eterbuilt Construction Inc. was established during the peak of the housing market in the middle of last decade.
Scott Jeter, a Shasta High School graduate and former Air Force engineer, began doing small jobs before he decided to build his first spec home in west Redding.
The house in Kildare Estates eventually sold for about $100,000 less than what it would have fetched three months earlier. The company broke even on the deal.
"It was a very good indication that the market was changing, that new home construction wasn't going to be as desirable as it once was," said wife Lisa Jeter, who grew up in Burney and worked at Hewlett-Packard, telecommuting, and at Apex Technology Inc. in Redding before she went to work full time in the family business. "For us, it was more important to have a consistent income than not have one at all."
Which led Jeterbuilt into the business of rehabilitating foreclosures.
Painters, carpet cleaners, roofers, trash haulers, termite inspectors and suppliers have stayed busy the past couple of years, making bank-repossessed homes market-ready. Call it the foreclosure economy.
"It's part of the bank bailout that Redding has seen," said Kimberly Gabel of Gabel's Hauling in Redding.
Still, the money generated from flipping houses for banks is spare change compared to the dollars that reverberated through the economy last decade, when equity-rich borrowers were using their homes like an ATM machine.
The housing bubble created what Chico State University economist David Gallo has called the wealth effect — a boon to car, RV, boat dealers and other retailers.
But each $100 drop in housing values reduces annual retail spending by $6, Gallo says.
Home values in Shasta County are nearly half of what they were at the peak five years ago.
Construction activity has dropped dramatically statewide and employment in the trade along with it, Gallo said. "Then all that money those people were spending," he added.
Gallo said the work that rehabbing foreclosures has created is "just making a bad situation not quite so bad."
What Happen's after Foreclosure : Changing course
Photo by Andreas Fuhrmann
William Erickson of Gabel's Hauling and Demolition maintains a yard on a foreclosed home.
Like Jeterbuilt, Gabel's Hauling didn't set out to make money cleaning up foreclosures.
Alex and Kimberly Gabel moved to Shasta County in 2005 and started working with investors and homeowners.
It seemed a safe bet.
Housing speculators were honing in on the Redding area during the middle of last decade. For a time, Shasta County led the nation in houses sold to investors.
But the market was collapsing within two years of the Gabels' move to Redding.
"The homeowner at that point didn't have the money. So we asked, who did?" Kimberly Gabel said. "The conclusion we came to was it was the banks."
The husband-and-wife team had been marketing to real estate agents, so requests started coming in to do "trash-outs" for foreclosed properties.
"The conversation we had at that point was just say yes and follow the money," Kimberly Gabel said.
Roughly 80 percent of the Gabels' time is spent on foreclosures. During the winter the company keeps six people employed.
Without the foreclosure work?
"There would be six more people unemployed in this county right now," Alex Gabel said.
Lisa Jeter believes her family might have become an economic statistic had Jeterbuilt continued to build spec homes. She wonders if they would still own their home today had they not changed course.
"We could have easily been one of the stories," said Jeter, who's also an Air Force veteran. "It would have been a disaster. Both my husband and I are risk-takers, but within reason."
The lesson the Jeters learned from Kildare Estates was don't focus on one thing. "We will never put our eggs in one basket," Jeter said.
'It's huge'
Jeterbuilt works with a cadre of contractors to fix up homes.
One is Stephens Painting in Redding, a company owned and operated by Scott Stephens, whose father started the business in the mid-1970s.
Close to 60 percent of the work Stephens does is foreclosures.
"It is huge," said Stephens, who makes between $700 and $1,000 per house. "The key is you gotta get them done quickly, so you have to get more people involved, so you don't make as much."
Stephens remembers the first few times he went to a foreclosure.
"It's kind of sad, people losing their homes, and we are profiting a little bit from it," Stephens said. "It's tough to see the painted kids' rooms. ... But over time you get numb to it. You just hope those families are moving on."
On the flip side, Stephens said he believes his work will help bring more buyers to the market.
"With the lower prices, they will be getting a nice house," he said.
Meanwhile, banks often demand a quick turnaround to get the home ready for listing.
"We are very fortunate to do these jobs, so we don't complain when it has to be done in four days," said Jeff Tugwell of Tugwell Roofing in Redding.
Tugwell's company has done everything from patch jobs to replacing an entire roof on a foreclosed home.
Typically, Tugwell won't make as much as he does on a regular home, but the roofer is philosophical about it — especially because Shasta County's unemployment rate is 16 percent, and the housing crash has cost the construction sector nearly 3,000 jobs.
"I think the majority of us, the way we look at it, we are all lucky to be working," Tugwell said. "If I could make a profit on something, whether it be a smaller percentage or larger percentage, it is still a profit. ... I have employees I have to keep busy."
Design Time & Tile owner Sylvia Schmitt said sales are down from the boom of last decade. But business, buoyed by investors and first-time home buyers who have bought foreclosures, is still solid.
"I know we are always doing something for somebody who has picked up a foreclosure," said Schmitt, who estimates 25 percent of her business is related to foreclosures.
Many who buy foreclosures, especially first-time home buyers, have spent most of their savings on the purchase, so there is not a lot left over to fix the place up.
"They are broke; they have put all their money in the foreclosure, so they're not looking for high-quality like granite but for inexpensive vinyl and carpet," Schmitt said.
Some who have purchased foreclosures do so with aid of the government's 203(k) program, a loan that has received renewed attention during the foreclosure crisis. The cost of repairs are built into the Federal Housing Administration loan.
Retail giant The Home Depot markets the 203(k) loan under its Home Renovation Services, a program the store administers with the help of local contractors, among them Jeterbuilt.
"We know (foreclosure rehabs are) not going to be around forever, so we have to put our best foot forward now," Lisa Jeter said. "I don't know what the next big thing in the market will be in construction, but hopefully we will grow in whatever direction it is."
Bankruptcies up
The wave of foreclosures also has kept bankruptcy attorneys busy; they are seeing more clients who have fallen on hard times because of the implosion of Shasta County's housing market.
"We are swamped. Busy, and we are getting even busier," Redding bankruptcy attorney Dennis Cowan said. "What we find is as home sales continue to go down and prices go down. More people are filing."
Bankruptcy filings in Shasta County in 2009 jumped 31 percent compared with 2008.
Numbers for 2010 have not been recorded. But through September, year-over-year filings in Shasta County were up 19 percent, compared with the same nine months in '09.
Depending on the case, fees to file bankruptcy can run between $2,200 and $2,900, Cowan said.
Since the fall of 2007, The Associated Press has been tracking the nation's pain through its Economic Stress Index. The news service calculates a score from 1 to 100 based on unemployment, foreclosure and bankruptcy rates.
In December, Shasta County's stress score was 19.68, three-tenths of a point up from November.
By comparison, the nation's most stressed counties in December were Imperial (32.39); Lyon, Nev. (27.56); Nye, Nev. (25.91); Merced (25.37); and Yuma, Ariz. (25.34).
Cowan expects to be just as busy in 2011.
"They say the economy is coming back, but of course the north state is always a year behind the metropolitan areas," Cowan said.
