Builders in Hampton Roads continued to cut back in new-home construction during the past three months despite a tax credit for first time homebuyers, according to a recently released report.
Cities here issued 767 new-home permits between July and September, according to Residential Data Bank, a Suffolk-based housing market research company. The number fell about 14 percent compared with the same period last year.
Building permits are one of the first steps in building a home. Economists and real-estate experts follow the figures to monitor builders’ activities and the strength of the housing market. Much like home sales, permits tend to rise in the summer months and drop during the winter.
“I think access to credit markets remains extremely difficult for most builders,” said Terry Gearhart, vice president of marketing for Virginia Beach-based homebuilder Terry Peterson Residential Cos.
The permits, which are issued between four and five months before a home is completed, also hint at the builders’ confidence in the housing market. Gearhart said many builders probably pulled back on applying for permits, anticipating that a federal tax credit for first-time homebuyers would expire.
The $8,000 credit, which has buoyed home sales across the country, was recently extended through April and expanded to include $6,500 for home owners who have lived in their home for at least five years and want to buy a replacement primary residence. Last year, new-home construction and sales
in Hampton Roads fell to their lowest points in more than two decades, with declines spread across the region.
“Lenders don’t have the same appetite to loan money on speculative housing,” said Van Rose, president of Rose & Womble Real Estate Co.’s new-homes division. “That’s why the inventory has been declining in new homes. It is not a supply and demand thing. It is a cautious-banker mentality that is keeping these guys from extending loans.”
During the recent quarter, permit activity was down in most cities across the region, but Portsmouth saw permits increase to 39 from 14 issued a year ago.
“The recession is probably a little bit longer than anyone anticipated,” said Bill Halprin, president of the Tidewater Builders Association and a vice president with S.L. Nusbaum Realty Co. “With the economic climate, I think a lot of builders are trying to work through their inventory. They have to do that before banks extend any more credit.”
While first-time homebuyers have helped turn around sales figures in existing homes, Halprin said buyers for higher-priced homes are still on the sidelines, in part because of difficulty in getting a loan that doesn’t meet the conforming standards.
Permit activity will continue to remain low until builders work through inventory and the job market turns around, Halprin predicted.
Josh Brown, (757) 446-2318, josh.brown@pilotonline.com
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Yea, it's nutty. What does
Yea, it's nutty. What does it actually cost to build a place, assuming the land wasn't purchased during the credit fueled mania? $80/sqft?
The new builders should be undercutting the resellers.
DataQuick took a look at 4 states (one was California) and apparently the number of foreclosures making it to market is around 30% of the actual volume of homes entering foreclosure. The banks are keeping the inventory off the market or some such to help prop it up.
Would be nice if all the taxpayer backed home lenders started to require 10% down or something. Make the people put skin in the game, and watch them prices drop.
The Facts are..
builders, through agents, are trying to get an average of $100,000 more for a new construction home over comparable resale homes. Resale homes generally have many homeowner added features unlike new construction. If a new condo building of four individual 2000sf units sell for $200,000 each, does the whole building compare to an 8000sf $800,000 home and it's surroundings? A new 2900sf four or five bedroom single-family home offered at $399,000-$439,000 would only be $299,000 to $339,000 for a resale home. Check the city tax assessment on-line for valuation and sale history on specific properties, add a nominal average annual return maybe 3%-4% compounded annually since 2003 and make an offer with all closing costs paid by seller. New construction has been reserved for out of state and out of town buyers who after putting $80,000-$100,000 down, are left financing near 100% of actual resale value. Then add the deck, the inground irrigation, blinds, pool, instant hot, garage door opener...