Builders see growth in active-adult housing
The markets for both new and existing houses continue to struggle. Sales results have been inconsistent at best, despite perceived pent-up demand and low financing rates that are at about 4.6 percent.
Still, a number of housing developers are pressing ahead, albeit cautiously, with plans to build in the Hudson Valley.
To get a clearer picture, the Business Journal talked with executives from Toll Bros. Inc., a publicly traded luxury-builder based in Horsham, Pa., and Wilder Balter Partners Inc. of Elmsford, a private developer of active adult and affordable housing communities in the region.
Inconsistent data
Recent data on residential sales has been disappointing. On May 31, the Standard & Poor”™s Case/Schiller Home Price Index declined by 4.2 percent in the first quarter of 2011 after having dropped 3.6 percent in the same quarter last year.
Standard & Poor”™s reported that the national index was down 5.1 percent from a year ago and has hit a new recessionary low. The report said national home prices are where they were in mid-2002.
“Since December 2010, we have found an increasing number of markets posting new lows,” said David M. Blitzer, chairman of the Index Committee at S&P Indices. “ In March 2011, 12 cities ”“
Atlanta, Charlotte, N.C., Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa ”“ fell to their lowest levels as measured by the current housing cycle.”
However, even with the recent release of some positive sales results, the market for new home construction is far from out of the woods. On May 24, the U.S. Commerce Department said sales of newly built, single-family houses rose 7.3 percent in April to a seasonally adjusted annual rate of 323,000 units. The Northeast recorded a 7.7 percent gain in sales in the month of 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 Nelson, 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.”
He added that although there are reports of more buyer interest at builder sales offices, the level of actual buying remains quite low.
Toll Bros. looks to expand
On May 25, Toll Bros. reported a net loss of $20.8 million in the second quarter for fiscal year 2011 as compared to a $40.4-million loss during the same period a year ago.
Robert I. Toll, executive chairman, said home sales were fueled last year by the federal first-time homebuyer”™s tax credit. “This year”™s second-quarter demand obviously was not accelerated by any tax incentives,” he said.
Toll said the company, which builds luxury housing in 19 states, including New York, New Jersey and Connecticut, is experiencing flat to slightly increased pricing in most markets. “As consumers better understand that prices are firming, we believe they will gain confidence, which will help release some of the pent-up demand that must be building in the market.”
For a local perspective, Dan Zalinsky, New York metro division president of Toll Bros., said the company has been very busy developing single-family houses and townhouses, condo flats and active-adult housing communities over the past few years.
“It has been a very good market for us up here in Dutchess County,” he said. “The little builders have put everything on the shelf and are waiting for sunnier times. We have been able to gain a lot of market share up here.”
He added that national homebuilders such as Lennar, WCI Communities and K. Hovnanian have all but pulled out of the Dutchess County area. National builder Pulte Homes does have a community it is marketing in Carmel, he added.
In fact, Toll Bros. has purchased three home communities from WCI Communities ”“ Four Corners in East Fishkill, Westchester Estates at Wilson Park in Tarrytown and Rivington in Danbury, Conn.
Zalinsky said his division is selling eight active communities: Beekman Chase in Hopewell Junction, Fishkill Woods in Fishkill, The Hills at LaGrange in Poughkeepsie, Hopewell Glen in Hopewell Junction, Regency at Fishkill, Four Corners in Hopewell Junction, and Van Wyck Meadows and Van Wyck Mews in Fishkill. He said that during the recession the company was able to keep somewhat firm on prices but has tried to entice buyers via sales events and promoting upgrade incentives.
Zalinsky said Toll Bros. has begun work on the Westchester Estates site in Tarrytown and will begin construction on a model home within 30 days. Toll Bros. expects to open sales on the 14-lot luxury single-family house community in the fall with prices starting at more than $1 million. The company is also planning to open another Westchester community this year ”“ Ardsley Chase ”“ which will be its third in the Greenburgh/Ardsley area. The project calls for 24 single-family houses with sales opening in the late fall. Preliminary prices will start at more than $1 million.
Zalinsky said his division experienced its best sales in its history in 2007. Sales fell in 2008 and have remained relatively flat in 2009 and 2010. While sales were down, “they were strong enough to the fact that it had us continue to look for land opportunities in this area,” he said.
As for sales thus far in 2011: “Things are much the same.” He said sales have been choppy, with one quarter up and then one quarter down, and he believes that will continue this year.
“We had the winter weather that certainly hurt everybody,” he said. “Then we saw the upswing again, and now we see a little bit of a downswing and we scratch our heads wondering whether or not gas prices are keeping people at home and not out looking at real estate.
“We believe the worst is behind us. We are really anxious to get back down into Westchester. We have had success building our single-family homes down there and it has been a while, so we are quite excited to bring these two communities to the market this fall.”
Wilder Balter moving forward
Bill Balter, president of Wilder Balter Partners Inc., said the company has dealt with the recession by re-focusing on active-adult housing as well as rental and for-sale workforce housing.
He said the current downturn is the worst he and his partner, Robert Wilder, have experienced in the two decades they have been in residential real estate development.
“I think it is improving. I think 2011 is going to be slow, but better than 2010 and I think 2012 will be a lot better than 2011,” Balter said.
He said that while the luxury housing market continues to suffer, the company “went back to its roots” building affordable housing where there is buyer demand.
The company”™s active communities include Glassbury Court at Cold Spring, a 55+ adult lifestyle community of 80 semi-attached townhouses priced from $400,000 to $650,000. Construction began two-and-a-half years ago and 28 of the 40 units in the first phase have been sold. Balter said traffic has picked up in the past few weeks.
“I think we are selling at a pace that is better than most communities but is way down from what it was at the top of the market,” he said.
The company is also building a 92-unit affordable rental community in the town of Cortlandt called Roundtop. Balter said they broke ground about three months ago on the project and will have its first occupancy in about eight months. He said they have not started marketing the project, but he expects a long waiting list.
Wilder Balter is also developing a 52-unit affordable housing development in Larchmont. The company hopes to break ground in 90 days on Pine Brook Condominiums, which will feature one- and two-bedroom units with an average price of $220,000.
The company has two projects under construction ”“ a 72-unit affordable rental community in Carmel called Hillcrest Commons and 19 luxury single-family houses in Upper Nyack in its Riverton community. The company has sold three houses that had an average sale price of $1.6 million.
Sharing his company”™s strategy for the future, Balter said, “I think what we have done is get all of our common improvements done so that when the market picks up we can really hit the ground running and be ahead of other builders.”