The story isn't new: anxious to capitalize on rising home buyer demand, a local builder ramps up production, then gets caught with excess inventory as demand dies. What is new in the case of Roger Pollock and his fast-track start-up operation, Buena Vista Custom Homes, is the market, Portland, which has held up relatively well during the housing slump of 2006-2007.
It is no longer holding up: In September, inventory levels were more than double that of last year. As a result, next month Pollock will put his entire inventory of unsold homes--248 single-family homes, condo and leased homes--up for a two-day auction. Previously, the asking prices of the entry level and move-up products have ranged from $265,000 to $700,000, but at auction, bids will start as low as $69,000 for some lower-priced townhomes.
"We were over-aggressive and too slow to react to the changes in the market and that has created an over-supply of finished homes," Pollock said in a statement. He could not immediately be reached for further comment.
Mike Higgins of Buena Vista's public relations firm, Events Northwest, said the auction was an effort to quickly clear out inventory. He said the builder sold 10 homes last month, and at that rate, it would take many months to burn through overhang. The object, he said, was to clear out inventory and then "go back to a more conservative, pre-sell model."
Buena Vista Custom Homes was named as one of the top-10 fastest growing companies in Oregon by the Portland Business Journal in 2005 and 2006 and was named the nation's fastest-growing builder by Builder magazine for 2005. In 2006, the builder closed 463 homes and posted gross revenues of $149 which is a 93% increase over the prior two years. Closings grew by an astounding 222% from 2004 to 2006.
Though the company is casting the auction strategy as a creative sales tactic, sources in the market who would not speak for attribution said they saw it as an act of desperation and that they were concerned with the impact the auction might have on consumer sentiment. Said one, "Not only was he way overbuilding the market, but what was someone doing in funding them?"
Pollock has a history of implementing the if-you-build-them-they-will-come model in the region: In 1990, he began building homes in the Portland area through his company, RMP and focused on the first-time buyer market. With a spec home business model, the business grew rapidly and by 1997 RMP was the largest builder of spec homes in the Portland area logging 303 starts and 187 sales with profits of over $3 million.
Pollack sought a buyer, and D.R. Horton eventually bought RMPs assets in June of 1998 for $6.5 million in cash and $1.25 million in restricted Horton stock, according to legal documents. Though Pollock was originally retained to run the division, a contentious relationship evolved over compensation and he left the company. After the terms of a non-compete expired, he re-entered the home building business in the market with Buena Vista and redeployed a business model that one competitor who would not speak for attribution said was "a lot like an unsophisticated Horton model."
The homes that will be offered in the auction are located in a variety of communities in the Portland metro area including: Beaverton, Happy Valley, Hillsboro, Sandy, Bend and Scappoose. Buena Vista enlisted Real Estate Disposition Corporation (REDC) to conduct what is billed as the largest two day sale of real estate by one seller in Oregon history. The company, which does not maintain on-staff sales agents, has told indepedent real estate agents that REDC will be the exclusive sales agent for the properties through the end of this year, as required by REDC's contract, according to Higgins.
REDC has conducted similar auctions in California, Arizona, and New Mexico with strong results. A recent Albuquerque auction conducted for a regional builder there drew more than 300 registered bidders. Prior to the auction, more than 2,500 potential buyers visited the open houses. The auction resulted in 90% of the houses listed in the being sold.
The auction will be held Saturday December 15th and Sunday December 16th at the Oregon Convention Center. The inventory of homes will be posted on a special website at www.auctiontoday.com.