Homebuilder's survival strategy - stimulus
One N.J. homebuilder is hoping to weather the housing crisis by turning to stimulus projects.
NEW YORK (CNN) -- Certified Public Accountant Tom Critelli has never regretted the day 18 years ago when he gave up a secure accounting job to become a homebuilder. But he's thought about it recently as the housing market has continued to sink.
"I've always said to my wife we can go back to doing that," reflected Critelli, President of New Jersey-based Danitom Development Inc.
Before retreating to number crunching, which he concedes was "boring," Critelli is making every effort to remain in business, even as competitors are folding.
He's slashed his staff, now employing only two full-time workers, down from a dozen; he's sold off the majority of plots on which he had planned to build, enabling him to pay off millions in bank debt; and, he's broken ground on only three homes this year compared to more than 50 just a few short years ago. It still hasn't been enough.
"We're struggling. There's only so long you can stay on," said Critelli.
So, the accountant-turned-homebuilder is now looking to Uncle Sam, not for a bailout, but for a piece of the economic stimulus pie. In partnership with contractors who have experience working for the government, Critelli is bidding to repair military recruiting centers and facilities at New Jersey's Fort Dix.
"We're trying to not put all our eggs in one basket anymore," said Critelli. "I'm hoping a government contract can save the business, to keep going for the next year or two, till we get out of the housing crisis."
Though not as severe as the Sun Belt's decline, New Jersey's housing market has suffered. State building permits for the first five months of the year were down 65% from the comparable time frame in 2005, a record year, according to the U.S. Census Bureau and the New Jersey Homebuilders Association.
"It's been a crash and most people will tell you it's been a depression," Critelli said.
Danitom Development specializes in building single-family homes for first-time home buyers, typically priced near $300,000, relatively low for New Jersey. In today's economy, Critelli points out, some of his potential buyers are unable to get mortgages from banks that several years ago were happy to take them on as leveraged buyers.
The National Association of Home Builders says first-time buyers usually are instrumental to picking up the housing market during recessions.
"The first-time buyer doesn't have to sell a house. That's important in this cycle with values falling, a repurchaser has less equity and has to find a buyer before they can shop," said David Crowe, Chief Economist of the Association.
But, Critelli has yet to see any bounceback. Two of the three homes Danitom has under construction are unsold.
"What was projected to be a $400,000 house is now down to $359,000 and it'll probably sell for something less than that, $10-$20,000 less, below what we're asking right now," Critelli said, walking through one of his construction sites.
Much is riding on Critelli's bid for new business since he has a son in college and a daughter about to enroll. The Critellis already have had to sell their beach home, raid their 401(k), and tap other savings. But, Tom Critelli -- who has a "Never Give Up" slogan posted in his office -- is confident not only that he'll win a government contract, but also that the home building business will eventually come bouncing back so he can rebuild his business.