Thomas James Homes will wind down its Denver operations by next fall and exit the state after finding a tougher-than-expected market.
“We did decide to phase out of the market,” confirmed Steve Kalmbach, president and COO of the California-based homebuilder. “We have 34 homes that we are still going to deliver and sell in 2024.”
Denver’s housing market received a boost from in-migration during the pandemic years, bolstering home prices, which attracted the builder, based in Aliso Viejo, Calif., to what it thought would remain a hot market.
Instead, mortgage rates spiked, making it harder for buyers to qualify. And that influx of transplants coming into the market tapered off. New homes have been selling for 5% to 7% below the expected price on delivery.
“Relative to our other locations, Denver wasn’t as robust,” Kalmbach said.
Bolstering that point, real estate portal Zillow said Tuesday that Denver ranked 1,820 out of 2,300 markets in popularity among people searching for homes on its website. The Mile High City dropped 1,108 spots from where it ranked last year, a sign of greatly diminished interest.
The most popular markets for people searching on Zillow were West Chester, Pa.; Nashua and Manchester, N.H.; and Wethersfield and West Hartford, Conn.
Thomas James Homes follows a hybrid model, offering five “library” plans or preset designs that buyers can choose from. It isn’t a custom-builder, but it isn’t a full-blown production builder focused on mass-producing homes in master-planned communities.
Instead, it focuses on infill construction, putting new homes on individual lots or small groupings of lots in well-established neighborhoods. That appeals to buyers looking to live closer to work in popular areas, but who don’t want the headache of remodeling an older house and who can’t afford to scrape a lot and do a custom-build.
Since arriving in Denver in the spring of 2021, the company has focused on Bonnie Brae, Washington Park, Cherry Creek, Hill Top, University Park, Platte Park, Sloans Lake, South Park Hill and Congress Park.
Kalmbach said the company’s business model relies on a “resilient pricing structure” for consumers. Translated, the company needed to see its new homes sell for what it expected them to sell for before construction started.
Finding buyers before completing homes was more of a struggle in Denver than in the builder’s other market, and because of that, homes often weren’t getting sold until the final stage, contributing to prices getting squeezed.
The company often found it had to carry homes in Denver to the final stage, which resulted in prices getting squeezed.
With capital scarcer and costing more because of higher interest rates, the company needs to be more careful about where it invests, Kalmbach said.
Resources focused in Denver will be invested back into the builder’s more profitable operations in southern California, northern California, the Seattle area and Phoenix.
Thomas James Homes employed 32 people on its Denver team but recently let go of about a dozen of its staff, Kalmbach said. The remainder will help see homes through to final construction, which is expected to happen by August or September.
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