Down-home reality: amid decline, residential builders shed inventory on the outskirts and look to tap 'walkable urbanity' trend closer to city center.

AuthorTitus, Stephen

The word is out: The housing market may be crashing, but it's nothing the nation and Colorado can't handle.

On the very day an economist told a Denver audience the national housing market "is correcting in a very orderly manner," D.R. Horton Inc., a national home builder that lists 48 communities it serves in Colorado, announced a 23 percent decline in orders nationally and in its western division, which includes Colorado. On the home builder's Colorado website, the company offers home buyer incentives ranging from $40,000 to $80,000 per housing unit. A week prior to Horton's bad news, Lennar Corp., another large national builder active in Colorado, made the admission to Wall Street that it was taking between $400 million and $500 million of land-related write-downs as a result of the national housing market decline.

And financial numbers of other large public-company residential developers, including Colorado's largest home builder, MDC Holdings Inc., suggest the same things happening to D.R. Horton and Lennar nationally are happening to developers here.

"We're experiencing much slower sales in every market except Salt Lake City," said Gary Reece, vice president and chief financial officer for MDC and its Richmond American Homes, which also is one of the nation's largest builders. "It's difficult in general," Reece said of market conditions all over. But he added, "It's very similar to what Colorado's been going through the last five years. So we're battle tested in this kind of market."

Write-downs are losses taken on land purchases or options on land the builder was holding for future projects. In October, MDC's chairman and CEO Larry Mizel, in a conference call on third-quarter 2006 results, said his company had already spent the last 18 months reducing its inventory of lots across the country by $100 million or about 25 percent.

Those big-company reductions suggest a trend among large and small developers alike: a turn away from expanding new subdivisions on the outskirts of metropolitan areas, and a turn inward where small, attached multifamily units, renovation and remodeling, and "walkable urbanity" all are on the rise.

But those moves are not only a response to a sales downturn, they also reflect current demand. One middle-aged buyer of a 2,600 square-foot duplex in the Platte Park neighborhood of central Denver--he asked that his name not be used--said of his wife and himself, "We're coming from a big place with a two-acre lot. We wanted something low maintenance that we could just walk away from and not worry about." The couple has two grown daughters and a second home in New Mexico. While their half-million-dollar budget gave them plenty of choices--many that...

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