Variety, price and interest rates are selling points for new construction, especially today.
“People who are buying new homes are doing back flips because the housing selection is second to none,” says Bo Knez, president of Knez Homes in Perry Township.
Sound surprising? “This is contradictory to what people are reading,” he admits. National news articles describe a bust. While Northeast Ohio’s interest rates match national numbers, its market forecast doesn’t. The fact is, this area’s slow-and-steady market never boomed, holding 3 percent to 5 percent annual appreciation rates.
“Be careful of the national articles you read in local papers,” warns George Davis, president of ProBuilt Homes in Mentor. “Yes, there are areas of the country that were very heated in 2004 and 2005. In areas like that, the market is correcting. But that is not Cleveland.”
Now is the time to buy a brand-new home. “You can take advantage of better materials that allow for energy savings, low maintenance and convenient floor plans,” Davis says.
And there is plenty to choose from, says Lane’e Latina, president of the Home Builders Association of Greater Cleveland and vice president of sales and marketing for Latina & Latina Builders in North Olmsted. “Traffic is good,” she says. “Growth is still going where the land is.”
A Steady Market
Just as Northeast Ohio’s real estate market didn’t mimic the Sun Belt’s selling freeze, new construction has also maintained a steady frequency of building permits in the last five years. The 8,000 to 9,000 average permits granted in this region per year jumped in 2005, peaking at 10,000. “Now we are seeing [the market] stabilize, so there was a decrease in permits in 2006,” Knez says. Over time, housing starts are about the same, he points out.
Northeast Ohio is not seeing a drop in new construction, rather a “correction.”
Greater Cleveland is unlike superheated areas where speculative buyers invested in properties. “We were fortunate not to have that,” Davis remarks. ProBuilt Homes increased sales 40 percent in 2006, and Davis said the company had a very active January 2007.
Knez also reported a historically strong first quarter. He defines the hotbeds, and now “bust” markets, like this: Take a map of the U.S. and draw a big smile from the coast of California, along Texas, into Florida, and up the East Coast. “Those are the areas affected by the tightened market,” Knez relates. “When these areas say their markets are down 30 percent, it doesn’t reflect what is happening in the Greater Cleveland market.”
The reality in Northeast Ohio is that interest rates are still low, hovering around 6 percent, and sophisticated buyers understand the cyclical nature of the real estate market, says Enzo Perfetto, president of Enzoco Homes in Munson. Why not buy now when they can get a brand-new home at a best price? The area’s steady 3 percent to 5 percent appreciation secures homeowners’ investments, he adds.
“Buyers want to get onboard while the prices are reasonable,” Perfetto says. “We’ve seen an optimistic, enthusiastic traffic flow through our model homes.”
The Benefit of Brand New
Regardless of the low interest rates and other appealing variables that make new construction a best buy, homeowners who must sell to build are cautious. Knez recognizes this concern and to alleviate the stress of a potential double mortgage in case a buyer’s new home is finished before the old one sells, he offers a customer-assurance program.
“We do this to avoid the fear that is out there,” he explains. “So if someone wants to put their home up for sale, when they sign a contract with us, we’ll build the new home.”
Knez estimates six months for construction. “The buyer’s existing home is for sale at that time,” he says. “If their home is not sold when the new one is finished, they move in anyway and we cover the mortgage on the old home for six months.”
This insurance is enough to get many buyers to sign on the dotted line.
Davis eases any buying anxiety by explaining the value of real estate in the long term. “Homeownership is one of the most solid investments an American makes,” he says.
Meanwhile, new construction is a viable option over existing homes because buyers can customize the design and move in with warranties on materials. “They don’t have to compromise on anything,” Perfetto says simply.
Davis adds, “You get the flooring, finishes and the floor plan you want.”
And along with that, buyers can enjoy lower energy bills because of inflated glass windows, and efficient furnaces and water heaters. Limited-maintenance finishes prevent owners from having to paint the exterior every five years, and attached garages and first-floor laundry facilities are standard.
Latina says environmental products lure some buyers into building new homes rather than buying existing real estate. “Buyers are more educated every year,” she observes.
Selection and Sales
Knez attributes “good product and being in the right place” for his increase in new-home sales last year.
Lakefront property is a premium, and developments that feature amenities attract buyers, he says. Lake County’s Lake Erie Shores community in Painesville Township is in the final phase of construction. Residents can enjoy walking trails, a private beach, playgrounds and picnic pavilions. “It is a lifestyle community,” Knez describes. “That is a trend on our side of town.”
Perfetto says prices in Lake and Geauga county new construction provides a wide selection of homes. Affordable homes in far east Geauga County appeal to entry buyers who don’t want to exceed $250,000 to $350,000. Prices in western Geauga County go up from there.
On the West Side, construction is occurring beyond Westlake. Avon is a big building market as construction pushes farther west. Meanwhile, in-fill building creates a new-home market in desirable, mature communities like Rocky River to the west and Pepper Pike to the east, Latina says.
In-fill building is half of Perfetto’s business, and Knez says redevelopment in Willowick and Wickliffe introduce new homes in built-out areas.
“The Northeast Ohio market is full of variety,” Knez says. “A variety of price points, home styles and incentives.” Knez travels frequently with the National Home Builders Association, and while in Naples, Fla., he toured a 2,000-square-foot ranch home. The seller was asking $1 million.
“He said to me, ‘That’s not bad,’” Knez says. “That home in our area would cost $250,000. We are one of the best bangs for the buck in the U.S.”