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Many people are worried about the subprime mortgage crisis and what it's doing to homeowners and the banking industry. But another industry is also gravely concern - it's new home construction.
Celeste Headlee spoke with two builders in Michigan who are managing to survive in difficult times.
CELESTE HEADLEE: Frank Portelli(ph) is walking through the shell of a house -bare wood and exposed pipes, gravel floors. Portelli's career, up until now, has largely been with big national building companies, like Crosswinds and (unintelligible). But when the mortgage market began to collapse, he decided the only way to survive was to think small.
Mr. FRANK PORTELLI (Builder): I used to be enrolled in producing, you know, three to four homes per week in some subdivisions, you know, where things were active. Now, this year, for 2007, I'll complete a total of four homes. And for 2008, we'll see.
HEADLEE: A contractor is at the house pouring concrete for the basement. Portelli lost his job at a massive national company where he had dozens of staff members. Now, he has a staff of one - himself. And he's careful not to overextend himself because he's competing with all the existing homes on the market that are selling for very little.
Mr. PORTELLI: A bank that hasn't repossessed a piece of property can and does and will sell out of the loss just to get it off their books. Obviously, you can't build and sell a new house at a loss - or at least, you can't do it too often.
HEADLEE: The National Association of Home Builders says builders' confidence in the housing market is at its lowest point since 1985. And Portelli says the residential market has been hit the hardest in recent years.
Mr. PORTELLI: I've got a lot of contractors that I've done business with for years - good guys, you know, that are idle. They are not working at all.
HEADLEE: Portelli says there are dozens of contractors that he knows and likes - and as he says, would give his left arm to hire.
Mr. PORTELLI: They're scrambling, you know, doing small repairs, you know, various small repairs that a few years ago, you know, people would have put off or sold their house instead of doing the repairs.
HEADLEE: But the sad fact is, when you're building only four homes a year, you can't hire everyone that needs work. One of his favorite contractors is Jerry Sable(ph). Portelli's known him for years and says he is one of the best in Michigan.
Mr. JERRY SABLE (Contractor): We didn't see the mortgage crisis coming.
HEADLEE: Sable is standing in front of a shell of a home with no doors or walls. There are about 20 feet of bricks stacked in front of it, covered with snow.
Mr. SABLE: This house has been here for about four months, at least. And it's unsold and it's just unfinished.
HEADLEE: Just unfinished.
Mr. SABLE: unfinished. And you have to leave it that way because, number one, the builder doesn't want to put in any more money in it. And I don't blame him. And if you put in more mechanicals, they're subject to damage and stuff, so you just leave it and protect it as best you can.
HEADLEE: Sable says another developer in Pontiac, Michigan built a model unit and kept it open for six months without selling a single house. That project has been scrapped.
Mr. SABLE: Our business is down 75-80 percent. We had 28 people working four weeks, sometimes a lot of overtime. And now we're down to six or eight. And we're - it's very difficult to stay alive these days in business.
HEADLEE: Last month, housing stocks fell to the lowest level since 1991. Building permits that are often used as a predictor of future construction are down 34 percent for single-family homes.
Mr. SABLE: On an emotional point of view, it's very trying. People have worked for us for many years. And some of them just right out of high school and worked for us, got married, have a couple of kids. And now - and I have to lay them off. And I'm more worried about the people that worked for me than myself. We'll be fine personally.
HEADLEE: As for Frank Portelli, he has no employees and he doesn't build a house unless it's paid for. He says he survived only because he has adapted.
Mr. PORTELLI: Whereas before, I was involved in, you know, quality control, training of superintendents, selecting contractors. Now, as an independent, you know, I had become a Web master. I am also the banker. I'm also the sales person. I'm also - a lot of different hats that I didn't have to wear before, I just assumed somebody else on my team was taking care of it. Now, I do all those things myself.
HEADLEE: Portelli says he thinks the new construction industry will be radically changed by the mortgage crisis. And all builders who have to adapt or find new industries.
For NPR News, I'm Celeste Headlee in Detroit.
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