Don’t tell Adam Knecht that the recession is over. Not when he’s standing at a makeshift construction table in the unfinished family room of The New American Home 2010, checking his cell phone at every vibration to see if his most recent attempt to secure a $1.8 million loan might come through that will enable him to complete the house.
Knecht is the general manager of Domanico Custom Homes in Las Vegas, a company started by his father-in-law that has a 30-year track record of producing high-end luxury homes in the valley. Nearly three years ago, Knecht and Ernie Domanico were asked to pilot the 2010 version of the industry’s longest-running annual show home program, The New American Home, in conjunction with this year’s International Builders’ Show.
Relying on a private financier—a common practice by Domanico Homes to fund its few spec luxury homes, which The New American Home would be—the builder broke ground in late 2007 on an empty lot within a nearly completed, nine-lot infill enclave of like-sized homes, one of which is owned and occupied by Ernie.
By February 2009, amid arguably the country’s worst economic conditions since the Depression and the worst housing market ever experienced in Las Vegas, the private financier pulled out of the project, leaving Knecht with a half-finished home and no strong traditional lending prospects.
Eight months later, with $400,000 owed to subcontractors and another $800,000 leveraged from the builder’s own coffers, work on the 6,100-square-foot show house all but ceased, the prospects for its completion by the Builders’ Show in mid-January 2010 dimming every day that the call Knecht is waiting for does not come.
The New American Home 2010 had already survived delays in the approval and installation of its insulated concrete form walls, rejection by the city of an innovative graywater recycling system, and an arson fire that engulfed a framed house on an adjacent lot. But it could not overcome an AD&C lending environment that has dried up in Las Vegas and across the country.
Record-setting bank closings, tighter regulations for real estate lending, and reappraisals that are less than the amount of outstanding construction loans have put builders nationwide out of business or on the brink of insolvency. “The only way to describe the [AD&C] market is horrible,” says David Ledford, NAHB senior vice president for housing finance and land development. “Even good projects can’t get money, and it’s hard to identify any patterns about the lending that is being done.”
In the case of The New American Home 2010, the construction lending crisis also will end a 26-year streak of show homes that have brought innovative design and product ideas into the national spotlight.