As recovery takes hold, building lenders follow | CharlotteObserver.com
As new houses come back in demand, Charlotte is now home to several new banking teams dedicated to financing them.
Two community banks – Charlotte-based Park Sterling Bank and Raleigh’s VantageSouth Bank – both announced this month that they’re putting teams of “builder finance” lenders in the city.
That follows on the heels of Wells Fargo’s announcement in August that it was creating its own unit headed in Charlotte.
The mortgage market in Charlotte, like that of the country as a whole, is far from healed. Foreclosure rates remain elevated, and hundreds of vacant homes remain unsold.
But bankers say their new builder financing teams are less a bet on the future of the housing market than a reaction to what’s already going on.
While there are still vacant homes and lots that stay on the market for months, they’re mostly in the far reaches of the region. There is plenty of demand for new homes in places closer to the city, such as Davidson and Fort Mill.
Those homes are already being built.
North Carolina ranked third-highest for number of single-family home permits in November, according to data from the National Association of Home Builders – behind only Texas and Florida. South Carolina clocked in at No. 9.
“It is like oxygen finally coming to our industry,” said Alan Banks, owner of Evans Coghill Homes and new president of the Home Builders Association of Charlotte. “This is absolutely huge news.”
Boom, bust, boom
In 2006 and 2007, builders couldn’t get homes up fast enough, and developers moved farther and farther away from the center of Charlotte to find land.
“Then the world changed,” said Bill Miley, the Charlotte market director of research firm Metrostudy.
Demand dried up, home prices plummeted, and many builders went out of business.
Banks scaled back on their home building loans, and they largely stayed out of the business as they dealt with the distressed real estate on their books.
Now things are turning around.
In the third quarter, more than 1,900 new housing starts were recorded in Charlotte – up 28 percent from the same time period a year ago, according to the latest report from Metrostudy. Though home prices are still significantly lower than the peak in 2007, they are rising.
In the best locations, the inventory of vacant lots is down to about a 12-month supply when it can take two-and-a-half years for a single one to be developed from start to finish, Miley said.
That means regional statistics can remain mediocre while a pressing need has developed.
“The best locations, they’re all spoken for. Builders are scrambling trying to find good locations,” Miley said. “They don’t want those lots that are in Stanly and Rowan.”
Teams emerge
The teams at both Park Sterling and VantageSouth come from RBC Bank’s homebuilder lending unit. When the bank was acquired by PNC Financial Services last year, the new company announced it was winding down the division.
VantageSouth brought over Bill Bickett to lead the team, along with relationship managers Clark W. Gregory and Jay Hall.
Bickett said a return to the boom times is not imminent, but that there is a lack of financing options for builders in this area. VantageSouth will be looking for local builders in the Carolinas and Virginia who have weathered the storm of the recession.
Park Sterling had some bankers doing builder financing across its footprint, but hired Steve Ray to add expertise.
“By establishing a Builder Finance division, Park Sterling is further strengthening their lending division and showing that they’re dedicated to and believe in the market and the industry,” Ray said.
He said Park Sterling will be looking for professional local and regional builders with solid track records in the Carolinas and northern Georgia. Ray is currently building his team and says he hopes to hire additional administrative staff and a junior lender.
Wells going national
These local trends are playing out on a national scale, as well.
Wells Fargo launched its own builder finance unit focused on the Southeast, Texas and the Midwest after noticing an uptick in demand, better industry data and better performance from the bank’s own clients.
“We decided it was time to go back into more of an origination and entrepreneurial mode,” Anderson said. He’s been working in builder finance since joining Wachovia in 1985.
Of the team’s 14 members, three are in Charlotte.
“We’re not speculating as much as analyzing and reacting to our analysis,” he said. “Most markets have real improvement in those higher quality locations.”
