Rising land costs here will continue to help push up housing prices in 1980s.
The average house lot with sewer and water services now costs around $27,000, and builders are concerned that such lots will cost more than $40,000 before 1985. Meanwhile, costs of materials and labor continue to rise.
Those perceptions of the market are shared by men heading two big building firms that moved into this area in recent years.
Michael McGuire, head of the Costain Washington operation in Virginia, represents a firm based in Toronto. A Washingtonian, McGuire joined Costain here in 1978 as land development manager. Formerly a project developer with Capital Homes, he was recently promoted to Costain executive vice president here.
Gary Garczynski, vice president and division manager for Scarborough Corp. in its Northern Virginia home-building program, joined the firm while attending college in Philadelphia. While he was moving up the Scarborough ladder, the family-owned corporation was acquired by the Weyerhaeuser Real Estate Co. In 1979 he was named division manager when Scarborough entered the Washington market.
Why did Costain and Scarborough decide to build new homes here?
Both were seeking to expand, McGuire and Garczynski said, and both obtained information showing this area -- particularly Fairfax County -- to be one seeking more growth and new business.
"We were aware of an anti-growth posture in heavily populated New Jersey and a rather static population in Philadelphia," said Garczyski, who pointed out, that another Weyerhaeuser subsidiary is building in Maryland -- mostly in areas oriented to Baltimore.
McGuire said that Costain's growth in Canada was constant, despite economic cycles. But high costs of developable land and natural limitations prompted the company to study potential markets in the United States. Costain already has subsidiaries in Columbia, Md.; Boca Raton, Fla.; Phoenix and Seattle.
Garczynski and McGuire said they are satisfied with the early interest shown by buyers in their traditionally styled houses, which are priced from $130,000 to $140,000. Both firms are also turning to lower-priced town houses, to reach a larger segment of the market. Both seek to be producing about 500 dwellings annually here by 1985.
Garczynski's first subdivision, Medford Leas, opened in the West Springfield area earlier this year. Washington is "more turned to real estate than Philadelphia," he observed. "I know it's a clinche, but real estate and homes do tend to dominate conversations at all sorts of social gatherings."
The Scarborough executive also said that his firm's stick-built houses are priced 30 percent higher here than the same models built near Philadlephia. "We have to pay much more for lots and labor. Also, the stringent county inspections, which are good for us and the consumer, do extend the time needed to finish a house. We also see the need to use more brick trim here to satisfy our market."
Both builders contend that the response to consumer complaints about shoddy workmanship lies in better supervision, attention to details during construction and a longer period of construction with more stringent quality control measures.
McGuire said that lot sizes in Canadian subdivisions are smaller and more expensive than in Northern Virginia. "We are scaling down the size of homes a bit to meet the middle market and we likely will shift to include some town houses, multiplex (combination apartment-town house) units and even some new or converted condominium dwellings in our efforts."
He also said that people here want more detail and authenticity in their homes. "It's a sophisticated market," said McGuire, who got his master's degree from the business school at American University.
The builders said that laborers, to $5 an hour, are hard to find here. They said that opportunities are plentiful for high school graduates willing to start by doing the basic, somewhat dreary labor that goes into a new house.
"The young person willing to work and learn can move up the ladder to job responsibility on the site with aptitude and learning capacity," McGuire said.
Neither executive discounted the toll of the nationwide housing depression caused by high interest rates last winter.
"We were able to stay on course and catch up when rates declined this summer," Garczynski said. "But now rates are up again. That plays havoc with buyers and builders. The mortgage market has been much too volatile to inspire buyer confidence."
McGuire said his firm anticipated a decline in 1979, which turned out to be a fairly strong year for new housing.
"But the costly money market of February 1980 was absolutely unprecedented.
The move-up home-buying market has not yet recovered. Sales were acceptable this summer but high rates are slowing our market again."
The young executives said that the financial resources of their large parent firms enable them to ride out the rough periods and to hold key personnel at all levels. "Only the large firms can survive their critical ups and downs," commented Garczynski, who also has a master's degree. "That's not good because it's healthy for the public to have the small entrepreneurs in the business, too."