Some local builders cautious about spec home construction

The tough housing market is forcing some spec housing
builders to postpone projects.

The tough housing market is forcing some spec housing
builders to postpone projects.

Phase one of a traditional neighborhood design project
called Bryn Eyre in New Morgan Borough, Berks County,
where spec homes will range in price from $200,000 to $400,000, won’t begin
until early next year. The project includes 450 residential units and some
commercial space, said Jason Duckworth. He’s a partner in the project and vice
president of Bryn Eyre Corp., the corporate general partner of Bryn Eyre LP in Wayne. The reasons for
the delay are the housing market downturn and weak consumer demand.

builders/developers, like Garman Builders Inc. in Ephrata, view it as business
as usual and are going ahead with planned projects.

All said they are keeping an optimistic eye on the future.
Spec homes usually don’t have a buyer even after the finishing touches, forcing
the builder/developer to keep up the expenses until the home sells. “Spec
housing” is short for housing built on speculation that a buyer will be found
after the house is almost finished. One of the biggest advantages of spec
housing is that the consumer can buy it and move in almost immediately.

“The real estate market is not where it was a year or two
ago, when it was overheated,” said Michael Garman, president of Garman
Builders. “In the fall of 2006, we could hardly get the average spec home
finished before it was sold. It was too good. We’re all paying for that now. We
started slow this year.”

Brook Ridge in Elizabethtown; Clearview Gardens North in
Clay Township, Lancaster County; and The Meadows at Adamstown in Adamstown
Borough, Lancaster County, are just a few of the communities in the Lancaster
area where Garman had built spec housing. He said spec housing priced up to
$350,000 now takes about 60 to 90 days longer to sell. Spec homes that cost
more than $500,000 typically go fast because they’re scarce. In a tight market,
some consumers switch from buying a custom home to buying a spec home. Garman
predicts that spec housing prices in Central Pennsylvania
will stay constant or go up slightly because of the region’s desirability.

“As the market tightens up and home sales slow down, we have
less competition,” Garman said. “That means there’s less spec home inventory.
Where the market has slowed the most is in the $350,000 to $500,000 range of
home prices.”

Garman Builders’ spec home construction is also slower. In
2007, the company built about 90 spec homes. In 2008, the business estimates
that it will construct about 75 spec homes. Garman said while people are not
moving as quickly as they had, he’s noticed more people looking for a new home.

“By 2009, we’ll be back to building 100 homes a year,” he
said. “We have projects in the pipeline with townships.”

Those projects include 65 spec homes to be built in early
2009 in Summerlyn Green in Ephrata. Homes will have an average price tag of
$280,000. Another Garman project is 50 spec homes to be built by March 2009 in
Fallen Oaks in Lebanon.
Home prices will range from $300,000 to $400,000.

“We’ve noticed a lot more activity since the end of April,”
Garman said. “In our opinion, everything goes in a cycle. Now is a tremendous
time to buy a home. In America
today, people want it right now. With spec housing, there’s no waiting.”

Mark DiSanto is chief executive officer of Triple Crown
Corp., a builder based in Lower
Paxton Township.
He said he agrees with Garman. Advantages for the purchaser include less strain
and anxiety. For the builder, there’s an even flow of construction.

“We don’t have a buildup of inventory because we only have
two preplanned homes available at any one time,” DiSanto said. “I have heard of
some builders who are putting off projects because of the current housing

Triple Crown has a total of seven housing developments in
the Harrisburg

According to the Central Penn Multi-List, home sales in Central Pennsylvania are down 20-25 percent in 2008
compared with last year, DiSanto said. Triple Crown’s sales are down, but he
would not reveal specifics.

“We’re doing significantly better than the overall market,”
he said. “We construct in good locations, we don’t build up inventory and
haven’t had near the sales downturn.”

Scott Elliott, director of public relations for the
Pennsylvania Builders Association in Lemoyne, said what is happening now is
market-driven. There is less speculation in homebuilding because the market is
still working through the existing inventory of new homes.

“Homebuilding follows a business cycle, and the building of
spec homes, at some point, will increase again,” Elliott said.

Wendy David, executive officer of the Home Builders
Association of Metropolitan Harrisburg, said the Central
Pennsylvania market is strong.

“There’s money out there for people who qualify,” she said.
“The market is not bad.”

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