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5 125

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Published: Sept 22, 2011

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26

September 1 . 2011

Jackie Headapohl
Managing Editor

I

t sounds like good news. Building
permits increased in Metro Detroit
22.1 percent through the first seven
months of the year, according to a
report from Clarkston-based Housing
Consultants. However, local builders say
they still face many challenges related to
the prolonged housing slump.
That slump started in southeastern
Michigan around the end of 2005,
according to Michael Stoskopf, CEO of
the Building Industry Association of
Southeastern Michigan. The industry
hit its lowest point in 2009, when per-
mits were at 1,000 — 90 percent lower
than the 10,000 40-year historical
average. "The decline looks just like a
ski slope when you put it on a graph,"
Stoskopf said.
Since October 2009, permits have
steadily risen to around 2,200 for the
trailing 12 months at the end of June;
however, the industry has been stuck on
that "2,200 permits for the trailing 12
months" metric since April. "We're now
at a plateau': said Stoskopf, whose six-
month forecast for the industry remains
somewhat flat.
"It's heading up — slowly but surely;'
Howard Fingeroot of Pinnacle Homes
added. "If the industry does 3,000 to
4,000 permits it will be a stellar year:'
High energy prices, high unemploy-
ment and tight credit are among the
tough challenges keeping the build-
ing industry muted. Some members
of BIA haven't sold a house for three

years; they're just trying to hang on,
Stoskopf said.

Diversifying As A Necessity

BIA members have had to cut costs and

diversify in order to survive, such as
Rich Kligman, owner of Superb Custom
Homes, which builds high-end homes
in Northville and Novi.
Kligman currently has a few homes
under contract and a few under devel-
opment at lower price points than in
years past. "I think a declining market
is the new norm': he said. "It's a new
landscape now You have to do your best
to adapt."
The land development and housing
industries were built on a capital cash-
flow model, in which builders had a line
of credit from the bank to buy lots and
build inventory homes.
Builders who bought lots at the peak
of the market for $100,000 saw the value
of their land plummet as the housing
slump deepened. When builders were
unable to pay the bank, the lots returned
to the bank, which sold them to other
builders for $10,000 or $20,000.
Larry Cohen of Southfield-based
Cohen Homes felt the pain of those
devalued lots. He said he took big losses
when the value of his lots declined by
60 to 65 percent. Four years ago, he built
140 homes. Last year, only one.
"We had to reinvent ourselves': Cohen
said. He and his wife Janice launched
Berkshire Resources LLC. The company
finds properties to purchase, rehab and
lease out. They've bought properties in
West Bloomfield, Redford, Farmington