Slow recoveryPublished 10:53pm Saturday, July 21, 2012
Construction of new homes begins to rise
The Mallas family decided to build a new home in a different subdivision in Suffolk, mostly for the sake of their children.
Other kids for 8-year-old Kelsey and 5-year-old Kiera to play with were scarce in Olde Mill Creek.
Parents Kyle and Katie Mallas had moved there from Virginia Beach in 2001.
Another relocation had “been in the back of our minds” for about three years, Kyle Mallas said, when they decided to build in Harbour View subdivision The Riverfront.
They moved in last August.
“I would say the market was somewhat of a factor, but it really had a lot to do with quality of life,” Mallas said of deciding to take the plunge.
“(We) totally enjoyed the last house we lived in; we had a bigger piece of property and a little more privacy. But we have upgraded our lifestyle to a newer and more prestigious house, I guess I would say.”
The Mallas family built in what was the worst year for construction since the Great Recession hit Suffolk’s new home market like a sledgehammer in 2008, according to city permit figures for the past 5½ years.
In 2008, after permits were issued for 220 multi-family dwellings and 337 single-family dwellings in 2007 — construction worth $28.33 million and $72.82 million respectively — things fell off a cliff.
Permits for multi-family dwellings plummeted 64 percent to 80, and permits for single-family homes fell 19 percent, to 272.
By 2011, permits were issued for only 53 multi-family dwellings with a value of $6.6 million—– a 77-percent nosedive from 2007. Single-family permits were issued for only 226 homes with a combined value of $39.26 million, a little more than half the value in that category before the recession hit.
But things might have begun to pick up in the new-construction market, based on figures from the first half of the year.
In the six-month period ending June 30, permits were issued for 37 multi-family dwellings and 146 family homes, worth $4.34 million and $24.94 million, respectively.
It’s evidence of a nascent recovery if the figures are doubled for a full 12 months and compared to 2011.
Mark Edwards of East West Communities, developer of The Riverfront, reports 17 new home sales there so far this year and 45 since last May, when he said the uptick began.
“I think it’s a good sign that we have turned the corner,” he said. “I would go as far as saying we would be selling more new homes this year if we had (more) new homes (to sell).”
The Real Estate Information Network reports that 752 dwellings were for sale in Suffolk in June, almost 16 percent fewer than June 2011.
Across Hampton Roads, distressed homes made up 24.7 percent of total listings in June, the second-lowest percentage after it rose above 30 percent in October 2010, according to the network.
For Harbour View developer Bob Williams, this clearing out of foreclosure homes — an attractive cheaper option for homebuyers — is key to any sustained recovery.
“The reason that it’s beginning to push up is that … houses that are underwater are beginning to clear,” he said. “We are on the upside of demand and the downside of supply.”
Brian Mullins, another North Suffolk developer and president of the Home Builders Association of Virginia, stated in an email that the permit figures are “not strong, though better … we are slowly making our way out.”
Because home prices fell along with new home construction, demand for building services is “soft,” with projects on very tight budgets and discounted lots.
Investment in particular loans that allow developers to purchase properties and put in infrastructure like streets and utilities is lagging, he stated, and issues like looming mandatory federal budget cuts and the presidential election erode confidence and also point toward tepid growth in 2012.
Mullins said he wonders where the next generation of developers will come from, adding that city planners need to focus on new developments.
“Unless we get good quality developments in the pipeline, we will be seeing a longer road to recovery,” he said.
The Mallas family has settled into its smart new home at The Riverfront, with restaurants, a movie theater, ample shopping and various recreation options all within easy reach.
“The day after we moved in, there were 10 kids out in the front yard playing with our kids,” Kyle Mallas said. “I’m very at ease and feel very fortunate that we are where we are.”