Readers suggested a topic surrounding construction problems arising from a housing bubble. "I think in the coming months and years we will see more stories like this. It was only a matter of time before builder cost-cutting began to cause problems for buyers."
One said, "In the early 1990s in San Diego, construction defect litigation was a real cash cow. Looking for that to fire up again, partly legitimate, and partly as a ploy for FBs to try to get out of their obligations."
Another, "I bought new from Fulton Homes in 95 in Gilbert. A class action was filed a few years ago for improper slab prep (not post-tensioned) & poor grading on expansive soil. Luckily I only had minor damage, like settling cracks. Some people had huge problems. It took over 2 years to play out. $5 mil judgement. The lawyers took a third. Yeah, there's some money in it if you target the big HBs. Given all the recent building, they should be quite busy for the next few years."
One reader added, "My work in the construction defects business sent my kids to college."
One from California. "Back in the mid-80's, I lived North San Diego County. There had been a mini-boom in the late 70's which, like all booms usually busts at some point. One weekend I drove around the Oceanside area and came across a whole street of SFH's which were empty and the street was overgrown with weeds. I ignored the 'danger' signs and ventured into one of the houses and saw huge (6″ in places) cracks in the floor of the kitchen caused by subsidence."
"Someone who's father was a small builder told me that when there's a boom, it's hard to find various things like good building material (wood especially) because, for instance, the wood is being cut so fast and seasoned in kilns so badly, that's it just a matter of time before problems show up in 'rushed' construction."
"In these boom (and eventual bust) times, EVERYONE is grabbing for the money as fast as they can. The list includes (starting with the main offenders), real estate brokers and their sales people, mortgage brokers, speculators, building material suppliers, inspectors of all kinds, termite companies doing as many jobs as they can, because the realtors and owners and buyers want a termite inspection certificate quickly to satisfy mortgage requirements."
"Most of the builders employ sub-contractors to do the plumbing, air conditioning, roofing, etc. In boom times, they too rush to complete the job in order to get onto the next job to keep the money pouring in but, for the new home owner, many of these bad construction don't appear for several years until the shoddy plumbing and roofing starts leaking and the termites find some tasty timber which wasn't treated correctly."
"The end result is, there are going to be a lot of very busy lawyers in the next 10 + years but a lot of people are going to be unlucky because (like the building company Kara) many of these builders will be out of business or will have found protection in bankruptcy."
One added, "Bottom line … pre-bubble the argument to 'invest' was: Even if rent doesnt cover mortgage + other expenses, profits will come from 'appreciation.'"
"Sooo post-bubble the logical approach shall be: Even if rent is above mortgage + other expenses, better dont buy because of the 'depreciation' factor!"
The Wall Street Journal. "With once-hot condominium markets across the country in sharp decline and many real-estate professionals predicting a further weakening, some developers are facing more than a glut of unsold inventory. Angry condo buyers from Boca Raton, Fla., to San Diego are taking them to court, alleging everything from breach of contract to fraud."
"In Florida, 2,557 individual complaints against developers were filed in fiscal year 2006, ended June 30, up from 1,825 two years ago, according to the state's Department of Business and Professional Regulation."
"In Colorado, at least 18 lawsuits have been filed by attorneys representing condominium-owners' associations in the last two years. Most involve complaints of shoddy construction or faulty repairs in recently completed developments."
"In California, developer Crescent Heights is being sued by condo owners in three of its projects, including the Metropolitan, a recently completed 342-unit development in San Francisco's Rincon Hill district. Ben Bedi, who filed the suit, says he put down a 5 percent deposit on a $1.7 million condo during preconstruction in 2004."
"In his complaint, the 41-year-old attorney alleges that when he moved in at the end of 2004, he found defects such as screen doors installed backwards and water pipes that leaked. The complaint also alleges that the developer misrepresented the size of the apartment. 'I paid a lot of money for what I thought would be a brand-new home,' Mr. Bedi says. Instead, he says, he has spent thousands of dollars just on repairs and other labor."
"Real-estate professionals attribute this latest wave of legal actions to the surge in preconstruction purchases during the recent market surge. 'You've got buyers out there who paid one and two million dollars or more for a condominium and are now dealing with everyday construction defects,' says Ross Feinberg, a California attorney who specializes in construction litigation."
"'Right now, the condo market is a disaster,' says Lewis Goodkin, a Miami economist and real-estate analyst. The crash in some areas was inevitable, he adds. 'These markets were essentially propped up by speculators.' Indeed, investors accounted for as much as 80 percent of the preconstruction purchases of luxury condos in Miami."
"Dried-up demand and rising construction costs have forced many developers to stall or cancel projects, particularly in formerly hot markets that are now overbuilt. In Las Vegas, an estimated 6,900 condo units have been suspended in the sales process, while another 1,900 have been canceled officially."
"As the number of scrapped projects increases, so too do the complaints. In Florida, many condo suits involve severely delayed, cancelled or recently completed projects in the southern part of the state."
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The Housing Bubble Blog » Shoddy Construction And The Housing Bubble
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