What New Home could a builder/developer build at Lake Chelan that would sell?

In many parts of the country, builders are working to become relevant again in the housing market.  Their competition is less with other builders than it is with foreclosures and short sales.  But at Lake Chelan, other than what is mostly custom home construction, builders are laying pretty low.  Spec home construction is pretty much halted.

So, what would it take in the Lake Chelan market for a successful new home project to succeed?  People are buying homes.  While not at levels of 2004 or 2005, sales have improved since the last half of 2009.  So, there is a market for home sales.

First, what are builders doing other places.  They’re cutting prices, getting homes completed more quickly and educating buyers about the risks of buying foreclosures.  Primarily, they have to hit a price point.  Large builders like Meritage Construction are hitting prices as low as half of what homes sold for in their markets just a few years ago.  In the Phoenix area, Meritage is offering a three bedroom home for as little as $99,000.

Land prices have fallen, which is helping builders provide homes at much lower prices.  In places like Arizona, Nevada and Texas, serviced lots can be had ready to build for around $10,000.  However, in the Lake Chelan area, land prices are much higher.  Local impact fees can exceed $10,000 per lot in the City of Chelan!  There are impact fees for transportation in place or in planning in both the county and the City of Chelan.  Washington State ranks well above average in impact fee costs contributing to a high overall regulatory burden for housing in the state.

Another challenge for the local market is the small size of the market.  That minuscule size makes for several issues.  There are so few sales that it is difficult to ascertain trends with any certainty.  In the Lake Chelan market, it is difficult to find a statistically valid number good comparables for anything, much less on something that might reflect on something that is new and different.  Determining the market uptake of a project is also wrought with uncertainty.

Short sales and REO sales are such that a local builder is buying a short sale.  He would have preferred to build, but he could not have built a comparable house to the short sale for its purchase price.  So what’s a builder to do?

First, to remove the risk of the project uptake rate, the project would have to be able to be completed in phases.  That rules out projects with multiple residences in the same structure which would all have to be built at once.  Second, they have to hit a price point.  While there are Lake Chelan pre-sales homes available for less than $250k, there aren’t any newly constructed homes available in that price range.  For homes listed this year for $250k and under around 80% of them sold.  For more expensive homes, the percentage that sold was in the teens.  So, the challenge in the Chelan area would be coming up with a new single family home product, preferably 3 bedroom, that can be sold profitably for under $250k in low volumes in spite of the local land and development costs.  Any takers?