Three years into the beginning of the housing recovery, one particular sub-sector of the housing market is still lagging behind: new construction.
New construction has bounced back a bit from the depths of the housing crash: Data from the U.S. Census show 5,076 single-family home building permits issued in the Bay State through September, a 61 percent bump from their 2009 nadir, when only 3,153 were issued for that same period.
But not only are those figures down slightly from the same point last year – 5,114 permits were issued in the first nine months of 2013, a 0.7 percent decline – they’re a molehill compared to the typical pre-crash figures. In 2004, for example, 10,591 single-family permits were issued through the first nine months.
The relative dearth of new homes in part reflects a broader market shift: Across the country, homeownership rates have declined in the aftermath of the recession, as higher student loan debts and tightened credit guidelines have kept more households renting. Combined with a preference for denser, more urban living, that’s pushed builders to focus on bigger multifamily projects – while single-family permits made up two-thirds of the total permits issued in Massachusetts in 2004, in 2014 they’re less than half.
It’s not that the buyers aren’t out there. But “the challenge is that new construction is so time-consuming, and so laborious for the builders to meet all the local codes and go through the process, that the new construction is priced higher. If you’re in the Newton market, the Brookline market, there’s an appetite for new construction,” but entry-level buyers may find themselves out of luck, said Sam Schneiderman, principal broker with the Greater Boston Home Team and a buyer’s agents specialist.
Nationwide, the gap between the price of new construction and an existing home has widened to historic levels, hovering at more than $70,000 in recent months, according to data from the U.S. Commerce Department and the National Association of Realtors. Massachusetts is no exception to the trend. For example, according to data from The Warren Group, publisher of Banker & Tradesman, the median sale price for a single-family home in Plymouth through the first nine months of the year was $307,000. In the same town, new homes listed for sale on real estate portal Zillow range from $326,00 to $534,000.
It’s a similar story all over the Bay State, at a range of price points: Median sale price in Wrentham in the same period was $415,000; new home listings ranged from $538,000 to $573,000. In Holliston, median price was $439,000 through the first nine months; for sale new construction listing range from $748,000 to $830,000. In Reading, the median was $485,000; new construction listing range from $323,000 to $450,000. In Westfield, median price was $197,000, for construction listing range from $319,000 to $380,000.
Such gaps reflect the high – and rising – land costs, which have made building spec housing particularly difficult in recent years, said Amy Mizner, co-broker/owner of Benoit Mizner Simon.
Even in her brokerage’s home base of Weston and Wellesley, “Everybody wants new construction. They want high ceilings, open spaces, and they don’t want to do the work. But we really don’t have a whole lot of land in the Metro-West,” she said. “With spec properties, the builders are having a hard time finding teardown lots that are affordable enough to do speculative homes.”
That means that even for buyers who can afford new construction, acquiring such a property may mean commissioning a full-custom build, and signing on for months of delays and construction headaches.
“A lot of buyers, when they find out what it’s going to take to do custom, they’ll find they get better value if they [purchase an existing high-end home] and do some tweaks,” said Mizner.
Email: csullivan@thewarrengroup.com
