Spec homes resurface in Routt County
Colorado Mountain College professor settles in Dry Creek Village subdivision
June 20, 2010
Steamboat Springs — Kevin Cooper readily admits he was taken aback when be began looking for a new home in Steamboat Springs in February 2009. But he finally found a brand-new home he could afford in Dry Creek Village.
"I moved here from Rapid City (South Dakota), and I had sticker shock, especially in the Steamboat area," Cooper said. "I owned a modular home in Rapid City that sold in the $130s, and I found the exact same home in Phippsburg at a price of $259,000. It was very shocking."
Ultimately, Cooper, who is the instructional chairman of the math and science departments at Colorado Mountain College, had to pay the price. However, his $230,000 stick-built home in Hayden never had been lived in and came with solid hardwood flooring, gas heat, and a handsome exterior of stucco and cedar siding.
His new home was built by a local builder as a spec home at a time when almost no contractors in the valley are building without a contract.
In a lending environment where bankers are hesitant to extend credit on spec homes, two Routt County builders are using cash to launch construction starts in Dry Creek Village on Hayden's east side.
"The profit margin today is not what it used to be," Dale Kruse said Wednesday. "It's about keeping your guys employed. We just have to work through this soft market, take things as they are and keep on working."
Kruse's company, Kruse Builders, has built 50 homes in Hayden, Craig and Meeker. He said his business model always has been to build homes that are affordable to working people in the region whose household income might be in the $50,000 and $60,000 ranges.
"There are more buyers in the $250,000 to $260,000 price range," he said.
Kruse launched the first of two spec homes in Dry Creek Village this spring and sold it to Cooper soon after receiving his certificate of occupancy. The second home probably will have a roof on it this week.
Since Kruse sold his first home, established builder John McParland, who has a long track record and in Florida, has closed on two Dry Creek lots with the intention of starting the first this month or early in July depending on approval of his building permit with the town of Hayden. That home was planned as a spec house, but an employee, Chris Wahl, and his wife, Liz, have decided to put it under contract.
McParland, who works in Colorado under the business name Comfort Homes of Colorado LLC, said the economics at Dry Creek fit the economy.
"I have a lot on Harwig Circle in Steamboat that would cost you $100,000 more to buy than I can sell you a new home for here," McParland said.
The handsome home with large roof gables that Kruse built has three bedrooms and two baths in 1,400 square feet. Kruse bought the lot, which backs up to Routt County Road 37, from Dry Creek developers Jon Peddie and Jim West for $40,000.
It's a number that allows Kruse to hit his price point.
"I can build you a new home for less than you would pay to buy an older home in Steamboat," Kruse said.
Auction didn't do the trick
The Dry Creek developers are working on plan B after an October auction flopped.
"The auction just really did not produce any results," Peddie said. "I attribute it to an absolute lack of buyers."
Less than a month after the auction, the prospect of as many as 2,000 new lots being annexed into the city limits within the Steamboat 700 project was put on extended hold after voters rejected the annexation agreement that had been approved by Steamboat Springs City Council.
Peddie said he thinks those events might have changed the long-term thinking of people looking forward to home ownership, refocusing them on the existing communities outside Steamboat.
He and his partner developed their subdivision, which is complete with paved streets and an irrigated playground, during the run-up in Routt County real estate that left many Steamboat singles, couples and families despairing of ever owning a home in the city.
Even after a round of price cuts on existing lots in Steamboat, the entry price still is on the order of a quarter of a million dollars. Kruse said he was fortunate to have capital sitting on the sidelines waiting to go to work. After looking at the numbers in Dry Creek, he decided he could begin building homes with the confidence that he could achieve a 6 percent return on his money, as he's doing with several homes in Craig, by renting the new homes if they do not sell.
"The lot prices here really help," he said. "That's an extremely competitive price."
Peddie said the $40,000 lots in the subdivision back up to the county road, with $50,000 lots clustered in the middle of the tract on an interior loop road. The $60,000 lots are on the south side of the development, where they back up to a large expanse of undeveloped land that is bright green with new grass this month. Two phases of Dry Creek Village still are waiting to be developed.
Wahl said he has loved living in Steamboat for 14 years.
"I've been a happy renter," he said.
But he stopped to add up all of the rent checks he's written in nearly a decade and a half and started thinking about buying. Besides, Liz is a culinary enthusiast who always has wanted a home with a kitchen island and an exposed rack for pots and pans above it.
Not coincidentally, Wahl has worked as a carpenter for McParland at various times throughout the years and intends to build sweat equity in his new home.
McParland said if he's successful with his first two homes, he has an investor waiting in the wings to help him keep the momentum going.
Cooper is convinced he got a good buy in his price range.
"In terms of other homes I've looked at, this was the best value," he said. "I'm extremely picky, and I do my research."