Sunday, March 6, 2011

NEW CONSTRUCTION: Construction permits on the rise as interest in new homes picks up

LEXINGTON — As a family toured the two-story Colonial on Richmond Circle, builder Joe Gelormini stood in the unfinished kitchen, awaiting their questions. They had seen the home before and requested a meeting with him — a sign that an offer might be imminent.

“Whenever someone wants to meet, it means they’re pretty serious,’’ Gelormini said hopefully.

The house is one of the last three at Pine Meadow Farm, a 14-lot subdivision of $1.5 million homes that Gelormini started building more than four years ago. If it sells, it could be just one more indication that the state’s housing market might finally be starting to look up.

Economists and those in the real estate industry are cautious, but optimistic as the crucial spring season — which accounts for about 40 percent of annual home sales — approaches.

There are hopeful signs. Building permits, a key indicator of housing demand, rose in Greater Boston last year for the first time since 2005, the peak of the housing boom, according to the Commerce Department. The number of permitted units, however, was still only about one-third of 2005 levels.

For home builders, the past two years have been “about as bad as it can get,’’ as they have had to compete in a market saturated with distressed properties and empty new homes selling at bargain prices, said Patrick Newport, US economist with the Lexington forecasting firm IHS Global Insight.

Still, Newport said, his firm expects that new home sales, which last month hit an all-time low nationally, will start to pick up modestly in the coming months.

“The economy is improving, we’re seeing jobs grow,’’ Newport said, “and this is the year we think things will start to get better for the builder.’’

When Gelormini began building next to the Pine Meadows Golf Club in summer 2006, the housing market still looked strong. He finished the first house in mid-2007 and started in on the next few lots, putting the homes on the market while he worked to complete them. Home buying, however, had already slowed. By the end of that year, the downturn that would spiral into the Great Recession was underway.

During the next several months, activity at Pine Meadow Farm stalled. With two houses done and foundations laid for others, Gelormini decided to stop building until he sold a home.

“We had a year period where nothing was really happening,’’ recalled Gelormini, 44, who has been a builder for 15 years.

Whether potential buyers decide to purchase homes this spring will depend largely on whether the unemployment rate improves, said Northeastern University economics professor Alan Clayton-Matthews. High unemployment undermines confidence and impedes the income growth that people need to buy. In Massachusetts, the unemployment rate remains above 8 percent — nearly double the rate before the recession.

“Households mainly have to be confident about their future,’’ Clayton-Matthews said. “That’s the key. It’s all about employment, and household income, and finances.’’

Sales at Pine Meadows started to pick up again in late 2009, Gelormini said, and several homes sold in 2010. Now, only the three lots are left.

Despite the recent improvements, Gelormini said the market remains challenging. When potential buyers look at his houses, he works to make the home fit into what they’re looking for. Last Sunday, for example, he told the couple interested in the yellow Colonial he could add more linen closets, and a path from the driveway into the backyard.

“I’m excited about this year. I hope I’m right,’’ he said. “I’m looking forward to people finally saying, ‘You know, it has been two or three years of down times. I’m ready to jump. I’m putting my house on the market and we’re buying a house over here.’ ’’

Erin Ailworth Boston Globe February 27, 2011

No comments: