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Housing downturn takes homebuilder from 'the mountaintop and down all through the valley'

August 11, 2013|By ARNOLD S. PLATOU | arnoldp@herald-mail.com
  • Sandy, Zach and Tim Fields started the business Complete Power Wash after their consruction business went out due to the recession.
By Ric Dugan / Staff Photographer

In July, almost 25 years to the day he and his wife bought their first house to fix up and flip for a profit, Tim Fields was back at that same property.

But this time, with his house-flipping days long over and the recession having dismantled his small empire as one of Washington County’s top custom homebuilders, Fields was back for a different reason — to power wash the back porch.

Quite an economic comedown for the man who was president of the Home Builders Association of Washington County from 2004 through 2007.

“I have been to the mountaintop and down all through the valley,” Fields said last week. “And, here I am today, nothing like we had been, now in just a small corner of the business world.”

The Fields’ company, Royal House Construction Inc., isn’t the only one to have been ravaged by the recession.

Many homebuilders and many other kinds of companies that existed throughout the nation before the recession began in late 2007, aren’t in business any longer.

Homebuilders and companies from real estate, to lending, to furnishings, to truckers hauling supplies grew fast amid the housing boom of the mid-2000s, and withered in the years that followed.


Flipping houses

For Fields, now 54, and his wife, Sandy, 53, it was an unlikely beginning that led them to careers as homebuilders.

Tim Fields was a correctional officer at the Maryland Correctional Training Center near Hagerstown, and Sandy was head bank teller at a local savings and loan in the late 1980s, when an accountant suggested an investment that would save on taxes.

The accountant told them about people who bought dilapidated houses, fixed them up and resold them for profit.

“It’s what’s called ‘flipping’ now, but we didn’t know it by that back then,” Tim Fields said.

So in July 1988, the young couple bought their first investment house.

“It was a double. We fixed it up, sold each half at a profit,” Fields said. “And, over the years, we did that a number of times.”

In 1990, with Sandy now a stay-at-home mom and Tim still working at the prison, the Fields embarked on a more ambitious business.

Without any experience in homebuilding themselves, they hired workers with strong skills in the industry and launched Royal House Construction.

It was named after the princely view from their first flip target — the double-house they’d bought in 1988 near Hagerstown City Park, Fields said.

“It was a view fit for royalties,” he said.

In 1991, when the couple’s first child was beginning first grade, Fields left his job at the prison to run the new construction company full time.

As the homebuilding market grew, so did Royal House, he said.

It grew so much that in 2005, Fields hired a professional to manage the business. “And, by 2007, I was semi-retired. I was 48 years old and making $100,000 a year. It was a good life. It was a good life,” he said.


Paying the price

There was a time back about 2003, when a landowner in the county wanted a developer to pay as much as $25,000 for a 1-acre home lot, he said.

“I remember the first time that I saw (the offer of) an acre for $25,000. I laughed out loud,” said Fields, who noted he could remember thinking “that is ridiculous. Nobody is going to pay that.”

But soon, as mortgage lenders offered easy terms, the real estate and home building markets exploded. And, prices for home lots shot up fast.

“During the (price) runup, where lots got scarce in the mid-2000s, there weren’t enough lots available” for home construction, Fields said.

Large metropolitan builders were moving in, too, pushing lot prices higher faster.

Suddenly, Fields said he was paying prices far higher than $25,000.

“We paid as high as $132,900” for a 1-acre home lot in about 2006, he said. “Anybody with 20-20 hindsight can look back and say now, ‘That was way too much. That was crazy.’”

Back then, though, it was hard for business owners and consumers to believe what national economists were beginning to warn: The housing industry’s price bubble was going to burst, eventually.

That happened by midway through 2006, as Americans realized the riskiness of the subprime loans and adjustable mortgages many had just received.

Credit began tightening, housing values plunged and millions of new homeowners, owing more that their homes were worth, faced foreclosure and bankruptcy.

Nonetheless, Fields said his company’s best year probably was 2006.

“We were still picking the fruits of ’05 because it takes a while for the (homebuilding) process to be completed,” he said.

Fields said he doesn’t remember how many houses Royal House built in 2006, but he doesn’t think it was more than 15 because people were wanting such large houses.

“The number might not have been huge, but the size was probably huge because people just couldn’t spend enough money. It (boom market) just sort of all blossomed and expanded substantially.”


The downfall

Looking back now, Fields said he thinks Royal House Construction’s downfall stemmed from the combined effect of its ongoing loan payments for lots it couldn’t sell and from Fields’ “bull-headed” belief that market conditions just couldn’t get worse.

