Homebuilding in the pandemic

Virtual openings, contactless buying and the need for more personal space in homes are just some of the changes propelled by the coronavirus.

Homebuilding in the pandemic

Virtual openings, contactless buying and the need for more personal space in homes are just some of the changes propelled by the coronavirus.
The housing market is beginning to show signs of stabilizing and is moving forward from the pandemic.
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Just this week, Margaret Griffin Cameron and her husband, Roy Cameron, closed on a new-build single-family house in a planned community in Raleigh, N.C.

The house first appraised below the sales price, but a reappraisal came in at the sales price.

Griffin Cameron speculates the slowdown in the real estate market from the coronavirus pandemic may have played a role in the first appraisal’s lower value.

The anxiety of buying a house in these uncertain times is deeply worrying, she said. “Am I nuts to take out a mortgage when I have no debt now? I’m trying to decide what to do with my head not my heart, but I’m terrified.”

Her job as media director at an ad agency is secure now but she doesn’t know for how long. Roy Cameron isn’t employed. Two of their three adult sons lost jobs.

“After much soul searching, we said, ‘Let’s go for it. Let’s take the plunge. Let’s rethink how we can make money and how our lives could evolve,' ” she said.

Roy Cameron will start a handyman’s service and is optimistic about his prospects. Her sons now have a refuge. “If they can’t find work, they will still have a home. Who knows, maybe we’ll become an extended family, and one day they’ll help pay the bills,” she said.

Now that the decision is made, she is “excited but a nervous wreck.”

The pandemic is causing anxiety and some major changes in the home construction market. Everything from the touring process, to the building process, to the financing process, to the settlement process has been affected.

Expect delays

While the home construction market is well below pre-pandemic levels, builders and economists who follow the industry forecast steady improvement later this year. (Amanda Andrade-Rhoades/For The Washington Post)

If you’re a buyer at the initial stages in the process, the best advice from experts is to exercise patience. Expect the project to be dragged out longer, with delays in everything from construction to financing.

“As of the beginning of the second quarter, new residential listings in the DMV [Washington metro area] are 60 percent of what they were the same time last year,” said Clint Mann, president of Urban Pace. “Pricing has remained relatively stable and after a slight dip, there has been an uptick in pricing in recent weeks. It’s not business as usual, but it is business in our new normal.”

While the home construction market is well below pre-pandemic levels, builders and economists who follow the industry forecast steady improvement later this year. The supply of existing homes is tight, and interest rates are at historically low levels.

A new Redfin report says that new homes represent a bigger share of homes for sale — 1 in 5 in April compared with 1 in 6 in April 2019.

The supply of existing homes is shrinking fast with some homeowners delaying plans to sell and others pulling properties off the market because of the pandemic. The supply of new homes fell 10.5 percent in the 12-month period ending in April, according to Redfin, compared with a 24 percent drop for existing homes.

Masks on construction crews and visitors, hand-washing stations, shoe coverings, gloves and hand wipes are the new normal. (Amanda Andrade-Rhoades/For The Washington Post)

In April, housing starts in the United States on a year-over-year basis declined 29.7 percent to 891,000, according to the Census Bureau. During that same period, housing completions fell 29.7 percent to 891,000. And in April, 1.1 million building permits were filed, down 19.2 percent from the previous April.

Robert Dietz, chief economist at the National Association of Home Builders, anticipates about a 20 percent decline nationally in single-family construction this year “with a rebound taking hold at the end of the year and gains in 2021.”

Specifically, the housing market is beginning to show signs of stabilizing and is moving forward from the pandemic. By mid-May, the latest NAHB-Wells Fargo Housing Market Index, which depicts builder confidence in the construction of single-family houses, increased seven points to 37.

“But being below 50, it is still in negative territory,” Dietz said.

The loss of 1 million construction jobs “may potentially slow the rebound in new construction that will be needed to completely revive the housing market,” one industry expert said. (Amanda Andrade-Rhoades/For The Washington Post)

In a research note, Thomas Simons, a money market economist with Bloomfield, N.J.-based investment bank Jefferies & Co., wrote that he’s “optimistic” about the home building sector and that he expects a “sharp rebound” in sentiment in the June data.

“Coming into the COVID-19-induced shutdown of economic activity, there was a housing shortage in the U.S. that was driving prices steadily higher and led this index to reach its highest level since 1999,” Simons wrote. “Despite the massive surge in unemployment caused by the policy response to the virus, we don’t think the fundamentals in the housing market have changed all that much. With most of the job losses either temporary or at the lower-end of the income spectrum, they are unlikely to affect the demand for single-family housing.”

But Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, was less rosy. In a recent statement, he said the loss of 1 million construction jobs “may potentially slow the rebound in new construction that will be needed to completely revive the housing market.”

If you’re a buyer at the initial stages in the process, expect the project to be dragged out longer, with delays in everything from construction to financing. (Amanda Andrade-Rhoades/For The Washington Post)

Donald Knutson, president of the Knutson Companies, which has built condos and townhouses mainly in Northern Virginia, said he experienced slight delays in some closings because final inspections took a little longer than expected. “And it’s taking more time to get building permits, although county officials are doing everything they can to keep things moving forward,” he said.

Some of his cabinets didn’t arrive at the work site on time — when the Pennsylvania factory manufacturing them shut down temporarily — which required building out of sequence. “But the subcontractors pulled together to figure out how to keep us on schedule,” Knutson said.

Lori Graf, CEO of the Maryland Building Industry Association, said members are making adjustments to keep workers safe and hitting snags with home buyers in financial distress.

