News, insight and some thoughts about the Sacramento-area real estate market

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April 24, 2008

The Bankrupt Builder Blog

It seems this week this has turned into the bankrupt builder blog. Here is another one to fall, Illinois-based Kimball Hill Homes, which builds houses in Natomas, South Sacramento/Elk Grove and Rancho Cordova. The builder is also active in Stockton, Modesto and Merced.

Hanley Wood Market Intelligence notes that Kimball Hill sold 92 houses from its Sacramento division last year. You can see its office on Highway 99 driving south through Elk Grove.
All indications are the builder will keep its daily operations going while trying to restructure itself.
Here is the Chicago Tribune story.

I am also including here a reprint of a Nov. 2007 Home Front item when Kimball Hill's chief addressed local home builders. He had an interesting take on home building and the global economy. I also remember him saying how tough it was going to get if the banks didn't loosen credit for buyers. Now it has come true.

Here is the Home Front item

You don't have to go far to see the global economy. It is in your house.

That was the theme of an eye-opening speech last week when Sacramento home builders gathered for a 2007 housing forecast.

The message wasn't that your bathroom faucet in Roseville was probably manufactured outside Beijing. It was about this whole new thing being born in the home building business, a suggestion of better days for builders who survive the next two years.

Credit the global economy, said David Hill, executive chairman of Chicago-based Kimball Hill Homes, which builds in Sacramento and Stockton. Get over the idea of a domestic home building industry that relies on conditions inside the United States to thrive. The world's money is rushing in, he said, transforming the building industry that has so transformed the capital region in recent years.

The Germans and many others are looking at a chance to own a piece of this great economy of ours, he told builders.

Brush up on your foreign language skills, he advised local land brokers. As struggling area builders face prospects of land sell-offs, rich foreign investors will be there to buy.

Hill asked builders to think about who buys homes. Nearly one in three buyers now are recent immigrants -- what Hill called foreign-sourced homebuyers.

And he sounded a warning. They're being made to feel unwelcome in the United States.

We are doing a lot of things in this country to make sure the foreign-sourced buyers can't get citizenship very easily, cannot get documented very easily and are really looked at very suspiciously, Hill said. All I know is there is fewer of them now. And they are subtracted from the demand.

Look who builds our houses, he said, touching a subject many builders do not like to talk about. Hill said 30 percent of new U.S. homes since 2005 are being built by foreign-sourced labor.

Finally, look who is partnering with large U.S. home builders. Hill cited big infusions of foreign investment in publicly traded home building giants that dominate markets like Sacramento. He recalled the biggest buzz in home building last year: the sale of Newport Beach-based John Laing Homes -- which builds extensively in Sacramento -- to a Dubai conglomerate.

Hiss point to area builders: We are now interconnected and changed by things we never thought of before. And that suggests backers and buyers that few builders have considered before.

I believe this will have profound implications for the careers of anybody from 25 to 40, he said. We are no longer delineated by a boundary even when we're building American homes on American soil.