Amid the gloomy economic news, many might be surprised to learn that new houses are under construction in Muskegon and northwest Ottawa counties.
It appears local new home construction has bottomed out and is beginning to rebound. The surviving West Michigan home builders have restructured while others have gone bankrupt, out of business or both.
No company tells the survival story in the new home construction industry better than Eastbrook Homes of Grand Rapids. One of West Michigan’s leading home builders has gone from a peak of 350 housing units built in 2005 to an estimated 170 this year. Company employment has dropped from a high of 72 to 31 today.
Eastbrook continues building houses with construction under way in the Churchill Woods subdivision in Norton Shores and the Hathaway Lake subdivision in north Ottawa County’s Crockery Township. It leads Lakeshore home builders with 33 starts so far this year, according to Grand Rapids-based Builder Track.
“We remain here because we like it and believe that West Michigan will be back,” President Mick McGraw said of the company’s continued investment along the Lakeshore.
Norton Shores has been the leader in new home starts in Muskegon County the past two decades. The city peaked at 166 new housing units in 2001 and had 70 units as recently as 2007.
City construction permit records show the bottom fell out of new home building in 2009 with only nine new housing units. So far this year as of Sept. 1, the city issued 10 permits with another five pending, city officials said.
Eastbrook homes has focused its Muskegon County strategy on Norton Shores. The company entered the Muskegon market in 2002 with the development of Windflower Bay on the north shore of Little Black Lake.
Eastbrook has survived because it was not strapped with debt for unsold subdivisions or homes built on “speculation,” company officials said. The company with 43 years of building homes in West Michigan — constructing more than 8,000 over the decades — entered the mortgage market meltdown in 2008 without owing creditors, McGraw said.
The enviable cash position the company enjoys has allowed it to add to its holdings in Muskegon County. Eastbrook Homes has been opportunistic in Norton Shores by being in position to purchase a deeply discounted development that stalled in the face of the Great Recession.
“Now we have an opportunity to invest and have chances to look for good opportunities,” McGraw said of making investments on a cash-only basis. Eastbrook continues to pursue a waterfront development on White Lake on the former Whitehall Leather Co. tannery site that is now undergoing environmental cleanup.
In August, Eastbrook announced it purchased Churchill Woods subdivision on Henry Street south of Porter Road in Norton Shores. Churchill Woods will be sold by Nexes Realty and Bill Carlston, a leading residential real estate agent and subdivision developer in Muskegon.
Carlston and local developer Jeff Jacobs began the Churchill Woods development in 2006 and had an agreement to sell all 44 lots to Bosgraf Homes of Holland. The subdivision began but the builder ran smack into the real estate crash, Carlston said.
Eastbrook purchased Churchill Woods from a bank and in another case signed an exclusive agreement to develop the 49-lot Berryfield subdivision in Norton Shores for Community Shores Bank. Community Shores ended up with Berryfield at the corner of Martin and Farr roads after the developer put in the roads and utilities but was unable to build a single house due to the economy.
“They have always worked with their own cash,” Carlston said of Eastbrook’s survival through the Great Recession. “They have had strong financials and not had to go to the bank.”
Carlston estimated that more than 50 builders were constructing homes in Muskegon County during the peak building years but that number has been cut to a dozen. Those that survived also are building, according to Clayton Darrow of ABC Supply Co. in Muskegon, 2285 Roberts
The wholesale supplier of building supplies and materials has seen many of its contractor customers go into home remodeling. Others have gone from building 20-30 homes a year to 2-3, Darrow said.
“I think we hit bottom a couple of months ago,” he said of the local home construction market. “Everyone has gone back to the basics as many owners are swinging their own hammers.”
Eastbrook’s Bob Sorensen — vice president of sales and marketing — said the company’s semi-custom home lineup has changed in these economic times. Value-oriented home designs that he called “simple elegance” is what have become comfortable to clients.
“The show-off space is gone,” Sorensen said of large, seldom-used formal dining rooms. The overall square-footage of homes has declined with the average prices, he said of a company with a marketing tagline of “always more home for the money.”
A two-bedroom, 1,250-square-foot ranch condominium in Windflower Bay is priced at less than $140,000, while a three-bedroom 1,500-square-foot single-family home in Pine Meadows off Filmore Street south of Grand Haven begins at less than $185,000, according to Eastbrook’s website.
The buyers in this depressed real estate market tend to be growing families or those moving into West Michigan due to a new job, McGraw said. Retirees and empty-nesters continue to be interested in new homes but selling their existing one can be an obstacle, he said.
“Our biggest challenge in this kind of a market is selling what they already have,” Carlston said.
Home prices are being depressed by a large amount of bank-owned properties on the market due to the large numbers of mortgage foreclosures, Carlston said. Nearly half of all of the homes sold in Muskegon are owned by a bank, he estimated.
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