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The Suburbanite
  • Will new home sales recover in 2011?

  • As the prices for existing homes plummeted in 2009, much of the interest in new homes evaporated. Now, in 2011, the Building Industry Association of Stark County is hopeful that there will be a substantial recovery in the new home market in 2011.

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  • In November, Brock Bennington signed a contract for Regal Construction to build a condo unit for him at Meyers Lake.
    He wasn’t afraid of taking a 10 percent loss on the sale of his old condo. He wasn’t afraid the value of his new home could drop. And he was willing to forego the chance to buy an existing home at a substantial discount.
    All were worth risking to move into his dream home and away from his upstairs neighbor’s noisy 100-pound dog.
    “Every day my neighbor left, the thing went berserk across the ceiling,” said Bennington, 29, who stomped his feet to demonstrate. “The money means nothing if you’re not happy, and I wasn’t happy.”
    Three years after the housing market crashed, local home builders are hoping 2011 is the year they will be seeing more buyers like Bennington.
    “It’s been devastating the last four or five years actually,” said Regal’s president, Bob Leach. “We have come to a position now where there’s minimal new home inventory out there, and there’s beginning to be a resurgence in interest in new homes.”
    SIGNS OF HOPE
    Last month, the number of people attending the Home and Garden Show put on by the Building Industry Association of Stark County and The Repository rose by more than 30 percent to 3,273 from its 2010 attendance level. Joe Race, the association’s executive director estimated that at least 700 people visited some of the 11 houses on the association’s Spring Circuit of New Homes earlier this month — 10 times the typical number for an open house.
    “All the builders are getting calls,” Race said. “It’s going to be better than last year, but it’s not going to be anywhere near where we were in 2003. But we’ll take what we can get.”
    To Leach, the higher visitor traffic was a morale booster.
    “These last two weekends, we had two different houses in that circuit. We had 150 people, prospects, show up at these open houses,” Leach said. “I’m not going to say they sat down and signed a contract, but that told us that people are thinking again favorably perhaps about new houses.”
    Still, Leach said, “people don’t make the decision as quickly as they used to. ... They pretty much know it’ll be there tomorrow.”
    TRENDS
    According to building industry association research, the number of permits issued to build single-family homes in Stark County plummeted 78 percent from 1,203 in 2004 to 264 in 2009. But in 2010, it rebounded 16 percent to 305.
    “Our industry is out of the woods,” Race said. “It can’t possibly get as bad as it was a year or two ago. But the recovery has been very slow and deliberate and stubborn.”
    Page 2 of 3 - A key sign is how many spec homes are built — that is, homes that builders construct with their own cash or bank financing on the speculation that they’ll sell soon after construction.
    “Building a spec home would be a tremendous risk in this market,” said Race, adding that getting financing is still a challenge. “There’s not a guy now who’s breaking ground unless he’s very sure he can sell the house or if he has a contract.”
    SURVIVAL
    Leach said that in 2005 Regal was building about 70 homes a year that sold for $150,000 to $300,000. And it was easy to find a bank willing to provide financing to build 10 homes at a time.
    Then the market collapsed in 2008.
    “There’s a lot of builders that didn’t make it through,” Leach said.
    Regal had an inventory of 30 unsold homes that the company had to maintain and make payments on. Leach dramatically cut construction, let go of 14 of his 19 employees, slashed salaries, leased office space, cut advertising and sold many homes at a 10-percent discount.
    Last year, Regal built about eight homes. Leach said the benefits of the homebuyer’s tax credit were limited because people who would have bought in June ended up buying in April, when the credit expired. This spring, Regal is building seven homes, of which five are spec.
    Regal also is building smaller homes priced as low as $130,000 to appeal to value-conscious empty nesters. Energy-efficient features such as better insulation, better sealant and caulking, 90-percent efficient heating systems and double-pane windows, which once cost a premium, come standard. Regal is building two-unit condo buildings instead of four-unit buildings because they’re easier to sell.
    “I expect a turnaround,” Leach said. But “as that gas gets higher and people get more concerned, it’s easy to put off a decision to buy a house.”
    SELLING HOMES
    James Rudo, president of VictoryGate Custom Homes in Jackson Township, said he sold 21 homes last year, up from 14 in 2009. And he has contracts to build a dozen in Northeast Ohio. Work on eight is underway.
    “There’s buyers out there,” said Rudo, who builds homes from 2,500 to 8,000 square feet and priced from $200,000 to $1.7 million. “It’s getting them from being scared ... and get them to realize ... the area is OK. Have we lost jobs? Yeah. But have we done as bad as Florida? No.”
    Rudo said the cost of lumber is down roughly 25 percent since 2009. However, the price of petroleum-based products such as shingles and vinyl siding has increased.
    Race said one stumbling block is that prospective new home buyers have problems selling their current homes. But, he noted, “whatever they stand to lose on a home sale on an existing home, they can make up on building a new home right now.”
    Page 3 of 3 - Bennington was willing to take that loss. After buying a 1,500-square-foot condo at the Fountains at Meyers Lake in 2008 for $142,000, Bennington sold it in November for $128,000.
    He then signed papers to buy a 1,700-square-foot, two-bedroom Regal condo in the same neighborhood for about $170,000. This time, the home, which is in a two-unit building, would come with soundproof walls and other amenities.
    Bennington estimates his home would cost $200,000 to $225,000 as a freestanding house. He said he had no interest in buying an existing home because those in his area are too traditional and energy inefficient.
    “My taste is much more modern,” he said. “I like an open design with a loft.”
    Bennington is not perturbed that the value of his new home could drop.
    “I don’t treat my home as an investment. It’s an investment in myself.”