After the worst real estate slump in decades, something surprising is afoot with homebuilders.
They're building homes.
The number of permits to construct new residences is on the rise again in the Baltimore area after years of sharp pullback in development activity. And across Maryland, builders are on a buying spree to snap up vacant lots before their competitors do.
In the first four months of this year, builders took out permits to construct nearly 1,900 residential units in the Baltimore metro area, up 70 percent from the same period a year earlier.
Building activity is still far below the 3,200 units permitted in early 2005. But the number of housing permits issued has grown more rapidly than in other parts of the state and nation.
"I'm seeing much more activity, much more discussion of projects going forward that were kind of stalled," said Jeff Kirby, owner of J. Kirby Development in Baltimore.
It doesn't mean the new-housing market is roaring again. But builders — betting that the worst is over, or at least nearly so — are trying to position themselves for a rebound.
Kirby is part of the trend. Construction on the first building of his new condo community for older adults, age 55 and up, got under way in Catonsville this spring.
Rising builder optimism, however, comes at a time when the U.S. housing market continues to languish. High unemployment hovering just below 10 percent nationally is limiting the number of people with the ability to buy. Homes on the brink of foreclosure continue to mount.
And new contracts for home purchases plunged to a record low after April 30 — the deadline to qualify for federal home-buying tax credits worth up to $8,000. The tax credits were widely believed to be fueling home sales.
But David Crowe, chief economist at the National Association of Home Builders, is forecasting a 25 percent pickup in U.S. single-family housing starts this year over last, and a 50 percent year-over-year jump in 2011.
A number of factors are behind that optimistic forecast. Employers have begun hiring again. Interest rates are at historic lows. "And house prices seem to have bottomed," Crowe said.
Cindy McAuliffe, president of Ellicott City-based builder Grayson Homes, said her sales "have stayed pretty steady" this year, with no falloff after the tax credit expired. All told, her company found buyers for 80 percent more homes between January and May than during the same stretch two years earlier, the roughest period during the slump.
"It's definitely a lot better," she said. "We've actually been increasing pricing some."
Maryland has one of the nation's healthiest new-home markets, said Kenneth Wenhold, director of the Mid-Atlantic region for Metrostudy, a homebuilding market researcher.
Suburban development controls prevented the massive boom-time overbuilding that still plagues parts of the country, so few Maryland builders are now sitting on finished homes going begging for buyers.
The state also has a limited supply of land ready for building, Wenhold said. "As we start to see [home] starts come back up, we're going to see those lot supplies shrink to nothing," he said.
That's why builders are buying land. They're worried about shortages down the road. National builders in particular are tapping their cash to acquire land in the state "at an aggressive rate," said John E. Kortecamp, executive vice president of the Home Builders Association of Maryland.
"That sends a signal to everybody that we're turning the corner," he said.
All but the weakest markets in the country are seeing the same land acquisition trend, Wenhold said. And land owners in local counties with stronger sales, such as Howard and Montgomery, are fetching prices last seen during the peak of the boom, in 2005, he said.
"Some of the homebuilders are concerned with the pricing that's being achieved," Wenhold said. "It's almost like it's another little bubble."
Not all the development activity is aimed at building homes for sale. Holland Construction Corp., a Pennsylvania general contractor active in the Baltimore market, is vying to work on several planned apartment projects in the region.
"We're starting to see an uptick," said Joe Holland, president and chief executive of the firm.
Holland Construction also is the general contractor on Patapsco Overlook, Kirby's condo project for the 55-plus crowd. That's a niche with the advantage of a burgeoning demographic — as more baby boomers cross that age threshold every day — but also a downside, in that most buyers first must sell their current homes before they can buy new ones.
Kirby, who specializes in low-maintenance housing restricted to older purchasers, is optimistic about the project's potential. Buyers have contracts on about half the 16 condos in the first building, the one under construction. Asking prices start around $300,000.
He also is in the early stages of development for a similar community in Towson. Clouds might be hanging over the housing market now, but he figures population trends are on his side.
"I think the long-term prognosis is really, really good," Kirby said.
Elaine O'Malley, one of his Patapsco Overlook buyers, liked the idea of one-level living — with no grass to cut — near most of her adult children. The view from her balcony will be of Patapsco Valley State Park — another plus.
And because she put her Brooklyn, Md., house on the market before the first-time homebuyer tax credit expired, buyers motivated by the $8,000 incentive snapped it up in two weeks. The speed surprised O'Malley, 75. She and husband Joseph are temporarily living with one of their sons while the condo is being built.
"I said, 'Well, if we don't sell the house, then I just don't get the condo,'" she recalled. "But it fell into place."
Future prospective buyers won't get the tax-credit boost to home sales that the O'Malleys enjoyed. But Kirby, the developer, is unfazed.
"I just really believe this is a strong, under-served market on this side of town," he said. "The traffic we've had through our sales center is kind of proving that."
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