Banging hammers and the smell of sawdust is becoming prevalent in areas of South Jersey, as there has been a significant increase in new construction.
New home construction permits in Atlantic and Cumberland counties increased last year to levels not seen since 2010. In Cape May County, the 662 permits in 2013 were the highest since 2007, when they reached 1,081, according to preliminary data from the U.S. Census’ Building Permits Survey.
The building, however, is very localized — much of the new construction is in resort towns. And this segment of real estate faces obstacles such as existing home inventories, rising foreclosures and high unemployment.
“If you drive around on the barrier islands, there are plenty of new homes going up. The trend is the same as it’s been the last couple of years — the higher-end stuff, the new stuff in Ocean City, Sea Isle City, Stone Harbor, Avalon, Margate, Longport,” said Sam Phillips, co-owner of Somers Point Lumber, a hardware store and lumberyard. “New construction on the mainland is there, but it’s slim. You can buy a house for less than you can build it.”
In Avalon, new-construction permits grew from 69 in 2012 to 76 in 2013. Demolitions also increased, from 48 in 2012 to 73 in 2013.
“We’ve got 50 to 60 homes going right now. We’re back to 2008 right now. We’re going through some boom right here,” Avalon Construction Official John Tracy said.
Expensive second-home and vacation getaways are a big part of real estate in Avalon and other seashore municipalities.
“People are finally building their retirement house,” Tracy said. “They have the grandkids now, they’re tearing down the houses they’ve had for 30 years and they’re (rebuilding).”
Real estate speculators are also building new homes with the intention of selling, he said.
Neil Byrne, Sea Isle City’s construction official, said new construction has been steady for several years. About 86 new-construction permits were issued in Sea Isle last year, and Byrne said 2014 is on pace to match that.
“We’re a little different economy — more of a second-home economy,” he said.
In the U.S., sales of new single-family homes in January reached a seasonally adjusted annual rate of 468,000, according to the Census Bureau and the Department of Housing and Urban Development. That was about 2 percent higher than January 2013.
In New Jersey overall, permits for new, privately owned houses reached 24,270 last year, the highest since 2007, according to U.S. data.
In Egg Harbor City, builder Brad Haber is building the Neighborhoods of Cedar Creek.
“My goal to sell homes last year was simply 12 homes — one a month. And we achieved 17 sales,” he said.
The development’s average sale is about $255,000, he said. Overall, Haber is planning 400 homes at the development, divided into smaller neighborhoods.
As the market picks up, Haber said he can increase his homebuilding pace from 24 to 36 homes per year. That pace — representing three homes per month — is something Haber foresees a few years away, in 2016.
“There’s an old scuba diving expression that says plan your dive and then dive your plan,” he said. “I’m trying to keep it to the pace where I can deliver the houses on time in top-shape quality, profitably and keep my customers as fans. That’s the most important thing.”
Haber said his company also strongly targeted a market of renters looking to become homeowners.
“Certainly the broader economy still poses some pretty strong headwinds. The economy still needs to get rolling. People still need to get jobs. I believe that is still happening, just more slowly than most would like,” he said.
There are some other new home developments taking place in the region.
Ryan Homes, one of the nation’s largest homebuilders, is constructing a 22-home development in the Swainton section of Middle Township called Seagrove Estates, located off Route 9. In the Burleigh section of Middle, the company is preparing to build another development, Sand Dollar Estates, also off Route 9.
Representatives of the company did not respond to requests for interviews.
NVR Inc., Ryan Homes’ parent company that operates in 14 states and the District of Columbia, settled 11,834 homes last year, a 20 percent increase from 2012 and a 39 percent increase from 2011, the publicly traded company said in an annual report to the U.S. Securities and Exchange Commission.
Rick Van Osten, spokesman for the Builders League of South Jersey, said South Jersey has been especially slow to recover from the economic downturn and the recession, which affected new home sales and remodeling.
“I’d say there’s more optimism this year than probably since 2008,” he said.
But there are challenges: Foreclosures in New Jersey increased last year, while across the U.S., they fell.
In New Jersey, foreclosure filings rose 44 percent in 2013, according to figures from RealtyTrac. This includes increases of 45 percent in Atlantic County, 38 percent in Cumberland County and 20 percent in Cape May County.
“The one caveat is the foreclosure issue in New Jersey is still hanging over there, affecting supply and prices,” Van Osten said. “That’s sort of working its way out. I think people feel a little more confident about the economy.”
But the bigger problem, particularly in southern New Jersey, is job creation, Van Osten said.
“A lot of (builders) for a long time didn’t want to bring on anybody. For one, there wasn’t the work, and if there was, they did it with the people they had,” he said. “We’re slowly getting there in terms of employment in the industry. People are out looking for ground. … Projects that have been sitting there have been coming back to life.”
The economic downturn hammered the construction industry nationally and in the area.
The industry employed about 8,800 people in Atlantic, Cape May and Cumberland counties in June 2013, the latest data available from the U.S. Bureau of Labor Statistics. This was about 27 percent fewer workers than five years prior.
The Cherry Hill-based Builders League of South Jersey lost about 40 percent of its members from 2006 to 2013, as many went out of business, Van Osten said. Membership has started to pick up again — it’s about 350 this year.
At Somers Point Lumber, Phillips said the business is seeing a boost from remodeling work driven by investors purchasing homes and remodeling them with the intention of selling them in the future. Remodeling and rebuilding work from Hurricane Sandy continues to increase construction activity as well.
Tom Gleeson, owner of Gleeson Contractors in Sea Isle City, said home construction has picked up, as well as remodeling work.
Among the high-end construction, Gleeson said, buyers want the bells and whistles — with swimming pools, and wired with stereo equipment and electronics that let them turn on the heat from an iPad 100 miles away.
“It was a struggle since 2008. We stayed busy, but it wasn’t like it was. We were steady,” Gleeson said. “Now, it seems like the phone’s ringing a lot more. We’re bidding a lot more new construction.”
Thomas Welsh, of Thomas Welsh Builders in Avalon, said last year was one of his best.
“That period — 2007, 2008, 2009 — it was really difficult. It has started getting good again,” Welsh said. “I’m finding the niche between $1.5 million and $2 million is really popular. After 2008, even the people who had the money tended to lean toward the under $2 million market.”
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