By Pete Zamplas -
Recovery from the lagging economy and housing industry is taking place, a few nails at a time, according to nationwide data and the head of the local home builders group.
Sales of new single-family houses rose 4.4 percent from October to November and, in November, were 15 percent greater than one year prior. The seasonally-adjusted annual rate was 377,000 in November, above the 361,000 in October and far ahead of the 327,000 in November of 2011, the U.S. Census Bureau and Department of Housing and Urban Development jointly reported Dec. 27. Data for December comes out Jan. 25.
The sales price of new houses sold in November averaged $299,700, with a median of $246,200, the study showed.
Further, 149,000 was the seasonally-adjusted estimate of the number of new houses built and still up for sale by the end of November. That is a supply of 4.7 months, at the current annual sales rate.
These figures bode well for local general contractors, too. They are represented county-wide by the non-profit Hendersonville Home Builders Association, which began in 1971. Members work in residential and commercial building, remodeling, and land development activities. Associated members are in construction-related fields.
HHBA states that it “strives to meet the community’s need for quality, affordable construction and renovation of housing and commercial space.” The trade group is affiliated with the N.C. Home Builders Association and National Association of Home Builders.
Former banker Cara Pryor has served as HHBA executive officer since April of 2011, succeeding Dottie Hensley who retired. Pryor said membership “leveled out, in the last couple of years” at 220 after peaking at about 300 in 2006 before recession struck.
“The bigger market is in remodeling, but new homes are on the upswing,” Pryor said.
Local Home Builders President David Mayo, who runs Providence Custom Homes, agrees. “There seems to be a little more activity” in building new homes in recent months than before, he said. “We’re building spec homes, and doing well.” He has built homes for 10 years, after working as a civil engineer.
“A few of us are still building homes for people who already have the property, or have the money to build what they want,” Mayo said.
Mayo builds mostly in Henderson County, also in Transylvania which similarly has many retirees and some in Buncombe where some clients seek energy-conserving “green elements.” Retiree clients typically have more money than others saved over time, to buy a new home.
The trick for those moving to here is selling homes in other areas hit harder during the recession, Mayo said. “There are still issues with tight money lending and low appraisals on current homes people have to sell to buy a new home, especially for a (costlier) custom home. Values are much lower than five years ago. Yet our new construction costs haven’t gone down much, since then.”
Thus the profit margin is less than a half-decade ago, for both new and existing homes. “Prices are still low,” Mayo said. A seller often has to “take 20 to 30 percent less” than earlier appraised. Further, new homes compete to an extent with used homes, which have depreciated and dragged down the market, Mayo said. Least expensive custom homes have the most competition with used homes, he added. While “mid to upper level homes are doing okay, it’s hard to compete in the entry level for a custom home builder.”
On one hand, size does matter. “Banks and appraisers look at heated square footage,” Mayo said.
Yet clients are opting for smaller but well-built custom homes, Mayo said. “Square footage is getting smaller. People seem to prefer nicer features. They’re willing to give up square footage, to get that.” Buying power dropped after people’s earnings or investment savings shrank during the recession, compounded by less value when selling their current homes. “
Also, retirees often opt for a smaller, one-level house that is easier to keep up and move around in. And a new custom house is typically intended as their final home. That lessens importance of resale value, though it is a factor if going into a pricey retirement development.
In a custom house “they invest in what they want for themselves, not necessarily for what you get back in resale,” Mayo noted. “Radiant floor heat in the entire basement (which he just put into a home for $7000 more) or more expensive tile may not add much to the resale value. But the comfort is worth it to them.”
In contrast, he said resale value is boosted most by designs and features in such main rooms as the kitchen and master bedroom and bath. “These rooms are more expensive to change, than a floor or carpet.”
This makes it ever more crucial to get it right initially. Custom builders “can provide what people want,” Mayo said.
Mayo is confident demand will steadily rise back, and time is on the side of the builder and owner who depends on the home as an investment. “People want to live here. It’s just a matter of time, before home value adjustments correct themselves. That’s why we builders stick it out. We’re in a great location.”