Homebuilder 'Rolls' Along, Deals With Hard Times

Originally published on June 17, 2011 9:41 am

Construction of new homes rose more than expected last month. But with the glut of foreclosures and other houses already on the market, home prices in many places continue to fall. For homebuilders it remains a very tough market, and many are struggling to survive.

Martha Rose has been building houses for nearly four decades, and despite the hard times, she still loves it. The Seattle-area homebuilder refers to herself as a building nerd and worries about every detail, from the overall plan and energy efficiency of a project to how a particular corner will be built.

On a recent morning, she was clad in a blue bomber jacket with the name Martha stitched on the front — poring over construction drawings at the site of her latest project. She's building two town houses in the city's Qnee Anne neighborhood.

Rose is friendly and given the circumstances, surprisingly upbeat. She says you have to be an optimist to build on spec — that means you build a house and then hope someone will buy it a at price that allows you to turn a profit.

Rose says she's not usually nervous during construction; that part comes later.

"It's not until we are getting ready to list the property for sale, that's when the nerve-racking time [is]," she says. "If you build it will they in fact come? Does that work?"

It hasn't worked very well over the past three years. She built lots of houses, and lost money on just about all of them.

'Throwing The Dice'

Obstacles were and still are everywhere. For example, in the boom years, getting a construction loan was easy. But by 2009, Rose says, the routine approval process had turned into a two-hour ordeal.

"Sometimes you felt you were in a deposition," she says "You were grilled. It was intense."

She was rejected 10 times by 10 banks.

Rose ultimately got a small bank loan, but not before she drew down her savings so she could begin what she thought would be a fabulous four-house cluster.

"I gambled, I did," she says. "I threw the dice."

It was a terrible bet. For example, she had hoped to sell one of the houses for $639,000, but it didn't work out that way.

"It got down to 439 and people are offering 398, it felt like I was laying on the ground and people were kicking me," she says.

Asked why she kept building when the market was falling, Rose says simply that she's a builder. It's who she is and what she does, adding, sometimes you have to spend money to get yourself out of a hole.

Making Adjustments

In an effort to stay afloat, she's made some changes in the past few years. The biggest one is that she no longer has employees.

Instead she hires general contractors and subs only when she needs them. Gone is the expense of Social Security, unemployment and workers compensation payments. The latter could cost up to $3 an hour per worker. The staffer who dealt with all the forms is gone, too.

"I can't see having a business that is that complicated again," she says. "The idea is to get leaner and meaner, not literally meaner, but to get your business down to bare essentials."

Worrying about all this is tough, but Rose has discovered the perfect place to get away and gain perspective.

She's headed off to go roller skating.

She says she goes there and thinks about staying on her feet and not falling down.

"The floor is slippery until you get used to it, and you go with the flow, you do your best, you pay attention and you try to stay vertical," she says.

Just like she's trying to do in her business.

Rose slips into the crowd and makes the first turn looking confident.

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STEVE INSKEEP, Host:

From Seattle, NPR's Wendy Kaufman has our story.

(SOUNDBITE OF CONSTRUCTION WORK)

WENDY KAUFMAN: Martha Rose has been building houses for nearly four decades and despite the hard times she still loves it. She refers to herself as a building nerd and worries about every detail - from the overall plan and energy efficiency of a project to how a particular corner will be built.

MARTHA ROSE: This wall comes over here like this and then when you build this next wall here...

KAUFMAN: Clad in a blue bomber jacket with the name Martha stitched on the front, she and a framer are poring over construction drawings for two city town homes that she's just started.

ROSE: Unidentified Man: Huh?

ROSE: Unidentified Man: Yeah.

ROSE: Unidentified Man: Fine.

(SOUNDBITE OF LAUGHTER)

KAUFMAN: Rose is friendly and given the circumstances, surprisingly upbeat. She says you have to be an optimist to build on spec. That means you build a house and then hope someone will buy it at a price that allows you to turn a profit. Sitting on a makeshift chair in what will be a bedroom in this new house, she says she's not usually nervous during construction. That part comes later.

ROSE: It's not until we're getting ready to list the property for sale. That's the nerve-racking time. That's when it's like if you build it, will they in fact come? Does that work?

KAUFMAN: It hasn't worked very well over the past three years. She's built lots of houses and lost money on just about all of them. Obstacles were and still are everywhere. For example, in the boom years, getting a construction loan was easy. But by 2009, Rose says, the routine approval process had turned into a two-hour ordeal.

ROSE: And sometimes you felt like you were sitting in a deposition. The questions were that pointed and like you were grilled. And in the end we got rejected 10 times by 10 banks.

KAUFMAN: She ultimately got a small bank loan, but not before she drew down her savings so she could begin what she thought would be a fabulous four house cluster.

ROSE: I gambled. I did. I threw the dice.

KAUFMAN: It was a terrible bet. For example, she had hoped to sell one of the houses for $639,000.

ROSE: When it got down to 439 and they're offering you 398, and it felt like I was laying on the ground and people were kicking me.

KAUFMAN: When you ask her why she kept building when the market was falling, she said simply: I'm a builder, it's who I am and what I do, adding sometimes you have to spend money to get yourself out of a hole. In an effort to stay afloat, she has made some changes in the past few years. The biggest one: she no longer has employees. Instead she hires general contractors and subs only when she needs them. Gone is the expense of Social Security, unemployment and workers compensation payments. The latter could cost up to $3 an hour per worker. The staffer needed to deal with all the forms is gone too.

ROSE: I can't see having a business that's that complicated again. The idea is to get leaner and meaner and not literally meaner, but to figure out a way to get your company down to the bare essentials.

KAUFMAN: Worrying about all this is tough. But Rose has discovered the perfect place to get away and gain perspective.

(SOUNDBITE OF MUSIC)

KAUFMAN: What are you doing?

ROSE: I just put my skates on.

(SOUNDBITE OF LAUGHTER)

ROSE: Now I'm going to put the wrist guards on.

KAUFMAN: She's headed off to go roller skating - something she sees as a metaphor for her business.

ROSE: The floor is slippery until you get use to it. And you go with the flow, you do your best, you pay attention, you focus on it, and you focus on staying vertical. Do you want me to go out there? Yeah.

KAUFMAN: Wendy Kaufman, NPR News, Seattle. Transcript provided by NPR, Copyright NPR.