Home-building crash is muted in WNY
Especially at the high end of the market, builders here are busy — at least for now
While the U.S. home building industry as a whole is having its worst year since the 1991 recession, Buffalo-area builders are bucking the trend and selling homes at an enviable pace.
According to the National Association of Home Builders, the number of building permits for new residences plummeted 40 percent nationwide during the first nine months of 2008, compared to the January through September period of 2007.
But in Western New York, the dip was a comparatively small 19 percent.
“I’ve scratched my head and pinched myself several times,” said John Manns, Marrano-Marc Equity Corp., vice president for sales and marketing.
Manns said his West Seneca company, the area’s largest home builder, is on track to beat its 2008 sales goal.
“We sold 163 units in 2007 and after assessing the market, lowered our expectation to 153 homes this year,” Mann said. “I’m pleasantly surprised to say it looks like we’ll close the year with 160.”
Similar new-home construction and sales success is being charted by Forbes-Capretto Homes of Getzville and Clarence-based Essex Homes of Western New York, two of the area’s other large residential builders.
“We’re certainly down 10 to 15 percent from where we were three years ago, but people are still touring our models, signing contracts and buying houses,” said Forbes’ business manager Vincent P. Celestino. “We’re not feeling the doom and gloom you see on the national newscasts.”
Essex President Philip J. Nanula said evidence of the local market’s insulation from the national economic angst is the stack of fresh contracts sitting on his desk.
“In the past two weeks, as the stock market was falling 900-some points, we sold three homes and signed contracts for another five. Our phones are still ringing and we’re still building,” Nanula said.
But all three major builders admit they’ll be conservative in setting 2009 sales targets and will employ a variety of incentives to keep deals coming in. Newhouse hunters will be enticed by such extras as “free” extra bedrooms and finished basement space, and upgraded windows, countertops and decorative finishes.
“The bottom line is: People still want the American dream of a brand new home,” Manns said. “And we’re going to show them that’s still realistic and achievable.”
Jacqueline and Mark Purkiss, and their four children, achieved that dream in a big way last week when they moved into their custom-built home in East Amherst. The $700,000-plus luxury residence replaces the home they left behind in Sheffield, England, three years ago when Mark Purkiss was transferred to Buffalo by HSBC Bank.
“It’s first and foremost a home, and an investment second,” Mark Purkiss said, whose international banking background has made him acutely aware of the worldwide fiscal chaos that has impacted both financial institutions and consumers.
“I think we’ve made a very good investment in the solid local market. We did not hesitate,” he added.
Jacqueline Purkiss said the decision to build the “right home in the right location,” was much more than a financial decision. The family, which has lived in a rented house since arriving in Buffalo, checked out dozens of existing residences before deciding to build from scratch.
“We moved our family thousands of miles away from our family and friends and it was important to have a real place to call home here. This is about a lot more than money, it’s about our lives,” she said.
A new build was also the choice for Eleanore Cieplinski who closed on her new patio-style home in Cheektowaga on Thursday. The elderly home buyer was seeking more efficient quarters.
“I’m getting out of a big house into something more manageable,” the elderly home buyer said.
She said one of the big factors in her buying decision was finding a new home that didn’t require taking out a mortgage.
“I got a nice house I could afford. I wouldn’t take out a loan with everything going on with the economy,” Cieplinski said.
While the area’s large home builders are weathering, and even prospering, in the tight economy, their smaller counterparts aren’t all as lucky. 2008 is turning out to be the toughest year Wilson builder Robert Martin has faced in his 20 years in business.
“In my best years I’ve built 15, this year I’ve done two,” said Martin, of RRM Developments Inc.
Martin’s bread and butter is starter homes priced at $200,000 or less, a market that’s been hit hard by fallout from the subprime lending meltdown. With banks less willing to lend to home buyers with slim or spotty credit, many of Martin’s potential clients can’t — or think they can’t — qualify for a mortgage now.
“Between 24-hour cable news and what politicians are saying, there’s a perception you can’t get a mortgage and real estate values are dropping,” Martin said. “I’m not a needed commodity, like food. People don’t have to have a new house.”
That reality is something on the minds of all builders, according to Joseph W. McIvor, executive director of the Buffalo Niagara Home Builders Association.
“We’re still in a pretty good position here, but when you see the roller coaster ride of Wall Street, and investment portfolios shrinking, it’s hard to predict what 2009 will bring,” McIvor said.
He said anecdotal information indicates local builders saw less traffic at open houses and inked fewer sales contracts than expected in the past month.
Mann said he expects the high-end housing market to get the shivers as “move up” buyers look at their stock and retirement portfolios and decide to stick with their current homes.
“I think the $500,000-and-up buyers might stay put for another couple of quarters while all this shakes out,” he predicted.
That’s a possibility for which at least two local condominium project developers are bracing themselves. Gerald Buchheit, who’s reinventing the former Freezer Queen food plant on Buffalo’s outer harbor to luxury condos with price tags between $300,000 and $1.2 million is considering offering half of the 150 planned units as apartments.
“We’re looking at apartments as a safer investment. It would make the banks more comfortable with the the financing,” Buchheit said.
Veteran Buffalo developer Carl P. Paladino, who is in the middle of constructing Waterfront Place, near the city’s Erie Basin Marina, is putting plans for a second 13-story condo tower on hold, as well as lowering prices on future phases of adjacent townhouses.
“The upper-end buyers are holding back. I think we need to figure out when the demand will be back before we build more,” Paladino said.
