California developer Thomas James Homes has decided to pack up and pull out of Denver, leaving Colorado and its falling home prices behind.
The Orange County-based builder is winding up its jobs in the city and preparing to exit next fall in the wake of new homes selling for up to 7 percent lower than predicted prices, the Denver Post reported.
Thomas James, based in Aliso Viejo, plans to complete nearly three dozen homes in the Mile High City by September, then call it quits.
“We did decide to phase out of the market,” Steve Kalmbach, president for the Aliso-Viejo homebuilder, told the Post. “We have 34 homes that we are still going to deliver and sell in 2024.”
During the pandemic, new residents flooded into Denver, bolstering home prices. That attracted Thomas James Homes, to what it thought would stay a sizzling market.
But then mortgage rates spiked, making it tougher for buyers to qualify for loans. And the influx of transplants pouring into the market tapered off, according to the Post.
New homes have been selling between 5 percent and 7 percent below the expected price upon completion.
“Relative to our other locations,” Kalmbach told the newspaper, “Denver wasn’t as robust.”
Thomas James rolled into Denver in the spring of 2021, planning to develop homes in Bonnie Brae, Washington Park, Cherry Creek, Hill Top, University Park, Platte Park, Sloans Lake, South Park Hill and Congress Park.
It focused on infill construction, building homes on individual lots or tight groups of lots in well-established neighborhoods.
Its goal was to appeal to buyers looking to live closer to work in popular areas, but avoiding the headache of remodeling an older house or the cost of demolition and a custom rebuild.
Its business model relied on a “resilient pricing structure” for consumers, meaning Thomas James needed to see its homes sell for an expected price — before they broke ground, Kalmbach said.
But the company discovered that finding buyers before completing homes was more challenging in Denver than elsewhere. As a result, homes often weren’t sold until the final stage, contributing to prices getting squeezed, according to the Post.
It’s not clear how many total homes the developer built across the region.
With capital scarcer and costing more because of higher interest rates, Kalmbach said the company needs to be more careful about where it invests its resources.
He said resources from Denver will be invested back into the builder’s more profitable operations in Southern California, Northern California, Seattle and Phoenix.
— Dana Bartholomew
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