Joel and Melanie Goron had to feel satisfied after reading a notice posted by their builder, at The Preserve at Rocky Gorge, where the Gorons broke ground for a home in October.
"At the end of January we were shocked," Melanie said. "We had come by and there was a note posted on the door of sales trailer that said, 'Due to an overwhelming demand for lot sites in the community they had temporarily restricted sales.'
"We knew that things were selling quickly, but I guess . they were selling too quickly. It's pretty unbelievable."
It wasn't until a few weeks ago, with the opening of the model home in the Ryan Homes Inc. development, that the company resumed taking orders in one of the hottest-selling communities of single-family homes in Howard County.
"We had to shut it down at one point since sales were so brisk," said Bob Coursey, marketing director for Ryan Homes. In the first three months of the year, the company had taken 17 contracts for the project in Laurel. "When deliveries get out so far in front you're just very vulnerable," he said, adding that settlement dates were reaching into March and April of 2000.
There is no question that consumers buying new homes in 1999 are going straight for the single-family residence. With confidence and a healthier financial situation than in past years, buyers are bypassing townhouses and condominiums to go for the larger purchase.
"What used to happen is that people would [look] into single-family [homes] because that is everybody's dream," said Linda Veach, vice president of Bob Ward Homes. "When they find that they really couldn't afford it, they would go to the townhouses.
"Now, they are not coming to the townhouses, because they are finding out that they can afford the single-family. Our single-family traffic is much higher than our townhouse traffic."
And even though new-home sales in the Baltimore metropolitan region statistically slumped in the first quarter of 1999 when compared with 1998's breakout year, the general feeling among industry professionals is that this year will hold its own.
According to The Meyers Group, a firm that tracks and analyzes new-home sales, closings in the Baltimore metropolitan market fell 9.9 percent when compared with the first quarter of 1998. All three product types -- single-family, townhouses and condominiums -- lost ground, but that didn't seem to faze Coursey, whose Ryan Homes continues to dominate the Baltimore market in sales of new homes.
"I would say that it does not reflect the strength of the marketplace the market still has legs," Coursey said. "You couldn't ask for a market with more demand than we have right now. [The numbers] reflect the lack of inventory.
"It's almost like the Mark McGwire thing. If Mark McGwire hit 70 home runs last year if he hits 69 this year would it be a bad year? That is what we are looking at; 1999 is looking like a tremendous year, whether it is going to be a 70-home-run year or a 65-home-run year is yet to be seen."
Overall, condominium sales were down 27.3 percent; townhouse sales dipped 16.4 percent; but single-family sales were almost even with last year's first quarter, sliding just 0.9 percent.
"The single-family [detached] market is still doing really well," said Anna Pitheon, regional sales director for The Meyers Group. "That is still the biggest portion of the Baltimore metro region, almost half. The two markets that are behind are Anne Arundel and Baltimore counties. That is specifically due to the shortage of new product availability."
The lack of ready inventory to sell, the difficulty in obtaining new land positions, shortages in drywall, lumber and skilled labor are all cited as the obstacles builders are trying to cope with this year.
According to the Meyers list of the top builders in the Baltimore metro area, the top three -- Ryan, The Ryland Group Inc. and Pulte Homes Corp. -- had fewer sales in the first quarter this year compared with the same period in 1998. Ryan had 49 fewer sales, Pulte had 46 fewer and Ryland was off by seven fewer sales.
"It's a killer [finding new land]," said Jim Joyce, president of the Baltimore division of The Ryland Group. "We are closing out of places faster than what we thought, and the new places are taking longer and longer to get in place -- if you can find them."
According to Meyers, the number of months it would take to sell all the existing single-family inventory in the Baltimore area shrank from 15 months for the first quarter in 1998 to 13 months this year. Generally, builders feel comfortable by having an 18-month supply of inventory to satisfy the market.
"There is less land available. There is less land going through the approval process. There are less developed lots out there," said Ryan's Coursey. "And there are more players going after those lots, so that has created some holes in certain product niches, in certain price points, and in certain counties that has made it" difficult.
