Home Construction Millennials and prices drive down demand for new single-family homes

Millennials and prices drive down demand for new single-family homes

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The boom in multifamily residential construction in the region has claimed most of the headlines lately, but that’s not to say that interest in owning single-family homes is evaporating. According to observers, it’s simply in a state of flux.

millennials housing multifamily construction“The good news is that single-family (building) permits are off their lows across Westchester and Fairfield counties,” said Michael Neal, senior economist at the National Association of Home Builders. He added, however, “Although they are above their lows, single-family permits in Westchester have now plateaued at around 300 permits per year since 2014, while single-family permits in Fairfield have been in decline over the same period.”

NAHB data shows that Fairfield County has seen a steady erosion in single-family permits over the past three years, dropping from 987 in 2014 to 800 in 2015 and 712 last year. The county has not seen single-family permits in the four figures since 2007, while Westchester hasn’t topped the 1,000 mark since 2002.

Meanwhile, building permits for multifamily construction in Fairfield County leaped from 902 in 2014 to 1,798 in 2015 – a 99 percent increase – before dropping to 1,191 multifamily permits issued last year, according to the National Association of Home Builders.

The same trend was evident in Westchester, where 288 multifamily building permits were recorded in 2014, according to the NAHB. That number jumped to 501 in 2015, a 74 percent increase.

In 2016, 1,192 multifamily permits were recorded in Westchester, a 138 percent increase from the previous year and more than three times the pace of multifamily construction in the county two years earlier.

“We hear a lot of talk about multifamily construction becoming more popular because of the walkability factor, and how that’s being driven by millennials,” said Michael Murphy, director of new project development at Murphy Brothers Contracting Inc. a builder of custom homes headquartered in Mamaroneck. “They supposedly don’t want to own a car, cut the grass or wash the windows – they just want to live and enjoy life.”

Murphy noted, though, that those millennials can be expected to eventually tire of multifamily living once they’ve found an area they like. “As a community, we welcome multifamily construction because it brings young people into our towns,” he said. “Once they’re in and settled and start thinking about starting a family, that’s when they typically will start considering having a house of their own. It’s a nice little model, as it has been for the past 50 to 60 years.”

Joanne Intrieri, a real estate agent with Douglas Elliman in Scarsdale who also runs D&A Element and Design and JMI Remodeling, said she’s seen growing activity in the new homes market over the past three years in Scarsdale, Harrison and Rye, where she does most of her work.

“In certain markets, you may have to pay a little bit more for a brand-new house than for an existing house,” she said. “But that’s what more people seem to want instead of having to do a lot of modifications. They don’t want to spend time and money renovating a kitchen or bathroom.”

Houses built on speculation by developers “aren’t just sitting there like they do in other areas,” she said. “If they are, they’re not priced right.”

McMansions “are something people don’t want anymore,” said Intrieri. “They want something with its own character — maybe four bedrooms that hits the sweet spot by staying in the $2 million to $2.5 million range.”

In Fairfield County, “Our employment compensation rate hasn’t kept up with the price to build a new house,” said Paul Scalzo, president of Scalzo Group Real Estate Services in Bethel.

“And Connecticut is still the only state in the region that hasn’t recovered all the jobs we lost in the recession,” Scalzo added, referring to the state’s latest employment report, which indicated that Connecticut has recovered about 79 percent of those lost jobs.

Hal Kurfehs, vice president of Coldwell Banker Commerical Scalzo Group, who also serves as chairman of the Western Connecticut Economic Development Alliance and the Brookfield Economic Development Commission, said he sees the multifamily trend continuing at the expense of the single-family market, at least for now.

“Millennials want more urban-style surroundings where there are things to do and that provides an easy way of getting to work,” he said. “I had a 38-unit building going up in New Milford and before it was even finished we had 700 applications.”

Downtown redevelopment projects in municipalities such as Ridgefield, Stamford and Shelton ”typically involve a lot more retail and apartments, which appeals both to young people and to older people looking to downsize from their house but remain close to their children, grandchildren and friends,” Kurfehs said.

Kurfehs also blamed the state’s economic situation for the current state of the housing market. “There are not enough jobs to go around for young people,” he said, “and even if there were, they don’t pay enough money for them to afford to live here.”

Joe Feinleib, principal at Coastal Construction Group, a homebuilder in Westport, said he believed that politics have also cast a spell over the Fairfield County market. “A lot of people were not at ease” during the 2016 election cycle, he said. “They were kind of waiting to see what would happen and now they’re still getting used to the new normal.”

Feinleib said Coastal Construction is seeing most of its single-family home construction work in Greenwich, with New Canaan, Westport and Fairfield “not quite as strong as they were two or three years ago.”

As for spec houses, “The good inventory has been cleared out and the ones that are left are not in the most ideal locations,” he said.

David Adams, president of Design Builders & Remodeling Inc. in Ridgefield, said the new homes market is “soft.”

“It’s really expensive to build new homes, and so many (existing homes) that are on the market are more reasonably priced,” he said. “You can get them at a much better price than if you build a new home. A lot of spec homes are just sitting there, all over Connecticut. People may be willing to pay a little more for a brand-new home, but not enough to make it worthwhile for the builder.”

Jonathan Kost, owner of Jonathan Kost Architecture in Newtown, said spec homes “are coming back into play,” but agreed that new single-family construction seems to be on the wane.

“I walk in to a client meeting and talk myself out of a lot of work,” he said. “The numbers are pretty simple: Do you want to buy a house that’s for sale at $130 per square foot or build a house that’s going to cost $225 to 250 per square foot?”

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