From the Absury Park Press:
Kara Homes anticipates filing for bankruptcy
East Brunswick builder Kara Homes Inc., one of the biggest home builders in Monmouth and Ocean counties, anticipates filing for Chapter 11 bankruptcy, a company official said in a letter given to laid-off employees earlier this week.
Roberta W. Schultz, vice president of human resources and organizational development at Kara Homes, said in the note that the employees’ jobs were terminated as of the end of the day Tuesday.
The Shore Bubble Blog has been discussing this “rumor” for the past few days.
Is there anything that can be done in a situation where Kara bailed – not completing a home and leaving over $100,000 worth of work to complete? This is a real situation a family member is facing and my feeling is there is nothing that can be done about it. Not sure of the contract since I’m not personally involved just concerned.
Kara homes was going to build something in Franklin Lakes NJ. Nothing has been done to the site in 2 years. The two original houses which have been sitting on the land off of Colonial Road are still there overgrown. The construction trailer has been sitting and nothing has been going on there either. The sign they have up is beginning to show signs of age and wear.
From the Home News Tribune:
Home builder may file for bankruptcy protection
ara Homes, Inc. one of the state’s largest private home builders of condominiums and active-adult communities, is anticipating filing for bankruptcy.
Patrick W. Turner, the general counsel for Kara, said yesterday that the company terminated some personnel on Tuesday because it is “trying to restructure” the payroll.
“We are trying to become more profitable,” Turner said, without disclosing what sort of financial trouble the homebuilder is experiencing.
Kara Homes sent a memo to several employees indicating that “the company anticipates filing Chapter 11.”
Employees would be eligible to file for unemployment benefits, according to the letter sent by Roberta W. Schultz, the company’s vice president of Human Resources and Organizational Development. She could not be reached for comment about how many employees had been let go.
Turner said filing Chapter 11 “is one of the alternatives we’re considering,” but he said he could not comment on the letter.
I actually posted this prognosis for Kara Homes a couple weeks ago in this blog. Kara homes is the builder of some rather large luxury homes in Marlboro NJ (Monmouth County). I know someone who works for the company and had told me about the impending Chapter 11 prognosis a couple months ago. Boy, things are changing out there in the housing market. I remember last year going into the models and actually considering buying at those bubble inflated prices. Those same houses can be bought at quite a large discount right now (I estimate 20-30%). That’s just a fact. As a renter waiting to jump into this market, it’s quite remarkable to watch this unfold.
It BEGINs!! **rubbing hands evily!!**
If the issue at Kara is simply mismanagement, the possibility of a buyout from one of the larger homebuilders is always a possibility.
jb
I doubt its mismanagement. They simply are not able to sell houses and might have too much debt.
It’s ok, house prices never drop. If they can hold on for a year or two, their inventory will double in price and they’ll be able to start townhouses in the low 1.4M range.
I am shocked that they would be in this position this soon. There couldn’t have been a more favorable business climate for home builders over the past five years.
check this out
http://www.karamoldhomes.com/
Bubbletuner,
20-30% off already?? Maybe my original estimate of a 30% retracement is too conservative. I’ve been called every name in the book, including by some on this site, for stating that we have at least a 30% pullback coming. Time frame??? 2-4 years. Looks like my time frame is off also.
Bubbletuner-
As BC Bob says…30% already?? That is really great.
Just one tidbit from here in Monmouth county, they have a model home that if I am not mistaken, has dropped at least ~90k on 1.19 million place. I don’t remember exactly what the original listing price was, but that is about a 7-8% shave right there.
The mls for this unit is 10089482
..any other data to support there willingness to drop more than this?
oops.. “their” not “there”
Their product is crap, they’ve got a revolving door when it comes to subs, and they get sued by local homeowners a lot. Hardly the recipe for success.
How about you recently purchased one of their tradewinds properties (1.5 mil and up) and you have issues with some of their construction???
Don’t worry, location,location,location!!!!!
Yeah great location – perfect place for when a noreaster hits….
A word of caution: the 20% refered to on this thread was on some specifc, distressed new home inventory by this particular builder. From what I see, it does seem likley that some new home builders will have to take this kind of hit, and maybe even more into the 25% to 40% range on specific properties.
But that is very different from predicting same (30% drop) for the whole market. Remember new homes are often in the top end of the market, and builders have greater incentives and necessity to drop prices.
Note, I am in the buyers camp here, waiting patiently. But it is useful to clarify what we are talking about; note that even if the overall market does not drop 30% there may be opportunities created for diligent buyers who search well for value to get very good breaks.
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