The inventory situation in the greater Boston market is so dire it’s driven many buyers (and their agents) to despair. But at least one segment of the local housing industry may be singing a happy tune – things are finally looking up for builders, with the latest figures showing a rise in new home construction in the Bay State.
For the first two months of the year, according to U.S. Census figures, new construction permits in the Bay State were up 35.7 percent, with single-family permits up 4 percent over 2013.
That’s well above the national average, which saw new building permits rise about 7 percent during that same period. According to preliminary building permit data compiled by The Warren Group, publisher of Banker & Tradesman, it’s the towns just outside the 128 belt which appear to be the primary beneficiaries of the boost, with towns like Acton issuing 12 new permits this January compared to three last year, Sherborn jumping to 35 from two, and Hingham issuing 41 new permits in January compared to four for the same month last year.
Things are looking even better for the forthcoming spring market.
“It’s definitely picking up now. This winter was tough – people just weren’t coming out, and I don’t blame them. So cold, too much snow, nothing for them really to look at. There’s definitely more people out now looking,” said Scott Colwell, president of the Greater Boston Builders and Remodelers Association.
Even in Western Massachusetts, which has been slower to bounce back from the housing crash than the rest of the state, builders are seeing more interest.
“Things are getting a bit better. Remodeling still carries the day out here, but we are seeing more activity in new construction. We just finished up our home show, and there was a lot more interest [than last year]. Lot of consumers talking about building a new home. So things are slow, but I think they’re headed in the right direction,” said Brad Campbell, executive director of the Home Builders & Remodelers Association of Western Mass.
Solid Growth Expected
Much of the rebound has to do with the flood of distressed sales that had buoyed the market finally receding. Nationally, the distressed inventory hit its lowest level since November 2008 last month, according to a new report from Freddie Mac. Locally, the number of foreclosure petitions dropped by 48.7 percent for the month of February compared with February 2013, according to The Warren Group’s data. This is the 16th consecutive month that petitions have decreased on a year-over-year basis in the Bay State.
“The flood of distressed sales kept existing home sales elevated, and depressed new home sales since builders weren’t able to compete with the low prices of all the foreclosed properties,” wrote well-known housing blogger Bill McBride of Calculated Risk. But with the number of distressed sales receding, “I expect to see solid growth [in new home construction] this year.”
That increase could be especially acute in greater Boston, which is still experiencing shrinking inventory compared to last year – unlike much of the country, where inventory has begun to rebound.
Despite positive signs of interest – and an utter death of inventory – local builders are still in a cautious mood. While builders are taking on spec homes, few are yet willing to take on larger projects, at least in the single-family market.
“We’re putting up specs, which we never used to do the past few years. We’re not as nervous about having something sitting, and it’s great to have something up that people can see and buy [right away],” said Colwell. But even so, right now he’s putting up specs in only one of the towns in which he operates.
“Medfield is pretty much built out; the town has bought most of the open land. [In] Norfolk, there’s certainly a lot more available. We’re putting specs in Medfield, but we’re not doing that in Norfolk just yet, because there are more new homes up that we’d be competing against, so we’re kind of watching to see how that goes,” he explained.
Campbell agreed. “You’re not seeing a lot of spec developments. They’re a little more time consuming, with the regulations that you deal with. I know of some that are being talked about, but most [of the new construction] is custom."
Email: csullivan@thewarrengroup.com