During the boom, Fields said the company had to buy more home lots than it needed immediately, just so it always had land to offer potential buyers.

“Had we not had land, I think we would have been out of business,” he said.

He only bought “finished lots,” those that already had been subdivided, with ready access to roads and utilities, in rural areas scattered across the county.

Those lots went for higher prices than raw land, but could be developed more quickly. At any one time, he said, he had three to six extra lots available.

Late in 2006 and into 2007, when the demand for new houses fell, the prices that potential home buyers were willing to pay shrunk just as quickly.

Initially, however, even after the slowdown began, Fields said he was still buying extra lots at the high prices.

“That was not a wise business decision. I think that’s just being bull-headed,” he said.


When the fun’s gone

As market prices fell, Royal House began to reel from the pressure of having to make debt payments that were based on the prices it had paid.

“Because we were fully leveraged on our inventory of lots, we were not in a position to lower the price — because we had to pay the lender off in full, before we could build somebody a house,” Fields said.

He said his lender refused to let him lower the lot prices, a move that would have made Royal House more competitive and more likely to attract homebuyers.

Fields said he doesn’t blame the lender. The fault is his alone, he said.

The lender “was there for us when times were good, and he was there when it wasn’t so good. I kept on making payments in faith that we were going to last,” Fields said. “I believe if we were able to hang on long enough, it’s a cycle, and it would have eventually turned around.

“Bottom line, I was over-leveraged in finished lots, and when the market hit the skids, I just was not able to move any lots. And, over the years that followed, I spent so much of my resources maintaining the debt payments on those lots that, eventually, there wasn’t enough strength in the company to last.”

Fields said the business strategy had been to hold money back, to help the company through the down times that will inevitably occur over the years.

But by the mid-2000s, the company had grown larger than ever, “with obligations that go along with that,” he said.

One obligation Fields said he felt strongly was to the families of the 11 employees he had before the recession began.

Another was to his lenders, he said.

“We knew that conditions would slow down and go upside-down, except we didn’t know that time would be measured in multiples of years, instead of multiples of months. So that (money) that we had set aside, eventually ran out.”

Back then, Fields said he refused to admit, even to himself, that the worst of conditions could continue to worsen.

“I had a lot of fun helping people to meet the American dream of owning a home,” he said. “I often said, ‘When it’s not fun anymore, I would get out of it,’ but I lied to myself because I was in it long after the fun was gone.”

As the market continued to decline, Fields said his remaining confidence was badly shaken when his lot lender “started foreclosure action, after we could no longer make the debt service payments in full. Then, I got scared.”

He said he began to be afraid that even if Royal House could land a contract to build a house, the lot lender might try to repossess the land.

By then, the market was so bad that even the lender was struggling to sell the lots it repossessed, Fields said.

He said the one for which he had paid $132,900, is still unsold — even for the $35,000 the bank is asking now.

Finally, last year Royal House stopped doing business after selling all its equipment, and its 3,000-square-foot showroom and office near Clear Spring, he said.

By then, its only employees were Fields, his wife and a carpenter who had been with the company for many years.


Full circle

For Fields and his family, “the saving grace was my Creator and that we were surrounded by my church family that surrounded us and supported us through it all,” he said.

Then there was the side-business that Fields and his son, Zach, had begun in 2007.

The business, Complete Power Wash, specializes in cleaning home exteriors with a pressure wash and cleaning roofs with a nonpressure detergent.

Although the recession and its aftermath have been hard on homebuilding, the power-washing business continues to be successful, Fields said.

“There’s money out there, and people have nice stuff and like nice people to do nice work,” he said.

Considering the area’s ongoing weak economic recovery, “we are encouraged by the level of work we have,” he said. “Certainly, it doesn’t compare to anything we used to do in contracting, but I believe we’re beginning to see an uptick in my little corner of the business world.”

The power-wash company has four employees.

“My wife runs the office. I run the phones. And, my son (who is 19) works and has a helper out in the field.

“We’re back where we started — in many ways,” Fields said.

There is even the full circle of going back to the beginning, that now includes that first house, the one that the Fields bought 25 years ago on July 24, 1988, with plans to fix up and resell for a profit.

On July 23 this year, Fields received a request from the home’s current owner for a quote to come power wash its back porch.

“So there we were, 25 years later, out to wash that house, after I went to the mountaintop and down all through the valley,” he said. “Twenty-five years later, we were back at the same house doing a $300 power wash.”

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