“There’s no sense of urgency whatsoever”

From the Record:

Builders cutting prices to cut deals

How much would a buyer pay for a new house in Ramsey, with three bedrooms, 3½ bathrooms, a stone facade and high-end finishes such as crown molding and stainless steel appliances?

Mike Karvellas of Grace Michael Builders in Allendale, who built the house, used to think the answer was $759,000. But after the house sat on the market for months, Karvellas cut the price again and again. He finally sold it for $659,000 — a price that wiped out his profit. But at least he will no longer be burdened by the property’s carrying costs, such as taxes and loan interest, of more than $5,800 a month.

“I’d rather get rid of it and get out from underneath my investment,” Karvellas said.

As Karvellas’s experience shows, the market for new homes has changed radically since the boom times of 2004 and 2005. While North Jersey builders have not suffered as much as their colleagues in distressed markets such as Florida, many are being forced to cut prices and delay new projects.

According to the National Association of Home Builders, builders’ confidence in the housing market is at the lowest point since the group began measuring it in 1985.

North Jersey builders face high costs for land, building materials and fuel. And they’re paying higher interest on bank loans — 8 percent and up, compared with less than 5 percent a few years ago. While builders can make profits of 20 percent or more during good times, that’s far from a sure thing these days.

There have been dramatic price cuts. In Norwood, a subdivision of three new houses went on the market earlier this year for $1.2 million to $1.4 million. Two of the three sold for more than $300,000 off the original asking price; the third is on the market for more than $400,000 off the initial price.

Still, many potential buyers aren’t taking the bait yet. Many believe that prices may have further to fall — or, at the very least, that they won’t rise much for a while. A number of national housing economists and analysts agree, predicting that prices and the pace of sales won’t pick up until 2009 or later.

“Now, there’s so much supply that buyers are saying, ‘It’s a nice house, I really like it, but I don’t know, I’ll wait and see,’ ” said Richie Wells, president of the Builders and Remodelers Association of Northern New Jersey. He is the head of Team Construction and Team Remodeling Inc. of Mahwah.

“There’s no sense of urgency whatsoever,” said Murad. “That’s the new market right now.”

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