Auction signs sprout from manicured front yards of a row of new brick and stone townhouses in Columbia, signaling yet more foreclosures amid the collapse of the luxury housing market. n But in what some experts see as the latest wave of foreclosures to hit the Baltimore area, the homes' builder, rather than homebuyers, went into default.
Two separate lenders have foreclosed on 35 of Dale Thompson Builders' unsold homes, building lots and unfinished houses in Columbia's Scot's Glen townhouse development. One lender also foreclosed on seven lots in a neighborhood of $1 million homes in western Howard County, according to public records detailing property auctions. Two auctions are scheduled for Friday.
Though builder foreclosures have not been as frequent or severe in the Baltimore area as elsewhere in the U.S., they have become more common in the past few months, and more are likely, some real estate experts believe.
"This is pretty new, but it is absolutely going to happen more," said Pat Hiban, a broker with Pat Hiban Real Estate Group at Keller Williams Crossroads in Ellicott City. "The swing that that business goes through is massive."
Some builders with high debt loads have found themselves unable to withstand big drops in market demand and property values.
Auctioneer Paul C. Cooper, vice president of Towson's Alex Cooper Auctioneers, is seeing what he describes as a "second wave of foreclosures," after individual homeowners, that now has reached some small, new homebuilders in the region, including many in Prince George's County. Many, Cooper said, were unable to obtain the financing to complete a project, and "they couldn't sell the models, much less sell new homes on unimproved lots. As their funds run out, they will reach a point where, if they can't work it out with a bank, the bank will foreclose."
Cooper said builders have come to him asking about auctioning their unsold homes and lots to forestall a bank foreclosure. But often, he is forced to turn the business away when builders owe more than an auction sale will likely bring.
"The smaller builders and developers are trying to obtain funds to support construction, and the banks are not forthcoming to builders," he said.
Shrinking pool
Places such as Howard County, where farmland is still being carved up for sprawling custom homes, could be more susceptible. That's because many new-home builders have focused on the high-end segment and now are competing for a shrinking pool of buyers as values have plummeted and bank financing has become scarcer.
