A pair of builders who were once a driving force in the local speculative housing market say they’re being driven out of business, and they blame declining demand in the face of a saturated supply of homes here and elsewhere.

Henson Homes, which was Bowling Green’s largest homebuilder for several years, recently filed for Chapter 11 bankruptcy in order to stay in business and pay its contractual and debt obligations after a lack of buyer interest.

The company, which will give up its practice of building speculative homes – 90 to 95 percent of what it has historically done – is an example of what happens when a builder is overinvested in the market, according to owners Mike and Todd Henson, the 20-year veterans of the construction market who organized Henson Homes in 2000.

“We’re going to have to get out of that and go into light commercial (construction) and apartments,” Mike Henson said.

Following the reorganization, the business will also focus on custom homes – but only after completing the sale of the remaining 28 or so “spec” houses they have on the market in Warren County, Nashville and parts of Gulf Shores, Ala.

From 2000 to 2005, Henson Homes dominated and built up the local speculative housing market, setting trends with innovative amenities that other builders imitated, Mike Henson said.

He recalled that his company boasted more than 50 percent of Bowling Green’s market in $150,000-$400,000 range of new homes; for most of that period, Henson recalled having anywhere from 50 to 60 homes under construction at any given time.

But the past two years have seen a downturn for the Hensons. Once employing 40 or so people, gradual layoffs have whittled the company back to its foundations: Mike Henson and his brother, he said.

The cause, Henson said, comes from a variety of factors. Rising cost-of-living expenses – higher gas prices, grocery costs and the like – along with national headlines exaggerating housing woes have caused buyers locally to think twice before deciding to buy a house, he said.

“You can’t make somebody buy a house if they’re scared by what they’re seeing and hearing,” Henson said. “There is an oversupply, and demand is just not there.”

But while he fears his company’s misfortune could produce a ripple effect for area builders, painting a negative image on the housing market, he’s confident things will rebound.

“We all just have to get through it and look toward the future,” Henson said. “We have great builders in this area. This is still a great time to build and buy a home – from me or any other builder in town.”

Anita Napier, CEO of the Builders Association of Southcentral Kentucky, said home sales across the nation were peaking in 2004 – the Hensons’ glory days. The National Association of Realtors said there were a total of about 6.7 million sales in 2004, up 9.4 percent from 6,100,000 in 2003 and a fourth consecutive annual record at that time.

“Now we have leveled off to pre-2004, but we are still above where we have ever been in the past 20 years,” she said.

Speculative homes – those built new, but for no particular buyer – are always a challenge, she added, as their costs are more heavily influenced by rising land prices and other factors.

“We are not suffering the setback seen in other areas, but we do have a tightening of our market,” Napier said. “This is a time where we would caution builders (who are) constructing massive amounts of spec homes in the same way you would caution anyone you take an investment with.”

Bob Appling, director of the Bowling Green Warren County Contractors Licensing Board, said when he speaks with certain high-profile contractors in the area, they all say they’re busy – but he cautions that builders have to watch their cash flows, since there is a glut of inventory locally.

“Things are not as bad as people may think it might be,” Appling said.

In general, Appling said keeping expenses in check is key, especially when building a large quantity of homes as the Hensons historically have.

“You’ve got to be able to control your cash flow or watch your cash now, no matter if you’re in the housing industry or in the manufacturing industry,” he said. “If it gets interrupted, its going to cause a hardship.”

Local builders flock to the custom home category, because it’s more of a guarantee, Napier said: Buyer can enter into their decisions with a well-defined wish list of personal preferences, compared to buying a readymade home that would have to be adjusted later.

“It’s just like any other business – you have to decide what factors you’re willing to face,” Napier said. “From the builder’s standpoint, when you build a custom home you are building a home that is already sold. You are not taking a bigger risk.”