“Social distancing requires workers to be spread out on the site, and this slows down progress,” Graf said. “Our bigger challenge is postponement of projects,” she added. “Individuals [ordering houses] have money problems because they’ve been laid off or deemed nonessential.”

In fact, said Hope Morgan, branch manager at Mortgage Network in Salisbury, Md., “everything is taking longer due to the accessibility of most aspects of the mortgage process: obtaining building permits, appraisals, well and septic inspections, title searches.”

Compounding that, Morgan added, is that mortgage rates are at near-record lows, attracting a flood of applicants for refinancing as well as new home loans. At the same time, lenders are implementing more due diligence to verify that applicants still have the income to pay the loans.

“Lenders are taking additional precautions to ensure the home buyer or refinance client are currently employed,” she said. “We are confirming three days prior to consummation [settlement] that the borrower still remains employed.”

360-degree views

In April, 1.1 million building permits were filed, down 19.2 percent from the previous April, according to the Census Bureau. (Amanda Andrade-Rhoades/For The Washington Post)

Developers adapted quickly and nimbly to a new way of operating. Masks on construction crews and visitors, hand-washing stations, shoe coverings, gloves and hand wipes are the new normal.

In many cases, virtual tours of model homes have replaced in-person touring. You can still tour some model homes in-person, but you’ll need an appointment to do so.

Van Metre Homes formed a video department comprised of game designers from technology companies. Those designers created lifelike virtual tours and the ability to not only walk through rooms but also design them. You can stand in the middle of a kitchen, change the cabinets, countertops and appliances and then look at the room from a 360-degree perspective.

The opportunity to not only design but to live in a home that has never been inhabited is appealing to some buyers, said Jarod Blaney, Mid-Atlantic division president of PulteGroup. “During this pandemic, I do think people will lean toward newer materials and a known history of the home, driving new demand over similarly priced resales in the short-term,” he said.

Instead of crowds, one-on-one activity between sellers and buyers is more common, Dietz said.

Plus, said Jon Adler, president of Dream Finders Homes, “if you want to sign a purchase agreement with me today I can do it on the phone. We can go page-by-page. You don’t need to be there.”

There are online notaries, virtual preconstruction and pre-drywall meetings, Zoom calls from design centers and settlement companies forwarding documents ahead of time.

“You want to FaceTime, sure. Take a Zoom or GoToMeeting tour, of course,” said Cindy Plackmeyer, director of marketing and public relations for the Wormald Companies. “You want to tour the home without a salesperson there, naturally. You want to make your design selections online, yes, you can.”

EYA CEO Bob Youngentob said the capabilities the builder has devised for contactless buying will not go away but would likely continue in combination with in-person interactions.

EYA hosted its first-ever virtual opening for a new townhouse project, Riggs Park Place in the Fort Totten neighborhood of Northeast Washington, on May 27.

“Typically our goal is to get a couple hundred people on a Saturday morning at a grand opening. You can’t do that in person now so we explored other ways to get information out to prospective buyers,” Youngentob said.

“We decided to try a Zoom webinar for a virtual grand opening. Over 500 prospective purchasers participated,” he added. “It was more successful than we ever imagined.”

Within 24 hours, more than 90 virtual one-on-one appointments were scheduled, Youngentob said. By the third day, eight homes were sold. The company is planning its next virtual opening for later this summer with the Townhomes at Reston Station.

Builders say there are plenty of factors pointing to a strong market in the future: population growth; household formation; historically low interest rates and inventory levels; and continuing growth of the 55 and older buyer. (Amanda Andrade-Rhoades/For The Washington Post)

Reinventing

Multifamily residential buildings of the future will have to incorporate remote work, one expert said. (Amanda Andrade-Rhoades/For The Washington Post)

Architects and designers already have begun to reassess and reinvent the home of the future, based on where they sense the public is going.

People are thinking: “ ‘If I’m going to be spending this much time in the house, I want it to be comfortable and a reflection of my taste,' ” said Alan Kanner, a principal with Added Dimensions, a Takoma Park, Md., remodeler and custom-home builder. “We see renovations and additions growing in demand.”

“After being cooped up, families may say, ‘We need a new kitchen or a bigger backyard,’ ” Adler said.

Some families may seek to add not one but two offices to their homes, said David Merrick, president of Merrick Design and Build in Kensington, Md.

“When you think about an office, it’s a personal space,” added Merrick, chair of the National Association of the Remodeling Industry’s government affairs committee. “Even sharing it with a spouse is an invasion of privacy. My wife took over the kitchen. If I were to walk in to make lunch and she’s on a Zoom call, I’m suddenly the bad guy.”

Workers at McCullough Construction guide an air-conditioning unit onto the roof of 37 L St. SE, a luxury condo development in Washington, D.C. (Amanda Andrade-Rhoades/For The Washington Post)

Brooks Howell, principal and residential global practice area leader at Gensler, a global architecture, design and planning firm, said multifamily residential buildings of the future also will have to incorporate remote work.

“A home office should be part of the mix and one that includes space for a desk, ergonomic chair, lighting and built-in storage,” Howell said.

“We may also see increased demand for two bed/one bath or one-plus-den offerings as new buildings are planned, where the extra room could function as a dedicated home office, guest room, or nursery,” he added. “These rooms could come equipped with a retractable green screen background for video conferencing or a closet build-out option that includes space for a printer and office supplies.”

Builders say there are plenty of factors pointing to a strong market in the future: population growth; household formation; historically low interest rates and inventory levels; and continuing growth of the 55 and older buyer.

“We want to stay ahead of the curve at the same time the public is trying to figure out what it wants,” said David Gorman, a principal with Lock7 Development.

realestate@washpost.com

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