The nation's financial meltdown dealt a setback to a housing market that was showing glimmers of recovery in Maryland, and local builders said yesterday that they are bracing for another tough year.
During a real estate and construction forecast conference, area builders said they are struggling through a period of slow sales and limited financing that has forced housing companies to lay off workers, put projects on hold or rethink the type of homes they can sell. The housing slowdown began about two years ago.
Experts at the annual conference in Woodlawn, sponsored by the Home Builders Association of Maryland, said the bloated inventory of new and existing homes was starting to come into balance as new housing starts dropped sharply this year. In September, sales of existing homes in the Baltimore area were off 2 percent from a year earlier, after facing several months of 30 percent declines. And average home values, which had ballooned during the housing boom, are declining.
But the recent credit crunch interrupted any progress being made, said economist Anirban Basu.
"Things are about to get worse," said Basu, chairman and chief executive officer of Sage Policy Group. "I view 2009 as a lost cause. The issue is not mortgage rates. The issue is, banks are not willing to lend at any rate."
Heavy losses in the stock market "will interrupt the progress we would have made in the recovery of the U.S. housing market by a year," Basu said.
Sales of new homes probably will not improve until the existing home sales market becomes more stable, builders say.
"We do feel like we have entered into a recession," said Bernard M. Markstein III, director of forecasting for the National Association of Home Builders, who predicted that sales of existing homes will bottom in the first quarter of next year, followed by a recovery in housing that is expected to go slowly, in part because of rising unemployment.
In such a climate, competition for the limited number of buyers has been particularly difficult for small builders, especially those that try to set themselves apart from national builders by offering custom features.
Fewer potential buyers are touring model homes, but those who do want "value," said Harry "Chip" Lundy, founder of Williamsburg Homes, which builds houses in Howard and Prince George's counties. "They don't want bells and whistles."
Builders said they have shifted to building smaller homes that are energy-efficient and less expensive.
"We are seeing an increasing demand for energy efficiency" as energy prices have risen, said Rich Thometz, owner of Hailey Development, a Burtonsville-based land development company. No longer are buyers gaining approval for mortgages on homes priced up to five times the family income, said Lou Baker, president of Pulte Homes -- Maryland Division and president of the builders association.
Many builders now rely on incentives, including price breaks, to persuade buyers to close a deal.
"When people ask for reductions, we'll talk to them about it," Lundy said. "We're not going to kick them out the door."