Photo Credit: Mike Brown
The scene is all too familiar.Empty lots not maintained. Government foreclosure stickers and “for sale” signs litter the landscape. Potholes and partially paved roads offer visitors an uneasy entrée into this decade’s version of Paradise Lost.
This time it’s the Gardens at Stonebriar, an 80-unit subdivision in Memphis, Tenn., a housing development a mile or so down the road from many of the large warehouses that have made Memphis a major distribution center.
Memphis has had its share of housing debacles, such as when big builders Beazer and Levitt and Sons left the region last fall. That was about the same time that prominent local builder Matthews Brothers pulled up stakes at Stonebriar.
Memphis has long been known for its haunting, finger-picking delta blues songs, and its homeowners who bought at the Stonebriar complex are singing some hard luck tunes of their own now. What was supposed to be a suburban oasis—a gated community for predominantly inner-city home buyers—has turned into yet another poster child for the subprime meltdown.
The residents say builder-owner Mark Matthews left them high and dry, with no one to address their warranty issues, pick up the garbage, or build out the community’s amenities. Many took on subprime loans and now can’t make the mortgage payments. While a different builder, Regency Homebuilders, plans to build out the rest of the project, many initial buyers are furious about what’s happened.
“Regency will be building out the Matthews Brothers models, but for $10,000 to $20,000 less and loaded with tile floors, granite countertops, and tall cabinets in the kitchen,” says Lamont Bethea, who paid $224,500 for his two-story, five-bedroom, 3,000-square-foot home when he and his family moved in during April 2006.
“Now, it will take $25,000 to $30,000 to have my house upgraded so I can compete with the new homes,” explains Bethea, who drove us around the community, pointing out empty lots that he and the neighbors maintained in the heat of the summer, as well as a street that stops at Lot 230, an unfinished 4,000-plus-square-foot home that informally designates where Matthews Brothers stopped building.
“How is the new builder going to sell homes if the place looks like this?” Bethea asks, pointing out the unmaintained streets and unkempt lots. “It’s just unacceptable.”
Unhappy Buyers
Neighbor Carilyn Daniel, who purchased a model similar to Bethea’s for $243,000 in June 2006, can’t begin to express her disappointment with the house.
Photo Credit: Mike Brown
“There’s no way that I’m putting $20,000-plus into this house,” fumes Daniel. “Why should I put money into something that has depreciated?” She adds that the kitchen floors in her house are uneven, and the home was improperly framed, causing many of the walls to tilt and bow.
Daniel says a poorly maintained empty lot next door has been a breeding ground for snakes and field mice, causing the rodents to find their way into her new home. To make matters worse, when she called the gas company one day last fall because a visitor smelled gas, Daniel says the service technician abruptly left the house and cut the gas line, fearful of an explosion. Daniel went without heat and hot water for more than two weeks.
Bethea and Daniel both say almost all the residents have warranty issues, but many of them didn’t pester the builder the way they should have. Now that more than a year has passed for many homeowners, it’s unlikely that the warranty company, 2-10 Home Buyers Warranty, will honor any more claims. Daniel says that the problem many of the homeowners ran into was that as the home builder began to fail during the summer and into the fall of 2007, Matthews would refuse to go into arbitration on a warranty claim.
And according to Daniel, unless the builder goes into arbitration, the home buyer cannot file a warranty claim. The alleged strategy essentially worked, as many of the homeowners are now long past the one-year warranty period.
“At least 40 homeowners have warranty claims, and I’m just afraid that they are out of luck,” says Bethea. (Attempts to contact Matthews Brothers for comment were unsuccessful.)
Mississippi Blues
The overall situation in the housing market in the Memphis metro area is making many recent home buyers uneasy. Buyers see how most building has ceased and they wonder if their builder will be the next one to declare bankruptcy, leaving them in the lurch.
Photo Credit: Mike Brown
Yet another buyer who’s had warranty battles with his builder and is concerned about the builder going out of business is Rick Stewart, who bought a $175,900 Reeves Williams home in August 2006 in Fairway Woods, a community in Hernando, Miss., a 20-minute ride south across the state line from Memphis. Reeves Williams is one of the area’s largest builders, and Stewart is concerned that the housing slowdown will push the builder into bankruptcy.
Mike Neill, president of Reeves Williams, admitted that the company has slowed down construction, but said Reeves Williams is well positioned to survive the downturn. He said the company built 578 homes in the Memphis metro area in 2006, 412 in 2007, and expects to build around 350 this year in 12 to 15 communities.
When asked about his company’s existing situation and if it could weather the downturn, Neill said there are very few communities in the entire Memphis Metropolitan Statistical Area where building is currently taking place.
“Some inventory burnoff needs to occur first, but we fully expect to restart our building program earlier than most builders, because our burnoff rate is faster,” Neill says.
Photo Credit: Mike Brown
A skeptic, Stewart has had a long feud with Reeves Williams and publicized his numerous warranty issues in a story reported by the local ABC-TV affiliate. The story led to an arbitration hearing last fall, in which Stewart won 21 out of 35 claims, including problems with walls out of square and poorly finished stairwell walls.
While Stewart is grateful that he was able to take care of most of his warranty issues, there is a nagging problem. In attempting to extend out his backyard, the builder filled in a natural drain at the bottom of a hill in back of Stewart’s house.
Both Stewart and the builder could never agree on how many drains to put in the backyard. Stewart said the area needed three; the builder only wanted to put in one, which was based on the recommendation of the engineer who designed the project. The two parties continued to disagree and the result was that nothing got done. Now, when it rains during the spring and summer, the backyard becomes completely flooded. Worse, when it’s hot, the flooded area becomes infested with mosquitoes and the backyard is filled with mud and slime.
Stewart is also concerned about what happens to the community now that the builder is scaling back.
“Who will mow the grounds or clean up after a jobsite has been vandalized?” he asks.
Stewart doesn’t think Reeves Williams will make it. But Neill disagrees. “Reeves Williams has been the largest builder in the Memphis area for many years and consistently expects a 30 percent market share in those areas where we operate,” says Neill. “Of course we expect to survive.”
Other stories in Field Report 2008:
Lien On Me: Contractors left unpaid by a bankrupt Neumann Homes think twice about extending credit to other builders.
Blast Surviors: Builders in Ft. Myers/Cape Coral, Fla., struggle to hang on.