Local developers go far

August 04, 2002|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

Michael DeStefano is conducting an experiment, and the outcome will go a long way in determining what direction he will take his home-building business.

"It's a test on whether we can build 40 miles away from where we are used to building and to see if there is a market there," said Michael DeStefano, president of Anne Arundel County-based Sturbridge Builders, who has purchased 20 lots in Coventry Farms in Chestertown, at the other end of the Bay Bridge.

DeStefano is like a number of Baltimore-area builders - large nationals and smaller independents - who are edging away from the region and finding more fertile ground for housing developments in Pennsylvania, Delaware, the Eastern Shore and Southern Maryland.

It's not that they are abandoning the Baltimore region, but with fewer development opportunities and soaring land prices, uncertain outcomes to lengthy approval processes and the state's Smart Growth policies, homebuilders are expanding their reach.

Newspaper ads from Ryan Homes, the area's largest homebuilder with almost 17 percent of the Baltimore market, reflect the change.

In a July 2000 full-page Sun real estate ad, Ryan marketed 38 Baltimore-area communities vs. seven outside the area: one in Calvert County; one in Cecil County; two in Queen Anne's County; one in Chester County, Pa.; one in York County, Pa.; and one in Sussex County, Pa.

In last Sunday's ad, Ryan advertised 32 Baltimore metropolitan communities vs. 20 outside the area, including six along the Delaware beaches, four in York County, Pa., four in Cecil County, three in Calvert County, two in Queen Anne's and one in Talbot County.

And that is all within a two-year period.

Ultimately, that affects not only Baltimore-area consumers, who are seeing fewer new-home choices and higher prices, but also municipalities and builders.

"I think there was a time when many builders would have said there is no market in Cecil County," said Bob Coursey, marketing and sales director for Ryan Homes. "However, once builders started offering new home communities in Cecil County, a market was created. Once the builders started building, the buyers started to see that Cecil County was a very viable option based on sales prices vs. commute. Same thing in our Pennsylvania communities."

Coursey said about 20 percent of his Baltimore-area sales come from communities outside the traditional metropolitan region of Baltimore, Carroll, Anne Arundel, Harford and Howard counties.

"Two years ago, 100 percent of our business was in the Baltimore metropolitan area," said Bill Luther, president of Harford County-based Gemcraft Homes, the fourth-largest builder in the area.

"This year, it will probably be 60 percent Baltimore, and next year it will probably be 40/60 - 40 percent will be Baltimore and the 60 percent will be Delaware, Pennsylvania because of the land availability."

Availability of land for housing developments is the lifeblood for builders. In the past five years, land has become scarcer as jurisdictions have slowed or shut down the development process and Smart Growth policies have tried to persuade builders to turn inward to redevelop aging and neglected suburban neighborhoods.

Pat Keller, director of the office of planning for Baltimore County, sympathized with builders but said the "trick is not to do leapfrog" development over one county in favor of a county where the financial grass may be greener.

"Just fleeing? Is that a solution?" he said. "To me it was always a sort of balancing act of new vs. existing stock. ... Yes, at some point the land supply will run out and then you are left with options that are more difficult, but still doable, I think.

"Obviously, the supply is decreasing; it doesn't take a genius to figure that out."

Nevertheless, Keller added, "the big open boom thing is a thing of the past. You ask yourself what are the implications: Is it good or bad? Some of the consequences are supply and demand, decrease and increase and certain units are going to skyrocket in price, and that drags other units as well."

And with builders competing for fewer parcels and buyer appetites at all-time highs, new-home prices in the Baltimore area have climbed and still are.

"What we have seen happen is the available lots have dried up, the prices have gone through the roof. With lots drying up, it makes builders tend to want to look other places to find the work," said DeStefano, who also is president of the Home Builders Association of Maryland.

"Ten years ago, Queen Anne's County was always kind of a crapshoot because if you could buy a $130,000 townhouse in Anne Arundel County, why do you want to deal with that [Bay] Bridge? But now [with] townhouses at $250,000, I'll go over that bridge and get a nice single-family house for $250,000 on an acre of land.

"The lack of growth areas in the core, where we really should be growing, is really creating the demand outward because the prices sare going up so much."

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