Lower lot prices help some homebuilders

Mike Gitlewski of Badgerland Fireplace Inc., Waukesha, finishes the stonework Tuesday on a new house under construction by Brookstone Homes Inc., Oconomowoc, in the Victoria Station subdivision in Pewaukee. Residential construction spending rose 1.8 percent nationally in September. (Staff photo by Kevin Harnack)

By Joe Lanane

Success stories in Wisconsin’s residential construction industry have been few and far between lately, but Oconomowoc-based Brookstone Homes Inc. has two examples in a Pewaukee subdivision.

Brookstone is building a pair of homes in the Victoria Station development, where lot prices have gone low enough to turn the once-vacant neighborhood into a bustling area, said Steve DeCleene, the company’s executive vice president.

Banks are finally giving homebuyers enough incentives to get off the sidelines, DeCleene said. He credited lower land costs for helping to boost residential construction spending 1.8 percent nationally in September.

“I wouldn’t call it desperation — I would call it good business,” DeCleene said. “There’s a lot of land at a very high price that hasn’t sold in the last three or four years, but I think this has really broken the logjam.”

But lower property costs have not helped all Wisconsin homebuilders. Mark Etrheim, president of Mastercraft Homes Inc., La Crosse, said he went three months before getting two projects. Etrheim said affordable properties, interest rates and supplies have not been enough to increase buyer confidence.

“I’ve never seen a time period where every single factor to encourage people to build a house is there, but nobody’s doing it,” Etrheim said. “A lot of people are sitting on their hands until they are a little more certain what the future brings.”

Dropping vacant property prices 10 to 35 percent in the Victoria Station development led to a large decrease in the number of vacancies there, however, said Dan Scardino, senior asset manager for Brookfield-based Point Real Estate. There are now nine vacant properties, compared to 49 before the price drop, he said.

Scardino said several southeastern Wisconsin subdivisions have experienced similar increases. As a result, he said, Point Real Estate has sold 80 percent more properties than last year.

“The combination of reduced land prices and low interest rates has people finally willing to make a move before pricing stabilizes and goes on an uptick again,” Scardino said.

But comparing this year’s figures with 2009’s — when the market hit rock bottom — can be misleading, said Jerry DeSchane, president of the Wisconsin Builders Association. Although the state’s new home production is up 18 percent from last year, it is still down 82 percent from 2005, according to a Census Bureau report on building permits.

And as the economy struggles to recover, DeSchane said there is no rush in Wisconsin to buy land on spec.

“Wisconsin builders tend to be more conservative than average national builders,” DeSchane said. “We need to see a few more signs before we start being more aggressive again.”

But declining prices of property might give homebuilders a boost, DeCleene said.

“The public was really waiting for that big price drop,” he said, “and I think they’re finally getting it.”