Confidence, optimism and potential as home construction industry sees uptick

“We’re seeing a huge upswing,” said Holahan, president and partner with Liberty Homes Custom Builders in Monroe County.

Holahan is not alone, as homebuilders in the Greater Lehigh Valley are enjoying a bump in single-family housing starts. Year-to-date new-home construction permits issued the first half of this year grew by 4.9 percent in the Allentown metropolitan area, by 11.1 percent in the Reading metro area and by a whopping 100 percent in the East Stroudsburg-Pocono metro area.

But it’s not necessarily all hammers and nails for homebuilders, as some said zoning and permitting obstacles and lending restrictions will continue to pressure the industry.

Yet the National Association of Home Builders, which noted a strong increase in the Northeast this summer, said the growth trend will strengthen through the rest of 2016. Factors such as job growth, a rise in consumer confidence, pent-up demand and low mortgage interest rates are expected to fuel the uptick.

“This looks pretty promising,” Holahan said.

MOVE-UP BUYERS

Holahan credits brisk movement in the resale market for increased activity in new construction as more move-up buyers sell homes and build. Recent growth in health care and resort business in the Poconos has supported empty nester desire to retire and locate near family.

“We are seeing move-up buyers,” Holahan said. “They say they are downsizing but they are just trying to reconfigure their floor plan to reduce obstacles, something that’s more manageable. Our clientele are getting to the age where ‘We want what we want now. We want it really customized to ourselves and designed that way.’ ”

He said clients tend to want three-bedroom homes, usually one-floor ranchers with no steps or barriers.

“The Poconos is coming back into its own,” Holahan said. “As we went through the different cycles of vacation homes and the mass exodus from New York and New Jersey and people moving back again, we are starting to see the regression to the mean, where it’s starting to level back out again.”

BUILD WHILE THEY CAN

Confidence and optimism persist for Walter Greth, president of Reading’s Greth Homes, a custom homebuilder in business 43 years.

“It’s not what it was years and years ago, but it has been very steady,” he said. “Everything in custom homes seems to be going along quite well. We’re excited about the prospects. We’re very optimistic at this time.”

Greth sees self-financed, upper middle-class customers who have decided to build while they can.

“They decide they want to do what they want and build the house of their dreams,” he said. “Most of them are larger houses. Most of them are future accessible, meaning they have wider doorways, planning longer-term … master bedrooms on the first floor.”

According to Greth, the trend for the new homes runs in the high 2,000- to 3,000-square-foot range.

REGULATORY HURDLES

Joseph Lorah, sales manager of Keepsake Homes, said it seems to be busier but “we haven’t seen it quite as much because of what we do.” Keepsake Homes is a scattered-site custom homebuilder based in Sinking Spring.

“We do see activity but not in my sector. We are not a development builder,” Lorah said. “It seems to be a little bit more phone calls are coming, but it’s not as rosy as we would like it.”

He said he attributes the regulatory and permitting process for the sluggishness.

“We are working on some projects now that have been four or five years in the making,” he said. “Two of the projects we are going to be starting, one started in ’09 and the other in ’12, as far as the very first inquiry into our company. That’s how long it’s taken just to get all of their hurdles out of the way so they can actually move forward.”

Though he sees slower activity, Lorah remains optimistic.

“I don’t think [activity] is going down. It’s going up,” he said. “In our sector, from what I see, it’s a little slower climb than a developer.”

PERMITTING DELAYS

“Government regulations are making things difficult to even come up with a permit,” said Judy Rau, secretary with Curtis E. Schneck Inc., a single-family homebuilder in Schnecksville. “They come up with new things all the time which equate to a lot of time and money lost.”

The company continues to build homes but sees regulations slowing the process and demand.

“We do have a couple of homes that we’re going to be starting the next couple of weeks,” Rau said. “The one should have been started three months ago but we are having difficulty getting permits.”

Rau sees the current tight-hold as a deterrent to new construction.

“They add additional cost to the homeowner,” she said. “If in the end, you had a better product that would be one thing, but that’s definitely not the case. Everything continues to increase in cost, your materials, your subcontractors, your own labor costs and things.

“That makes it more difficult because the cost of new construction is definitely going up, especially if you’re building a quality home.”

PENT-UP DEMAND

An Allentown developer sees potential.

“We’re still very slow,” said Jim Posocco, partner/owner of Posocco Construction. “For the high-end custom homebuilder, we have not seen a real good development.”

Yet, Posocco has seen activity in twin and multifamily unit new construction. The company plans to work on expanding its offerings the next few years as it moves forward with a 218-unit townhouse subdivision in South Whitehall Township. The development will offer three-bedroom, 2½-bath units in the mid-$200,000 range.

Posocco said he expects pent-up demand and higher consumer confidence in the economy will bolster new home construction moving forward.

INDUSTRY CHANGES

In Schuylkill County, longtime custom homebuilder Curtis J. Bailey Inc. said most clients are interested in more open space.

“They like their kitchen eating area and their family room all pretty much open and interconnected,” said Curtis J. Bailey, owner of the New Ringgold company. “They also pretty much have done away with the formal dining room and formal living room. It’s much more casual-type living nowadays.”

Bailey sees larger homes retaining those formal rooms, but sees today’s average new construction costing $250,000 to $350,000. He attributes industry changes over the past five decades with an existing sluggish market.

“I was accustomed to building anywhere from 15 to 20 custom homes a year in the early ’80s and into the ’90s and even into the first part of the 2000s,” he said. “But since 2007, things started to go downhill and for us it has never yet recovered.”