summary, that is not a lot of activity for the first half of the year. Hopefully, more financing opportunities and more permit activity will occur before freeze-up.

Connie Yoshimura is the broker/owner of Dwell Realty.