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Tue July 31, 2012
Getting By, Getting Ahead: Lakes Region Home Builder Adapts To Anemic High-End Market
Summer is boom time on the banks of Lake Winnipesaukee. These are the months when the region’s tourism towns double or even triple in size as wealthy vacation home owners settle in for the season. But at the moment, one of these homes—a 7,000 square foot mini-mansion on Governor’s Island—remains empty.
Forty-eight year old Joe Skiffington’s company built this home back in 2008. He’s a big man, with a dark goatee and an easy smile. He looks right at home on a construction site. In fact, Skiffington is part of a small community of Lakes Region developers who build high-end vacation houses. The kinds of places with 22-foot high vaulted ceilings, exposed pine beams, a sauna in the basement, and the amazing guest bedroom
“It has great lakefront views, 17 by 17 is the size of the bedroom, two walk-in closets," he notes.
Skiffington is hoping to sell this house for $2.7 million It’s sat vacant through 70 showings over the past four years. Besides being a model, this is a “spec” home. That means that rather than building-to-order, the developer buys land and builds a home, operating under the assumption that he can quickly unload it. It’s a high risk, high profit venture. And in the run-up to the economic downturn, the Lakes Region saw its own little bubble.
“2003, 4, 5, 6 and 7 and even into 2008, we were very busy building between four and seven spec houses a year that ranged anywhere from $2 million to $6 million.”
Demand was so high that Skiffington expanded his crew to 19 people. But by 2009, things started to sour. Wealthy executives from Massachusetts, Connecticut, and New York started getting skittish. Skiffington had to lay-off a couple workers. But he is in better shape than some of his competitors. He just has one spec house he’s trying to unload—the model home we’ve been talking about. And on the lake, it’s one of about 95-high-end homes with “For Sale” signs. So to stay afloat, Skiffington has mostly switched gears to high-end general contracting.
“You know, you don’t like going from a profit margin that you’re comfortable with to a profit margin that’s much less. But I think we’re making it through….we’ve had to be more competitive on our general contracting prices, by far…the profit percentage is cut in half of what it would normally be,” Skiffington says.
Although there were only a handful of developers involved even at the height of the market, they played an important role in the Lakes Region economy. It’s not unusual for a third or even more than half of the homes in a town to be seasonal. The bulk of jobs here are in the service industry, catering to tourists and the very wealthy.
“That’s all they do after we sell them a house, is spend," Skiffington says. "I’ve been told by different customers that they’ll spend anywhere from $50,000 to $200,000 per year to maintain the house, real estate taxes, then use of local services.”
That’s another thing that becomes clear talking to Skiffington. He really knows his customers. And while there is still a glut in the market for high-end vacation homes in the region, Skiffington says there’s nowhere else he would rather be building—or selling—homes.
“And this asset, in my opinion, provides a heck of a lot more happiness, a heck of a lot more memories, a heck of a lot more smiles than wherever you took the money from, be it a stock fund or a bond fund or something else," Skiffington says. "I always tell people, you know, put a price on teaching your grandson how to waterski. Try to put a price on that.”
So far, no one has been willing to pay the nearly $3 million price tag to make those memories in this house. But building homes for wealthy tourists is exciting work for Skiffington, whether he’s making big money on spec or raking in smaller profits in a tough market. But it would still be nice if he sold this lakeside getaway, first.