Sunday, April 20, 2014
By TUX TURKEL
John Patriquin/ Staff Photographer: Monday, Nov.24, 2008. Leo Davis cuts brick as construction continues at Dunstan Crossing condos in Scarborough for home building story.
John Patriquin/ Staff Photographer: Monday, Nov.24, 2008. Brick mason Jon Breton works on a set of front stairs as construction continues at Dunstan Crossing condos in Scarborough for home building story.
Fewer new homes will be built in southern Maine this year than any time since at least 1991, figures show.
From January through Nov. 15, builders took out 841 permits in the 38 communities tracked by Construction Data New England. That's roughly a third as many as were filed for the same period in 2000, the peak year for homebuilding in the area, according to figures tallied by the firm for the Portland Press Herald/Maine Sunday Telegram.
The Windham-based company follows building permits for single-family homes and free-standing condominiums from Lewiston to Kittery.
The national recession, tight credit and the abundance of foreclosed and unsold homes already on the market have contributed to the sharp drop in new construction.
Downturns in homebuilding ripple through the economy. Besides the loss of construction jobs, a drop in housing starts hurts retailers who sell everything from appliances to furniture, and the manufacturers who make these products.
The magnitude of housing's impact on the overall economy was reflected in the Federal Reserve's newly announced plan to pump $800 billion into new lending programs, with most of it aimed at lowering mortgage rates to benefit homebuyers and generating new lending to prime the residential real state market.
ECHOES OF 1991 RECESSION
The Press Herald analysis shows the largest drop in permits taking place in Portland's western suburbs, from Bridgton to Westbrook. Housing starts there dropped 63 percent to 227 building permits obtained, compared with 615 for the same period in 2004.
Housing starts nationally plunged to a 50-year low in October, the Commerce Department reported recently. The previous record was set in 1991, in the midst of a stubborn recession.
That recession and the current downturn both followed a run-up in housing prices and building activity, according to Charles Colgan, a University of Maine economist who helps forecast economic trends for the region.
''The boom-bust cycle characterized both periods,'' he said.
A flow of residents who moved to Maine from southern New England during the first half of this decade, including a wave of retirees, helped boost the demand for new homes in Maine. That migration has largely dried up now, in part because owners elsewhere in New England are having trouble selling their homes.
The global financial crisis, meanwhile, has crimped credit and overall spending.
''The two things keeping housing starts up are essentially gone,'' Colgan said.
This trend hasn't caught the area's largest homebuilders by surprise. Most have been in business long enough to have weathered similar economic cycles.
To cope, some are redirecting marketing efforts to first-time buyers. These buyers may qualify for special bank financing, as well as government-subsidized programs, such as those offered by the Maine State Housing Authority.
''It's a tough market, and we're just tightening our belts,'' said Susan Duchaine, president of Design Dwellings Inc. of Gorham.
MOVE-UP MARKET HIT HARD
Belt tightening in the industry cut an estimated 1,200 construction jobs from Maine's economy in September, compared to a year ago, according to federal figures. Homebuilders typically retain key personnel and rely on subcontractors for specialized tasks. Duchaine said she hopes to avoid any layoffs among her core staff of nine.
Duchaine is more than midway through two small subdivisions aimed at the first-time market: Beechwood in Standish and Douglas Knoll in Gorham. The ranches and small capes in these projects range from $230,000 to $260,000.
The move-up market is in rougher shape, Duchaine said. Some people who bought homes five years ago also borrowed against the equity in their existing, less-expensive houses. Now the value of their homes has fallen, and they still owe money on those loans.
''They can't pay back all the extra money,'' Duchaine said. ''And if they can't sell, then they can't build.''
Aside from custom homes and high-end green designs, the move-up market that has survived seems more focused on niche opportunities.
Elliott Chamberlain spent years getting approvals for Dunstan Crossing, a 264-unit neighborhood in Scarborough designed to counter suburban sprawl. He planned for a 10-year buildout.
The pace of sales today is obviously slow, but Saco-based Chamberlain Homes has nearly half of its eight rowhouse-style condominiums in the first phase of The Wilshire under contract. They sell for roughly $320,000.
This year's energy spike has eased the appetite for hard-to-heat mini-mansions in distant suburbs. Chamberlain is benefiting from the trend, seeing professionals and pre-retirees who want smaller homes near stores and city services.
''Price is king right now,'' Chamberlain said. ''But you still need to build a product that people want in a location where they want to be.''
BETTING ON AFFORDABLE HOUSING
A review of permit totals by town also shows notable slides in communities farthest from Portland. Bridgton, for instance, issued 74 building permits for the period in 2003. This year, it has 29. Casco had 55 in 2005, and 11 this year. North Yarmouth had 26 in both 2004 and 2005. This year, it has four.
Average new-home prices, though, haven't fallen as sharply. The average new-home price in the towns tracked by Construction Data New England peaked two years at $225,416, minus land costs. The price this year is $218,225. Building material, labor rates and land values remain relatively high, contractors say. Impact fees associated with permits in some towns also contribute to the overall price of new construction, they say.
Looking ahead to next year, Duchaine said she's cautiously optimistic.
Interest rates are low, and she's hopeful that the economic recovery strategies being developed in Washington by the incoming Obama administration will start to kick in. Having watched downturns during her 21 years in business, Duchaine said she's aware that it's hard to identify the top and bottom of an economic cycle until they've passed.
''I think we're done with the bottom,'' she said, ''but it's going to be a slow climb.''
Builders always have an eye on the next economic cycle and likely market trends. A slow recovery and continued tight finances will favor affordable housing, in the view of Don Grenier of DES Construction Inc.
Grenier is set to go before the Wells Planning Board this month in hopes of getting final town approval for One Hundred Acres, a 46-unit subdivision. The project will feature smaller, two-bedroom homes with prices ranging from $177,000 to $189,000.
''Even with the market as damaged as it is, these will be among the lowest-priced houses in Wells,'' he said.
Grenier still has to get state permits and nail down bank financing, which depends in part on putting homes under contract.
On the positive side, energy prices are down and changes in Washington may boost consumer confidence. The question, Grenier said, is whether the buyers he needs will remain paralyzed by job insecurity, tight credit and the overall economy.
''Which side of the coin people are going to land on is anyone's guess,'' he said.
Staff Writer Tux Turkel can be contacted at 791-6462 or at:
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John Patriquin/ Staff Photographer: Monday, Nov.24, 2008. Finish carpenter Kevin Cote checks the level of a door jam as construction continues at Dunstan Crossing condos in Scarborough for home building story.