New-home construction in southern Maine has jumped 35 percent in 2012, a rebound from last year when housing starts in the region hit a 20-year low.
While the news is good, it does not necessarily signal a recovery, builders say. They caution that the figures mark mainly prime locations in southern coastal towns and that new construction in the rest of the state remains stagnant.
The number of new-home permits in southern Maine is still well below pre-recession levels and some builders fear this year’s growth is just a temporary uptick after last year’s depressed numbers.
“There are definitely pockets of growth, especially in coastal areas in York County. West of I-95, things are really slow,” said Larry Duell, president of the Home Builders and Remodelers Association of Maine. “Statewide, new-home permitting is weak.”
“We had a blip this spring, but by July and August, it died out,” said Mark Patterson, co-owner of Patco Construction Inc. in Sanford. “We’ve been running along the bottom for three years. Every year I’ve said it can’t get any worse. I don’t see a big increase next year.”
From January through September, builders took out 802 permits in 37 communities from Lewiston to Kittery, according to Construction Data New England. That compared with 594 permits for the same period last year.
Just before the economic downturn, 1,111 new homes were started in the first nine months of 2007. Construction Data New England in Windham tallied the number of new residential building permits for the Portland Press Herald.
The biggest gains in new construction came in York County towns such as Kittery, Waterboro and Wells, where growth doubled or nearly tripled, the data showed. However, new construction dropped in Lewiston and remained flat in Auburn.
Duell, owner of Father and Sons Builders in Lebanon, said he works primarily in Wells, where Construction Data New England said permits jumped to 110 homes for the first nine months of this year, up from 58 homes for the same period last year.
Overall, Duell said he’s building 10 homes this year, down from 30 homes at the peak of the market. Each house built supports three full-time jobs, Duell said.
“The overall economy is slowly creeping up and getting better. People think in their minds that the worst is behind us,” said Bob Georgitis, vice president of North Waterboro-based builder Kasprzak Inc. “We’re doing very well in Wells. In Gorham, there’s an uptick in interest there as well, but the pace is not anywhere near what we’re seeing in Wells.”
Georgitis said the firm is selling just under 30 units this year, while in peak years, it built twice that number.
While the market in southern Maine is stronger than in the rest of the state, it still faces some challenges, including tight financing by banks, which make it tough for customers to build. Also, values of existing homes have fallen, making it cheaper to buy than to build, contractors said. People who are building also often need to sell their existing home — not easy in a depressed market, builders said.
The areas where construction starts are up bear out the adage that in real estate, location matters, especially in a weak market. Southern Maine is benefiting from a stronger job market, builders said. Unemployment in Cumberland County is 5.6 percent, and York County is 5.8 percent — both below the statewide average of 7.6 percent.
“There’s a pickup, but mostly increasing within four to five miles of the interstate. The farther you get from the interstate, the more dead sales get,” said Patterson. “In Saco, Wells, there’s still demand. In York as well.”
John Carter, Wells’ town manager, said the town is benefiting somewhat from retirees and out-of-state buyers of second homes, as well as the mix of housing stock that ranges from seasonal cottages, costing $150,000 to $225,000, to condominiums and exclusive oceanfront homes. The development also has been propelled by the lifting in 2009 of a building cap that had limited new-home construction, said Wells Code Enforcement Officer Jodine Adams.
The building cap had “limited our growth for awhile,” Adams said. “We haven’t been hurt by the recession at all.”
Except for custom builders who design multimillion-dollar waterfront homes, contractors said they are seeing the highest demand for modest homes and condominums.
“Last year, we built a lot of ranches. This year, we’re building slightly bigger homes, but most are still in the 1,500- to 1,800-square-feet range,” Patterson said.
Also tempering the rise in new-home permits is a decline in remodeling and renovations, according to Construction Data New England.
There were 1,193 permits issued for renovations and additions for the first nine months of this year, down from 1,264 permits a year ago and down from as many as 1,719 permits in pre-recession 2007.
There could be several explanations for the drop in remodeling, builders said.
Patterson said renovations often are paid out-of-pocket by homeowners, rather than financed through a bank. Many people also have depleted their savings during the recession or have little to no equity in their home to refinance or borrow money. There’s also the possibility that anyone who wanted to renovate has already done it over the past several years.
“People have been renovating for the past four years while they waited for the housing market to improve. Everyone has done what they wanted to do. It’s not a surprise to see some softness there,” said Duell of the home builders and remodelers trade group.
Ron Petrone of Petrone Construction in Cape Elizabeth said his remodeling business has actually improved this year, but now customers are more careful about containing construction costs than in the past.
“People are more aware right now about costs,” he said. “I have more informed clients.”
Staff Writer Jessica Hall can be contacted at 791-6316 or at: