Posted on September 29, 2012
Home builders who saw major slowdowns during and after the recession are starting to feel a bit better as the summer winds down.
While there continues to be a focus on building rental property — with major apartment projects ramping up in Hopkinton and Worcester — some of those who build new homes say they’re seeing a recovery.
Indeed, building permits issued for single-family homes fell steadily between 2004 and 2009, which marked a low point for the industry, U.S. Census data shows.
“It was definitely worse than normal,” said Framingham-based builder Richard Barbieri, who used to build four or five houses a year. However, since the housing market fell precipitously in 2008, his pace has slowed to two or three.
But selling prices also came down during the recession. That meant potential bargains, and he found himself one in Hopkinton, on Hayden Rowe Street.
“I just happened to be driving by a big farmhouse with a big piece of land behind it,” he said.
The price was too high for his liking. Barbieri called the owner every six months. Eventually, he was able to buy the property for $325,000. The town recently approved his plans to build two homes at the site.
Barbieri thinks there is more demand for new homes than there is supply in Central Massachusetts, which sounds surprising given the glut of foreclosed homes weighing down the market.
But there have been positive signs. Sales activity has been steadily improving this year. Home sales in July, for instance, marked the strongest in that month of the year in Massachusetts since 2005, according to The Warren Group.
On top of that, permits for new single-family homes are up so far this year compared to 2011.
Of the 50 Central Massachusetts communities the Census Bureau tracks monthly, 31 had issued more permits from January to July than they had in 2011. Overall, permits issues in those 50 communities were up 26 percent over the same period last year.
Barbieri may be onto something. John Vaillancourt, a Marlborough-based broker with ERA Key Realty Services, said he has noticed that newly built homes have been selling faster in some areas he has listings, even when compared to slightly bigger, cheaper houses that are in good condition.
“Personally, I’m a fan of old houses,” Vaillancourt said. “But with regards to what’s going on in Clinton and Marlborough, we’re seeing that new construction is selling, and at higher prices.”
The Allure Of ‘New’
It’s not apparent that there’s anything particularly unique about Clinton and Marlborough. And Vaillancourt is not ready to say it’s a trend everywhere in the region.
But he thinks that besides some improving economic metrics, there’s a psychological element at play.
“The public likes, or believes in, new,” he said.
That doesn’t mean things are back to the boom times of the mid-2000s, and no one expects them to be for the foreseeable future. But location seems to be as important as ever for those in the real estate business.
If a geographic trend can be found in the single-family homebuilding permit data, it’s that the communities that are seeing the largest increases in permit activity are situated along the Interstate 495 belt, notably Bellingham, Sudbury, Marlborough, Shrewsbury and Ayer. Upticks can be found in the Blackstone Valley towns of Uxbridge and Northbridge. Worcester’s permit activity is flat compared to last year.
It’s enough for Barbieri to make plans to pick up his building pace. He hopes to pursue a five-lot subdivision once he has built the Hopkinton homes. He hasn’t built that many since 2005.
“It’s been a while,” he said. “I’m thinking next spring it’s really going to open up.”
He’s not alone, it seems.
Activity Up In Holden
Pam Hardy, Holden’s town planner, has noticed more activity at a handful of subdivision projects in town.
“We had a lot approved years ago, but for some reason, they all started construction this spring,” she said.
One of those developments is called Stoneybrook Estates, a 78-unit subdivision being built by CB Blair Builders of Rutland.
President Clealand Blair, Jr. said that the family business, which he estimates has built close to 3,000 homes since his father founded it the 1950s, is “putting in road as fast as we can” in certain areas.
He said the second phase of the five-phase project is nearly all reserved by buyers.
“I feel as though in each and every subdivision, we’ve had a price increase,” Blair said. “Before, it was a lot of tire kickers.”
Banks Still ‘Stringent’
Barbieri and Blair operate on different scales, but both said they have not faced significant changes to their financing arrangements with banks, though their impression is that banks have tightened lending to some builders, as well as mortgagees.
“They’re stringent and they always hold me to a standard,” Blair said.
He thinks that’s good for the industry because frivolous lending would inflate another housing bubble.
“You’d end up with what happened last time,” he said.