Region's new homebuilding hits lowest point since 1984

New home construction and sales in Hampton Roads last year fell to their lowest point in more than two decades, according to a report released Wednesday by Residential Data Bank, a Suffolk-based housing market research firm.

Builders in the region were issued 3,380 new home permits in 2008, down 33 percent from 2007, according to the report. It also showed that the number of new home closings fell to 3,311 last year from 4,136 in 2007, a decline of 20 percent. Both figures are the lowest on record since Residential Data Bank began tracking new home construction in 1984.

The declines in new home activity were spread across South Hampton Roads with the steepest drops coming in Portsmouth and Suffolk, which both saw permits decline by more than 40 percent. The mildest decline was in Chesapeake, which saw a 17 percent decrease in permits issued. On the Peninsula, activity slowed the most in Newport News, which saw permits fall nearly 60 percent.

"The No. 1 reason the building permits were down in 2008 and will continue to be down in 2009 was the lack of funding from our banks," said J. Van Rose, president of the new homes division of Rose & Womble Realty Co. "As the economic meltdown has happened in this country, the first to respond were the lending institutions."

Rose said banks forced builders last year to sell off any available inventory before allowing new development projects to go forward.

"Which meant no one was running down and buying a building permit," he said, noting that "2009 will be a whole bunch of the same."

Across the country, building permits and housing starts hit record lows in December, the U.S. Commerce Department reported last week.

Average prices for new homes in Hampton Roads continued to decline throughout the year, according to the local report. The average price for all new homes was $361,720, down 6.7 percent from 2007. The decline became steeper as the year wore on. The average price during the last three months of 2008 was down nearly 16 percent from the same three-month period a year earlier.

Pete A. Kotarides, president of the Tidewater Builders Association and a partner with Kotarides Builders in Virginia Beach, said tighter loan standards also were a problem for home buyers, especially those in the middle and upper price ranges.

"There were some loan programs that were unsustainable, but even standard loan programs in '06 and '07 become harder to qualify for in '08," he said.

The report also showed less expensive new homes dominated the market. More than half of the single-family detached homes sold in Hampton Roads last year were less than $400,000.

"The lower the price, the higher the activity there is," said Helen Dragas, chief executive of Dragas Management Corp. "I think there's still a short supply of high quality, lower-priced homes."

Last year was the second-best sales year on record for Dragas' company, which specializes in less expensive homes. The company led the region in sales volume with 315 homes for a revenue of $74.8 million.

Chesapeake Homes and Dallas -based Centex Homes rounded out the top three builders in Hampton Roads last year. Both companies had local housing developments with homes selling for less than $400,000.

"I don't think it's going to look too much different in 2009," Dragas said. "I think people will gravitate to value."

The trend toward less expensive homes also is being reflected in this year's Homearama, the Tidewater Builders Association's annual showcase of new homes. The association announced last month that it will relocate the event from a high-end neighborhood in Virginia Beach to a less expensive area in northern Suffolk, where builders will be required to construct more affordable homes with tighter floor plans. Prices will be in the $400,000 range, a departure from last year's show, where homes started at $1.2 million.

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com