Frank Mackle (far right) and Venny Torre of Torre Mackle Group, standing in front of Terzetto Villas, a townhouse project in Miami they built out for Ocean Bank, which provided construction financing.
Josh Ritchie Frank Mackle (far right) and Venny Torre of Torre Mackle Group, standing in front of Terzetto Villas, a townhouse project in Miami they built out for Ocean Bank, which provided construction financing.

When Florida’s housing market collapsed, FrankMackle didn’t wait around for divine intervention. Mackle is a fourth-generation builder whose South Miami–based Mackle Construction had evolved into a general contractor specializing in high-end custom homes. When buyer demand evaporated, he teamed up with another general contractor, Torre Construction & Development Co., which had more expertise on the commercial side, “to chase after distressed asset work.” “We recreated ourselves,” says Mackle.

The combination, Torre Mackle Group, bore fruit when a court-appointed receiver, Michael Moecker & Associates, last year chose the contractor to complete a 62-unit townhouse project called Terzetto Villas in Aventura in North Dade County, which Ocean Bank had taken back from its developer. The project was already 60 percent completed, but “vulture” investors were offering only pennies on the dollar. So Phil Von Kahle, a managing director with Moecker who handled this case, decided “to do what was best for the creditors,” says Mackle, and recommended that the project be built out for sale.

The key was getting Ocean Bank—which, like most other lenders, is groaning under the weight of bad housing-related loans—to kick in $4.5 million for construction financing. “The bank agreed to re-fund this project because of its location,” explains Von Kahle, noting that it’s in a heavily populated area near both Miami and Fort Lauderdale and in close proximity to the waterway. The completed townhouses have been selling for $500,000 per unit, which is down from their initial price tag of $700,000, but certainly more than what creditors would have recouped from a fire sale or an auction.

“We all need to take our medicine,” says Mackle when asked how the housing market will finally get back on its feet. “And banks need to get out of their fetal positions and stop pretending there’s going to be some miracle buyer for their assets.” He wouldn’t mind it, either, if the government appointed more judges and court officers “to push this stuff through.”

A cry in the wilderness? Don Quixote with a toolbelt? Maybe. But have you got a better idea, as the housing market struggles to awake from its coma? That’s what Builder asked a wide-ranging group of housing experts: How, if you had unfettered authority, would you fix the housing market, and what’s your definition of “fixed”?

Even pretend empowerment doesn’t make answering the first question any easier when the housing sector is beset with so many fundamental problems—oversupply (some of it beyond selling), not enough demand, mortgage and construction lending paralysis, dwindling home values, and a consumer base fearing unemployment. Age-old tenets about housing coming out of the recession first and pulling the rest of the economy up with it don’t apply anymore, either.

“I just spoke with one home buyer who was putting 50 percent down but still couldn’t get a loan because he hadn’t sold his existing house,” says Greg Paquin, president of The Gregory Group, an information and consulting firm in Sacramento, Calif., where sales per community have been averaging only five or six per quarter this year.

Alex Pollock of the American Enterprise Institute for Public Policy Research
Courtesy American Enterprise Institute For Public Policy Alex Pollock of the American Enterprise Institute for Public Policy Research

“You cannot rely on a housing rebound to do it alone anymore,” says economist Tom Lawler, who half jokes that maybe builders should be paid government stipends like farmers not to produce to keep housing supply in check. Alex Pollock, resident fellow with the American Enterprise Institute for Public Policy Research, adds that housing finance is now stuck in a hole it dug for itself because of “excessive debt created against asset prices that no longer exist and against income levels that are not sufficient to service that debt.” While it seems like forever since anyone has actually seen a functioning housing market, many are confident they’d recognize it again when it reappears. “Seven months’ supply of inventory, 0.9 percent price appreciation above inflation, and a 1.25 ratio between jobs created and housing starts,” is the benchmark for John Burns, the Los Angeles–based consultant and analyst. Celia Chen, research director for Moody’s Analytics, gave pretty much the same description, with “6 million home sales” thrown in for good measure.

Virtually no one, though, equates “recovery” with the inflated starts and sales of the last housing boom. Mike Castleman Sr., chairman and CEO of the research firm Metrostudy, foresees a market that’s healed when there are buyers for 800,000 new homes per year. For R.L. Brown, an economist, analyst, and consultant whose firm’s newsletter tracks housing in Phoenix, a fixed local market would look something like it did in 2003, when demand supported 40,000 starts. (In 2010, Greater Phoenix will issue 8,500 permits and start 10,000 homes, he estimates). Jonathan Smoke, senior vice president at Hanley Wood Market Intelligence (a division of Hanley Wood, LLC, publisher of Builder), doesn’t believe a repaired housing market nationwide needs to be closing a million homes or starting 1.6 million annually. “Fixed simply means working correctly again,” he says.

It’s surprising, though, how few experts, when asked how they’d fix housing, say anything about the way builders design, build, or sell homes. That’s unfortunate, because most builders right now “can’t see past their noses,” observes New Jersey–based consultant Bill Becker, who thinks the industry needs badly to “re-evaluate its products and communities by asking prospects and buyers, in a detailed way, why they did or didn’t purchase a house.” Under his direction, Becker wouldn’t allow builders to proceed on any project unless they had sufficient financing in place. He also would require builders to hire consultants to educate buyers about owning a home.

Back to the Future

Imagining themselves as kings for a day freed experts to propose remedies for the housing market—a few of which they’ve floated before—that would hurdle or bulldoze any real world roadblocks. Their suggestions also often betray just how much blame they place for this mess on lenders, home buyers, the federal government, or some combination thereof.

Learn more about markets featured in this article: Miami, FL, Los Angeles, CA.