Kenneth W. Carlson, 46, couldn't have picked a tougher time to go into the home-building business.
Last summer he resigned as a vice president of the Ryland Group, which he had helped found 12 years ago. He had held several top executive positions, and had been responsible for the land assembly, marketing and construction of 8,000 homes.
But Carlson wanted a shot at doing it himself. With an estimated $200,000 to start up the business from scratch, he formed Diversified Housing Corp. That in turn set up a general financial partnership with JJK Development Corp. VI Inc., a wholly owned subsidiary of Loyola Service Corp. The partnership purchased 46 single-family lots in Woodstream, a 165-acre planned unit development in the Good Luck Road area of Prince George's County.
"I was mightily impressed by the community plan with a park and the wooded lots," said Carolson. " we decided to build two model houses and take sales contracts before beginning any houses. The models were completed early this year and my wife Rita decorated them with Creative Design furnishings. By March we were ready for the public, just as mortgage interest rates were ready to peak. But our initial traffic was good and we got three contracts."
At Woodstream moderately priced town houses are also built by KRB Corp. headed by Michael Rose. The Artery Organization builds slightly lower priced houses. Both have had above-average sales with no inventory ofunsold dwellings.
In February, KRB postponed starting a new section of 31 town houses, but two weeks ago Mike Rose gave the go-ahead sign interest rates declined substantially and his payroll was cut by 50 percent. 'In addition tohouses under contract, we'll have only three town houses available for delivery between now and November. Sales have improved," said Rose.
Rose also rhapsodizes about the single woman, a bookkeeper, who contracted to pay $85,000 cash for a luxury town house with fireplaces.
Artery continued to build and sell its Green Run town houses in Woodstream. "We've been doing real well and have 32 sold ahead of delivery," said Artery vice president Dennis Riordan.
But it has been slower going for the more expensive -- $80,000 to $110,000 -- houses built by Carlson's four-person firm. Besides being higher priced, we are in another part of the market in a fine area that has a lot of town houses and apartments," said Carlson. "Our April market was cold and May only sightly better.
"You see, single home buyers are more likely to be young families with children or empty nesters selling another home. Many people are reluctant to make a major move when the general enonomic news is bad," Carlson said.
Neverless, three houses are being started for contract purchases and Carlson has permits for six more. "We're anticipating a good June," said Dennis Reich, Diversified's sales manager. "Like KRB and Artery, we know that the demand for housing is here and that people like this new neighborhood, which is convenient to a wide range of schools, transportation, shopping and the Goddard Space Flight Center."
The Diversified team includes Sam McCullough, production manager. Like Carlson and Reich, he's a Ryland alumnus. He has supervised the construction of more that 500 houses and also has been a builder himself. "We are doing panelized homes with components purchased from Wilson Lumber Co. in Glen Burnie," said Carlson. "We subcontract the skilled work and labor and all of it is done under the skilled work and labor and all of it is done under Sam's eye."
Another ex-Rylander, administrative assistant Cathy Fournier, brings experience in marketing, administration and customer relations to her job completing the Diversified staff.
One Diversified model is a split-foyer with three bedrooms and an optional lower level with a family room, storage and two more bedrooms. The two-story model may have three or four bedrooms plus a basement, family room and garage. A split-level house is also offered. All have opportunities for expansion. Several options are available.
Reich, the salesman on the scene, said that prospective buyers are mostly two-income couples earning a combined total of over $45,000.
"I emphasize the tax benefits even through many shoppers are aware of them," said Reich. "It helps to point out specifically how much they canbenefit.
"For instance, a couple with an adjusted gross income of $45,000 might have $9,847 in itemized deductions, a current mortgage with interest of $2,270 and real estate taxes of $1,072. But buying a more expensive home here could raise the mortgage interest to $10,200 and the taxes to $1,900.
"That would bring down the tax bracket from 43 to 28 percent and result in a total additional tax benefit of $5,140. That's a considerable inducement. Our tax counsel works this out for each solid prospective buyer."
Diversified Homes maintains its confidence in the future of the single-family house. "If the market improves and buyers regain their confidence in the economy, we'll do all right here. We'll sell and build our 46 homes here in the next 12 months," said Carlson. "Surviving in these times takes some doing. You don't plan it this way. Our confidence in housing ownership in the 1980s keeps us going."