Slowing process
"In this business you always like to have the replacements ready to go, but they are getting strung out," Joyce said, adding that a Baltimore County development that he expected to be up and running this summer won't be ready until the first of the year, and a golf course community in Elkton may not be ready for grading until next spring.
"I think it is happening to everybody. All of the counties have tried to choke down on new residential and the process has always been tedious," Joyce added.
According to Veach of Bob Ward Homes, gaining new land positions in Harford County -- where the company is based -- hasn't been problematic "it's coming to us, but then again we have a name in Harford County, [but] in Baltimore and the other counties, it's not quite as easy.
"A lot of people have an unrealistic idea of what their land is worth. They will try and sell you land at an unrealistic price. By the time we would build the house, the public wouldn't be able to afford them."
But the public is absorbing price increases -- brought on by demand and construction issues -- apparently without flinching.
Josh and Debra Piccirilli recently moved into a home at Tuckahoe Farms, a Bob Ward community in Forest Hill.
They sought to buy a lot and build their own home. But when Josh was unable to find a suitable piece of land, they bought in the development last fall, beating several price increases.
"It had a good price and we'd be with new families with kids," said Josh Piccirilli. He purchased the home for $168,000.
According to Veach, the base price for the Aspen, the model at Tuckahoe Farms, has risen steadily since June 1998, going from $164,900 to $172,900, an increase of almost 5 percent.
Holding the line
"We are raising prices, and we are hold the line with incentives," Veach said. "The killer is that they [buyers] don't balk at these base prices, but they want to wheel-and-deal and want you to throw in extra options, and we are just not doing it.
"What [buyers] used to do is they would come to us and try to beat us down on price and then go to our competitor and try to beat them down on price, using us. Now even our competitors are holding firm with the price. And it's the old adage: 'Because we can.' "
The average asking price for a new single-family home for the first quarter of this year in the Baltimore area grew 2.9 percent to $253,993, according to The Meyers Group.
Harford County had the largest average increase, growing 4.9 percent to $195,255 for a new single-family home.
In other jurisdictions, prices averaged:
Carroll County: $222,791, up 2.5 percent.
Baltimore County: $240,370, up 1.2 percent.
Anne Arundel: $273,449, up 1.8 percent.
Howard County: $304,029, up 2.2 percent.
By purchasing when the The Preserve at Rocky Gorge was just opening, the Gorons have seen their home appreciate by thousands of dollars thanks to price increases by Ryan.
"It's fairly unusual, but you see it more in a market like the one we are in right now," Coursey said. "You see sales that are unusually brisk and, in a market that has such remarkable interest rates, even when we raise prices in many cases we don't slow sales."
Ryan's model -- The Savoy with 1,853 square feet -- started with a base price of $237,990. Today it starts at $264,990, an 11 percent rise since the community opened last September.
"There's a limit to it at some point -- when you combine price increases with interest rate increases -- but we haven't seen that point until now," said Coursey, referring to the rise in in the past month that has seen interest rates inch toward 7.5 percent. "Even with price increases and uptick in the rates, there is still that demand."
Said Ryland's Joyce: "Overall, I still feel very good about the market. I can't say that we are hitting a dry spot, and I do feel that if anything, the little scare on interest rates will probably help us in the next couple of months.
"Our total 1999 in Baltimore is going to be dramatically better than it was in 1998. I don't mean a little, I mean dramatically."
Top 10 builders January to March 1999
No. Builder Sales Market Avg. sales Projects
share % price
1. Ryan Homes Inc. 379 14.9 $149,966 57
2. Ryland Group Inc. 146 5.7 $177,928 22
3. Pulte Homes Corp. 118 4.6 $187,745 13
4. Bob Ward Homes 113 4.4 $131,912 15
5. Universal Housing 71 2.7 $155,357 9
6. Patriot Homes 69 2.7 $229,814 19
7. Gemcraft Homes 68 2.6 $138,178 11
8. NV Homes 65 2.5 $348,475 15
9. Washington Homes 59 2.3 $124,815 5
10. Masonry Macks Homes 58 2.2 $177,929 8
SOURCE: The Meyers Group