Housing slump hurting homebuilders, buyers

December 02, 2007|By ARNOLD S. PLATOU


Editor's note: This is one in an occasional series of stories about the local housing market and what's happening to residents as they grapple with rising interest rates, tightening credit, falling home prices and other economic issues.

The home construction industry in Washington County has pretty much fallen through the floor over the past two years.

From January to September 2005, permits were issued to build 1,163 homes, according to figures from the Hagerstown and Washington County building permits offices.

In the same period this year, the figures show, builders got permits for just 360 houses.

That's a 70 percent drop.

Residential construction overall - from decks to garages to swimming pools to new homes - has fallen alarmingly. In the county's unincorporated areas, it sunk from an estimated $60.8 million from July to September 2005 to $20.9 million in the same period this year, according to the values county permit applicants report.


"Three years ago was good, and two years ago it went to hell. And this year, further hell," said Carl Gallahan, manager of Sellmore Industries' building materials distribution business in Hagerstown.

"...And not little changes, either. This year, it fell off the cliff," Gallahan said.

The plunge is a byproduct of the mortgage crisis nationwide. Home sales have plummeted as borrowers of subprime loans have defaulted and credit standards have tightened, making it harder for some to borrow.

New and existing houses have become much harder to sell, and prices nationwide have dropped. Many people who have borrowed against the value of their homes are seeing it drop. And among those still looking to buy is worry that the price they pay today won't hold up tomorrow.

"There's no buyer confidence out there. It's very low," said Dennis Swope, vice president of Home Construction Corp. of Hagerstown.

"Used to be, you'd put an existing house up for sale and it would go, and it was selling for more than it was listed, and this was just two or three years ago," Swope said.

"And customers for new homes weren't asking for discounts. Today, they're asking for discounts."

Swope, whose company is turning to remodeling work more and more, said his business is down about 50 percent over last year. Other builders estimated theirs has fallen at least 20 percent to 30 percent. And some suppliers are feeling the squeeze just as much.

"Drastically," an official of G.A. Miller Lumber Co. of Williamsport said. "We've been hurt. I tell you if it wouldn't be for the kitchen installs," the situation would be much worse, installation manager Ronnie White said.

"The home improvements in the area are doing good. The windows, the doors and our kitchen department, people are spending the money fixing up what they have, but the new construction, the drying up, has really hurt us," White said.

He said Miller, which "normally employs about 16 to 18 people," has been able to keep most of them. "As far as laying people off, we haven't really had much, but have been cutting hours."

For Hagerstown Block Co., whose products include the gray concrete blocks often used in new house foundations, business "has been a little bit slow," Plant Manager Bret Sprecher said.

"We're down some. We're kind of thinking this year's going to be worse. Fuel price is going up, starting to drive price of materials to us," he said.

Sprecher said his company has been able to keep its employment steady at about 50 because the company also sells retaining wall and architectural block.

"So where one backs off, the other kind of starts to pick up," he said. "... If we were making just strictly gray block, we would be tight."

The slowdown has also hurt big building supply stores like Lowe's of Hagerstown, which sells to contractors as well as home do-it-yourselfers.

"It's affected our sales some, but we're starting to pick back up. I don't know if it's just a good Christmas or not," Assistant Manager Stephanie Mills said.

Mills said her store is selling fewer whole-house packages for lighting and cosmetics that builders had been giving buyers as part of the purchase deals.

"There for a while, when houses were selling like crazy, we would have housing packages go out of here every day," she said. Now, "we still do have some," but it's a lot fewer.

At Sellmore, business is "probably off 25 percent this year over last year, and we were off 25 percent the year before," said Gallahan, who's worked in the industry about 40 years. "And, historically, we're always off over winter and Christmas, and it's just going to come down even more."

Gallahan said he had about 11 employees last year and is now down to nine, but he worries, too, about other companies in the industry.

Trickle-down effect

The negative effect "trickles right down. It's like you have a lot of homebuilders out there used to do 150 homes. Now they're doing like maybe 20, maybe 30 ... They employ a lot of electricians, framers, plumbers," who now have had to find home-improvement jobs.

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