ARTICLES//
By BRIAN MCNEILL
Published: February 20, 2009
Once the grim economy begins to improve, the Charlottesville region’s struggling homebuilding industry may find a surprising number of interested homebuyers who had been sitting on the market’s sidelines.
The only catch, says economist Christine Chmura, is that homebuilding companies need to survive long enough for the economy to turn around.
“We’re creating pent-up demand,” said Chmura, president of Richmond-based Chmura Econo-mics and Analytics. “So when we come out of this recession, we should see a snap back.”
Chmura offered her prognosis Thursday morning before 75 homebuilders, subcontractors and others at a Charlottesville-area economic forecast seminar sponsored by the Blue Ridge Home Builders Association.
Chmura, who pointed out that the Charlottesville region’s housing market is proceeding at its slowest pace since at least 1993, said she expects the recession to end sometime in the first quarter of 2010.
Once that occurs, she said, many consumers will feel more confident about buying a home, leading to a projected 33 percent increase in home purchases in 2010 and a 31 percent jump in 2011.
“Your market is not nearly as bad as other places in the country,” Chmura told the homebuilders. “So when the recession ends, things should bounce back to normal fairly quickly. That’s the good news. The bad news is that things won’t improve for another year. So you’re going to have to hold on.”
The Charlottesville-area homebuilding industry has stumbled in recent months, as the real-estate market continues its slowdown. In one key indicator, Albemarle County issued only 418 residential building permits during 2008, marking a 47 percent drop from the previous year.
At least two prominent homebuilding companies, Church Hill Homes and Weather Hill Homes, have seen many of their properties go into foreclosure. Earlier this week, notice was given that Weather Hill had another 18 lots in foreclosure in the Liberty Hall subdivision near Crozet, as well as another 20 lots in the Wickham Pond community, also near Crozet.
“This is a difficult economy for builders,” said Jay Willer, executive director of the homebuilders association. “It’s going to take a while to even itself out.”
Builders such as Church Hill and Weather Hill purchased numerous lots during the hot real estate market, Willer said, but they found themselves saddled with expensive carrying costs and little cash flow once the market screeched to a halt. Many other builders, he said, are surviving by being cautious and waiting for the market to pick up.
Lloyd Poe, a Richmond homebuilder who also spoke at the Thursday morning seminar, said market conditions are “brutal.”
“We’re just going to have to slog our way through this year,” he said.
Nationally, Poe said, the homebuilding industry already has shed more jobs than the worst-case scenario described by auto executives seeking a federal bailout.
Builders that survive the recession, Poe said, will find business will be booming. “If we make it through
2009 to 2010, we’ll reap the rewards,” he said.
Poe urged the Charlottesville-area homebuilding community to meet customers’ evolving demands. No longer do homebuyers want super-sized houses, he said. Now, they tend to prefer smaller, energy-efficient homes with quality amenities.
“We’re out of the McMansion phase,” he said. “We’re into austerity. The four-car garage is dead.”
Poe showed a list of new “must haves,” including energy-efficient appliances, a sizable kitchen, ceiling fans and blinds, a home office, and an oversized shower with seating.
Desirable, but less essential, features, he said, include a master suite soaker tub, a butler’s pantry, tankless water heaters, environmentally friendly flooring and stone exterior. Less important, he said, are finished rec rooms, home-theater rooms, upstairs laundries and whirlpool tubs. Removable features, he said, are walkout basements, mother-in-law suites, and overall ostentatious design elements.
Poe pointed out that there were 198 homes for sale in the Charlottesville market at the end of 2008 that were listed for more than $1 million. They had been on the market for an average of 260 days.
“Don’t build any more of those,” he said.
