Developers who survived the worst recession in memory are not feeling bullish about the slight improvement in demand for new houses in Westchester and the Hudson Valley. Still, some builders say they have dusted off plans and are even breaking ground on speculative units.
While new houses are being built, developers are hopeful they will be completed and marketed at a time when conditions improve.
On May 24, the U.S. Commerce Department reported new home sales in April rose 7.3 percent ”“ the second consecutive monthly increase. Sales in the Northeast rose 7.7 percent in April. However, comments from the National Association of Home Builders immediately quelled any enthusiasm. In fact, government figures indicate the national inventory for new houses fell to a record low of about 175,000 units in April.
“The fact that new home sales have now risen for two consecutive months is certainly welcome news following an all-time low sales number in February,” said Bob Nielsen, chairman of the National Association of Home Builders. “That said, builders are still contending with a great deal of competition from foreclosed properties for sale in certain markets, and in places where this is not an issue, it remains extremely difficult to obtain credit to build new homes.”
David Crow, chief economist for the association added, “While more buyers are starting to show up at builder sales offices this season, the level of actual buying activity remains quite low. The razor-thin inventory of new homes for sale is indicative of the caution that builders are exercising with regard to new projects as well as their inability to obtain financing for new-home production.”
In the market for rentals
The Business Journal talked with some noted residential developers about where the market has been and where they see it going.
Larry Regan, president of Regan Development of Ardsley, said he has not been hit as hard as other builders due to the nature of his product. The company, a family run business for 17 years, has developed more than $172 million worth of residential and commercial real estate in New York, New Jersey and Connecticut.
“Our niche is affordable, senior and workforce rental housing developments, predominantly,” he said. “We really haven”™t experienced a downturn. Because we are serving a need and working in areas that have the need, there is still a demand for the rental units at an affordable rate at the developments we produce in the Hudson Valley.”
The company broke ground two months ago on an 82-unit workforce housing project in New Windsor called Masons Ridge. The rental apartment complex will feature one-, two- and three-bedroom duplex townhouses.
Other active projects include: Liberty Commons Apartments, a 72-unit affordable rental project in Liberty; the Views at Rocky Glen, an 82-unit affordable rental project in Fishkill; and the Views at Pomona, a 58-unit active adult market-rate condo complex in Pomona. The company is also marketing various rental properties in New York and New Jersey.
Unlike his rentals, which all have waiting lists, sales have struggled at the Views at Pomona. “That has been affected by the inability of Rockland citizens to transition out of their existing home into a new downsized condo,” he said.
However, even at the Views at Pomona, the builder says he plans to build more units later this year. The project was honored by The Builders Association of the Hudson Valley April 12 with “The Best Age-Oriented Community” and the “Best Multi-Family Community” awards in the new residential construction arena. Fifteen new families recently moved into the east building, which contains 28 units, and Regan is planning to begin construction this summer on the 30-unit west building.
Regan said the company competes for New York state housing tax credits that are then sold to investors, which allows it to offer quality rental housing at prices often below market rate.
High-end market shows stability
Joseph Simone, president of Simone Development Cos. of the Bronx, has built high-end speculative ($1 million+) houses in Westchester through affiliate Tri-County Development with partner Peter Albano.
Simone Development, which is also a commercial real estate developer, until recently was headquartered in New Rochelle.
Simone said its residential division has been virtually inactive for at least part of the recession but is gearing up and building spec houses at several developments in Westchester.
“For the last couple of years no one has been doing spec homes in the marketplace because the market was very soft,” he said. “The market has since stabilized and there are established values for used homes in the county. Because of that we are able to understand what a new home will sell for.”
He said that due to the steep drop in sales in the luxury market the past few years, there were no comps of existing houses to determine value for new construction. “Sooner or later people want new homes. We have gone through a period where there haven”™t been any new homes built in a few years,” Simone said. “Now that it has stabilized and sales are happening (with existing luxury houses) on a regular, routine basis, we can now understand value. The appraisers now have comps they can go by.”
The company plans to start building soon two speculative single-family houses of between 7,000 and 8,000 square feet at its planned 17-unit Stone Manors at Twin Lakes in Bedford development. It also recently broke ground on a 7,000-square-foot $4-million speculative house at its Sarosca Farm Estates in Purchase, a planned 10-unit single-family development.
Currently, four houses at Stone Manors were sold, including the last one purchase for approximately $3.5 million in 2008. New houses will be somewhat smaller with fewer amenities and priced at some $3 million.
Because there are now comparable existing single-family house sales, Simone said the company will be marketing the units at about 20 percent below the price it would have charged prior to the recession, but will be making some modifications based on buyer preference.
While the Bedford and Purchase markets are different, he said, “People today want homes that are a little bit smaller than they used to and they also want homes a little more simplistic than they used to,” he said.
For example, pre-housing meltdown circa 2007, Simone built homes with movie theaters, wine cellars and other “bells and whistles.”
“Today”™s buyer doesn”™t necessarily need the home theater on day one,” he said. “They would prefer to possibly do that maybe a couple of years down the road and possibly purchase that house for a little less money.”
He added, what were 7,000- to 8,000-square-foot houses are now about 6,000 square feet.
When asked why he has begun construction in what continues to be a sluggish sales market, Simone responded, “There is not any new product in those markets at these price points for sale and there is always a customer for these products that want new (construction). New is new, you cannot compare a new house to a used house.”
The company recently completed two condominium buildings totaling 225 units in Long Island City that were started during the recession. Simone, saying his company “was very lucky,” has sold all but five of the units despite the struggles in the condo sector.
