02 August 2010

Homebuilders are finding new opportunities on vacant, urban lots.

LaPlace builder Joe Scontrino has long built subdivisions in the land-rich communities of St. Charles, St. John and St. James parishes. But today, Scontrino, one of the area's largest home builders, is all about the city of New Orleans, especially Lakeview.

"We've done stuff in the city in the past, but certainly not to the level of investment we're trying to make now," said Scontrino, founder of Landcraft Homes.

Across the metro area, builders who previously specialized in new subdivisions in the suburbs are flocking to build homes on demolished lots or build new homes in flooded-and-gutted shells in the city. Their devotion is a mix of a unique opportunity in an urban area and survival during tough times for the home building industry.

"The opportunity to be part of that construction was never there before," Scontrino said of in-fill development in the city. "If Lakeview wasn't there, I think it would be fairly dim for builders."

The New Orleans area has never been the bonanza for builders that fast-growing urban areas like Atlanta have been, and in the past few years, what little new residential construction existed fell off a cliff.

In 2004, builders in teh metro area constructed 6,400 new housing units. Activity fell off a bit in 2005 and 2006 after Katrina as they area regathered and many builders themselves were harmed by the storm. But the number of single-family homes built in the area has continued falling since 2006, even though 2007 and 2008 the number of new housing units was padded by the construction of new multifamily developments and the redevelopment of the Big Four housing projects in New Orleans.

Starting in 2008, the numbers really tumbled as the recession, credit crunch and housing correction set in. Last year, the construction industry build only 2,832 new housing units in the metro area, and for the first five months of this year, builders have taken out permits for only 802 units.

"People are scared. They're afraid. I've got a job today, but will I have one tomorrow?" said Bob Major, president of Major Builders LLC, a Venetian Isles company that has stopped building spec homes because of the economy and difficulties with financing, and is instead concentrating on building homes for people on lots they've purchased in Lakeview.

The Lakeview Civic Improvement Association, in partnership with the New Orleans Redevelopment Authority, has had two sales of large vacant lots within the past year that will result in more than 200 new homes being built, according to improvement association board member Al Petrie. To guard against speculators, lots could be sold only to Lakeview residents or their family members. Construction is required to begin within a year of closing -- a godsend for the home-building industry -- and owners are prohibited from selling their new house for three years.

With urban lots opening up and creating a unique opportunity of desirable, affordable sites with a ticking construction clock, builders are flocking to the area. While empty lots are in demand, they're cheaper than the possibility of tear-downs before the storm, and give people the chance to have a new home in the city.

"Lakeview is basically like a new subdivision right now with all the work that's going on," said builder Jason Hardie, whose grandfather started their family company, Ferran-Hardie Homes, Inc., back in 1938 and built homes in Lakeview. Until the storm, his company, based in Metairie, had been doing more work in the suburbs. Hardie, 30, bought a home in Lakeview in 2007 and has been building there ever since.

In-fill mania is likely to spread to other areas as neighborhood associations in Broadmoor and Gentilly are looking at similar lot programs, Petrie said.

Meanwhile the dearth of construction work elsewhere also seems to be fueling new interest in the sale of flood-and-gutted properties. After prices on unrepaired homes had fallen for several years, they jumped in a few desirable locations in the first half of this year, according to figures calculated for the New Orleans Metropolitan Association of Realtors.

Theories are that prices of damaged properties have fallen enough to again make them economical for builders and investors, especially with interest rates being at record lows and a surplus of consruction workers available for hire. Wade Ragas, president of Real Property Associates, the firm that calculated the figures on Realtor-assisted sales for NOMAR, thinks that builders facing hard times may be trying to take on projects to keep their crews working. Meanwhile, programs like the Road Home rental assistance program and elevation grants could be helping the economics of home rebuilding projects, several people said.

"New home-builders are finding that their project list is starting to dwindle. They're having to start looking into smaller jobs and remodeling rather than having their jobs based on new construction," said David Johnston of Johnston Home Improvement, LLC, a remodeling contractor who works on older homes in the city.

But such work can be a gamble. Devon Sweeney of Sweeney Restoration, LLC said he has purchased a few vacant homes, remodeled them and put them up for sale or for rent, but he said he's lost money on several of the deals.

Still, Sweeney wonders whether builders may be trying to take on whatever work they can to stay afloat. "I know I've been underbid several times recently on jobs that I thought I was giving good bids on. It may be people who are trying to just keep their crews working," he said.

Thomas Tubre, president of the Natchitoches company TKTMJ Inc. who moved to Lakeview, said that building is tough right now because the cost of construction exceeds what the market says many homes are worth.

Tubre's company is nimble, and does commercial, residential, public works and high construction. In addition to doing individual homes in Lakeview, he's building Project Home Again houses in Gentilly, which he said truly is like doing a subdivision of all-new construction.

"We have economies of scale here because we have been able to start a project with 12 to 13 units at a time," Tubre said.

Rebecca Mowbray can be reahed at rmowbray@timespicayune.com NOLA.com August 2, 2010

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