Builders see slowdown in new home construction
The market for homes has shown signs of solid growth in Fairfield County over the last several months, with brokers noting strong demand for luxury homes and higher overall sales volume.
However, as economists point to housing as a primary contributor to the optimism being felt across U.S. financial markets, real estate experts say the data are still a far cry from pre-recession levels, with the market for newly built homes relatively flat at best.
For home builders, “It’s definitely a work in progress,” said Peter J. Fusaro, founder of Preferred Builders Inc. in Greenwich and president of the Home Builders Association of Fairfield County. “I’m not sure things will ever be back to where they were seven, eight years ago.”
Connecticut municipalities authorized permits for 4,140 housing units in 2012, up 46 percent from the previous year, when permits were authorized for just 2,837 units, according to data released Jan. 28 by the state Department of Economic and Community Development (DECD).
The rate of new permits being issued was higher across most of the county’s largest towns and cities.
According to the DECD data, Greenwich issued 65 permits in 2012 to 59 permits the previous year, Stamford issued 564 permits to 207 in 2011, Danbury issued 396 permits to 103 in 2011, Norwalk issued 235 permits to 67 in 2011, Fairfield issued 50 permits to 48 in 2011, and Bridgeport issued 174 permits to 126 in 2011.
The statewide volume was the highest it’s been since 2008, when 4,910 permits were issued. However, the 2012 number still represented a significant drop off from the mid-2000s: Connecticut towns and cities averaged 9,460 permits a year from 2004 to 2006, including more than 10,300 permits in 2004.
Fusaro said the high annual increase from 2011 to 2012 masks the fact that permit volume was still historically low last year.
“A 40 percent increase isn’t a true number, based on where permits used to be before this crash in the markets,” he said.
Terence Beaty, director of Prudential Connecticut Realty’s New Homes & Land division, said that while permits were up last year, that didn’t result in more sales of newly constructed homes.
Beaty said that of all homes sold in 2012, 1,309 were newly constructed single-family homes or condominiums, compared with 1,302 newly built homes that were sold in 2011.
“So it’s a very flat market from a new construction standpoint,” Beaty said.
He said new home sales have declined relative to the total number of homes sold.
“We went back and looked at nine or 10 years of new home sales compared to resales. If you look at new homes as a share of total sales, we were actually down 12 percent (in 2012),” Beaty said. “The numbers have been consistently sliding.”
He said new homes represented 4.2 percent of all homes that were sold in 2012. In comparison, new homes amounted to 7.8 percent of all homes sold in 2008, and 10.3 percent of all homes sold in 2006.
“Historically, we’ve just seen an erosion in the number of new homes built and sold as it compares to the overall market,” Beaty said.
Beaty said demand for newly built homes is likely lower because of the availability of existing homes, adding that a home that is two or three years old can often be bought for much less than an identical home that is brand new.
However, he said there could be a lag between the issuance of permits and the sale of homes, noting that medium-size single family homes might take eight months to build while larger homes could take anywhere from 10 to 14 months.
Both Beaty and Fusaro said demand for renovations — particularly fixes to homes affected by recent storms and upgrades that involve “green” components – is relatively high.
“There is going to be a big boom in retrofitting older houses to add energy efficiencies,” Fusaro said. “Right now … I see a lot of people wanting to stay in their existing homes and to retrofit them into more energy-efficient homes.”