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Tuesday, July 15, 2008

Bold New World

Readers of this blog have a very unique source of contrarian information, since the only thing I am hearing and reading about is the extremely negative reports of slumping housing prices, and an ongoing recession. Let me tell you something, I first realized we were in a recession in the spring of 2006, when the newspapers and news programs were still touting the vibrancy of the economy. Meaning, we've been struggling for over 2 years now.

However, regardless of the headlines, Catskill Farms is getting it done, and we are actually looking to expand. There is no doubt our stress level is a bit higher, since we did have some trouble closing some deals due to the mortgage market, but that was mostly the result of trusting the financial due-diligence to a mortgage broker instead of doing it myself, like I usually do. But we got 5 deals closed this year so far, at all different price points, so I would be surprised if we couldn't continue to 'get it done'. The next test is in August when we close on Cottage 7, and then September when we close on Cottage 8. We only sold Cottage 1 in June of 2007. Now we have Cottage 15 reserved.

It does take a village, now, though. Everyone on the team needs to be an 'A' lister - good attorneys, good banks, qualified clients, hard-working appraisals. Any chink in the army could be fatal - and Catskill Farms takes an active role in guiding the process. Deals are falling apart or not get started for a myriad of reasons, but we haven't seen any fallout.

I wonder if it's because we sell good houses, priced right, to qualified individuals. Old-fashion like. It's amazing how many games were being played to get the deals done over the past couple of years. Yes we build superior homes, and yes they are priced pretty good, and yes our buyers are pretty qualified - but that's just the starting point now in getting someone into a home - all the stars have to be aligned.

So the truth remains that regardless on what is going on out in the real world, Catskill Farms is on a buying spree. Over the last 12 months we have purchased 100 acres, and a couple of houses, and now we are actively looking to pick up more land. The real trick at the moment is to be super-hyper-educated about this local real estate market, and to understand what are attractive prices - many times it's 40% off asking price, since the run-up in prices distorted the reality of value.

For our homes, we establish our prices very simply - what does it cost us to build it, buy the land and earn some profit. And to keep us in line, we are always examining what it would cost our customers to build this house on their own. I believe it would cost any of our clients more than $80k extra to build one of our cottage design independent of us, and if that's the case, then everyone is winning.

And then the question of why families continue to buy - I think that's a no-brainer - can we expect families to stop living their lives just because we are going through the non-fun time of a business cycle? While the media bombardment makes us wonder if every little business is suffering and nearly bankrupt, I am finding just the opposite. Our customers are diverse bunch of professionals - fashion, shipping, art, accounting, publishing, acting, writing, real estate, finance, web, design - and I don't see these people jumping off the nearest bridge. Sure, everyone is a bit hunkered down, no one likes to live in fear, and the go-go times surely are more fun - but life goes on. And country living is as good of a place to contemplate the world's ills as any place - in fact, I think there's an argument to be made it's better than most.

And then I met with some probable future customers yesterday and they one of them had some development background, and they commented that it doesn't seem like all fun and roses to run this business of mine, romantic as its premise is, and that it is unusual to track the downs as well as the ups. Well, I think the beauty of Catskill Farms, and why we are continuing to sell in these tough times, is the fact that I think it's clear it's not all hype, and it's not all roses, and it's not all easy-living. It's a brutal little sport, this construction business, and the battles that are waged on a daily basis hopefully result in an unparalleled process for our buyers - on time, on budget, with quality high. I believe our credibility is strengthened by showing the good with the bad, the irritation with the glory, and the dramatic progress we make on a daily basis is not without it's pain and suffering. Especially up here in the sticks, where every decision I make gets discussed, disected, and reviewed among a small community of locals and my homeowners. But, a few years ago, I realized what is most important about succeeding in a small community is to be consistent, be fair, pay your bills (if they are correct) and let the chips fall where they may. While it's disappointing I can't always be the herioc figure I aspire to be, at least I know anyone else who hopes to enter this business of mine, will have the exact same varied challenges, and since we have no competition, I guess the challenges are more pronounced they may appear at first glance.

So here we are, warts and all, busting our ass to build these affordable little country homes.