New homes

A construction worker attaches siding to a new house being built for Richmond American as part of a new neighborhood of houses in Perry Hall. (Rachel Woolf, Baltimore Sun / July 27, 2014)

Construction of new homes is lagging around the country, and Maryland is no exception.

Permits for new homes, which the U.S. Census Bureau tracks as a barometer of the home-building industry, fell 8 percent in Maryland in the first six months of this year compared to the same period in 2013. The number of single-family detached homes authorized for construction fell 15 percent.

That's worse than the country as a whole, where multifamily structures lifted permitting 5 percent through June. Permitting for single-family detached homes was flat.

"Things are picking up, but we're not at a healthy level at all," said Scott Armiger, past president of the Home Builders Association of Maryland and vice president of Orchard Development Corp., which stopped building single-family homes and started focusing on apartments during the recession.

Homebuilding has long been a key engine of the U.S. economy, accounting for millions of jobs and tax dollars. Recoveries from recessions in 1981, 1990 and 2001 were marked by significant gains in new housing starts.

This time, new homes have found some buyers at the higher end of the market as baby boomers downsize and families start looking to move up. But growth has not met expectations that the recovery would unleash pent-up demand.

Analysts said an unsteady economy has led to slower-than-expected household formation, particularly among younger adults, reducing the need for starter homes. Stringent mortgage underwriting standards make qualifying for loans difficult despite low interest rates. The rising cost of new construction also plays a role in pricing people out of the market.

Some predicted this year's slowdown would be temporary. But others forecast a more gradual than normal recovery, as buyers resist the idea of long commutes and builders face a shrinking supply of well-located land where they can construct homes within the reach of younger families.

"In the long term, homeownership is a great investment and people recognize that," said Thomas Baum, board member of the Home Builders Association of Maryland and president of Bozzutto Homes, which specializes in in-fill development. "To think that millenials want to continue to move farther and farther from the urban core to buy larger pieces of real estate — I think that notion is changing."

Permits for single-family detached homes in the Baltimore region numbered 2,058 during the first six months of the year, 18 percent fewer than in the same period in 2013. Permits fell 7 percent in Anne Arundel, 4 percent in Baltimore County and 39 percent in Howard.

Overall residential permitting, which includes apartments, fell 34 percent year-over-year in the region, which consists of Baltimore City and the five surrounding counties.

Statewide, the number of permits drawn in 2013 — almost 18,000 — was about 60 percent of the amount 10 years prior.

Armiger said his firm has no plans to resume building single-family homes soon.

"It's going to be slow and sustained for a number of years," he said. "I don't think we'll ever get back to the boom."

Home construction follows population and, in the last five years, 70 percent of the state's population growth came from Baltimore City and Anne Arundel, Baltimore, Montgomery and Prince George's counties, compared to less than 30 percent before the recession, according to an analysis by the state planning department.

Builders — who have preferred historically to subdivide and build on large open lots — have responded. In 2013, 53 percent of the state's home starts occurred in Montgomery, Prince George's, Anne Arundel and Howard counties, according to Metrostudy, a research firm that tracks the home-building industry.

"Builders are going where the demand is, and that's more evident in the strategically located suburbs," said Ben Sage, director of Metrostudy's Mid-Atlantic region.

But Maryland is one of the most land-constrained states in the nation, and there are few lots available for development in those established suburbs.

"The supply line is scarce," said Conor O. Gilligan of Glen Burnie-based Craftsmen Developers, whose firm sells permitted sites to homebuilders in Baltimore County and has sold four sites with spots for 20-100 homes to national homebuilders in the past year. "You have to be very creative to find decent in-fill development, which is essentially all that's left."

That scarcity, as well as the complications of building in a more established area, drive up prices, meaning the homes that get built are often out of reach for first-time homebuyers. Nationwide, the median price of a new home in June was $273,500, up from $245,200 two years earlier.