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County faces home financing problems

Danny Rodriguez packs up construction equipment on Friday afternoon in Gypsum after a long day of braving winter conditions. New single-family homes are under construction in the Buckhorn Valley neighborhood near the airport.
Townsend Bessent | townsend@vaildaily.com |

Meanwhile, in Gypsum

While construction financing can be tricky, Buckhorn Valley developer Dave Garton says he has a deal available: 13 lots at half the 2007 list prices. Those prices could help builders bring more equity to deals when seeking financing, Garton said. He can be reached at dave211@centurytel.net.

EAGLE COUNTY — There will be 30 new homes built in Gypsum this year. Other homes are popping up elsewhere in the valley. And brokers are still clamoring for more units. The problem is financing.

After the financial collapse of 2008, a combination of risk-shy lenders and new federal banking regulations have put at lid on construction, at least for multi-family and other speculative projects. That lid may be lifting a bit, especially for those building one unit at a time.

“We’re talking to a lot of current customers,” said Michael Brown, regional president for Alpine Bank. Many of those customers either already own a building lot or are looking to buy land and build.



Some small builder-developers are also building one home at a time, selling, then moving on to the next project.



Spec Projects Complicated

But financing for projects that aren’t owner-occupied, single-family homes becomes more complicated.

Jimmy Brenner, owner of Blue Sky Mortgage in Vail, emailed a chart that was recently published by the national Mortgage Bankers Association. The lines between the regulations, and regulatory agencies, is a straight-line spider web. It’s complex, at best.



That complexity leads some potential builders to portfolio lenders, investment firms that operate outside the rules and regulations that govern commercial banks.

Risky Business

Aside from the regulations, Brenner said there’s more anxiety about risk on the part of commercial banks. Brenner has never done a deal for a condo or townhome project, but said he used to regularly field calls from banks and other lenders looking for projects. He hasn’t had one of those calls in a very long time.

Lenders willing to do deals for condos or townhomes also want developers to assume more risk — read that, “put more of their own money toward” — possible projects.

Brown said the range of cash required to complete a deal can range from 20 percent for an owner-occupied home or duplex to 50 percent for more speculative, multi-family projects.

For multi-family projects, a lot depends on pre-sales, Brown said. And pre-sales can be hard with units potential buyers can’t walk through.

“Without pre-sales, you’ve got to bring in more equity,” Brown said.

And, as is always the case, location matters.

Project Environment ‘Evolving’

Rick Hermes is the developer of a proposed new community at Wolcott. Hermes didn’t want to talk about potential deals for that project, but said the overall environment for projects is “evolving.”

The gradual reversal in the lending environment started in cities, Hermes said, and is slowly migrating to resort areas.

There are still some good deals on vacant land outside cities, Hermes said. And, as investment money seeks places to land, some of that money will find its way into resort areas. But the people who own that money are also looking to minimize risk in a complicated world market.

Brenner said there’s a good bit of foreign investment in this area now, as families based in other countries look for ways to shield assets outside their home countries.

But, Hermes said, there’s still a lot of investment cash being held on the sidelines.

So what does that mean for more building any time soon?

‘Sweet Spot’

Gypsum Town Manager Jeff Shroll said that area seems to be in something of a “sweet spot” for the combination of land prices, construction costs and sale prices. That’s borne out by the fact the town currently has $16 million in new construction value on the books for 2014. There’s even at least one new unit planned for the moribund Brightwater golf course project up Gypsum Creek.

Elsewhere, Hermes believes prices for new units will have to go up in order to draw more interest from potential lenders. Even then, he said, the banking-regulation environment remains restrictive, something that hasn’t yet shown signs of changing.

But, Brown said the valley’s existing-home inventory is shrinking, and demand is rising.

“We’re just going to have to see how development and demand balance out,” he said.

Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, smiller@vaildaily.com and @scottnmiller.


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