Pa., Del. land prices luring area builders

Curbs: Maryland's growth policies are put forth as an underlying reason why some area builders have been attracted to cheaper land in Pennsylvania and Delaware.

December 28, 2003|By Erika Hobbs | Erika Hobbs,SPECIAL TO THE SUN

Scarcity of land in the Baltimore region is pushing some area builders to seek less-expensive property beyond the state's northern borders as they try to meet sales targets and satisfy demand.

Analysts, researchers and homebuilders largely attribute this movement to a variety of statewide growth policies as residents complain about crowded roads and schools. Builders said those growth curbs have limited the available land for construction and contributed to rising property and housing costs. So, during the past half-dozen years, area builders have quietly been snatching up land in Delaware and Pennsylvania.

After record home sales during the past three years, builders say they are under pressure to increase business and meet customer demand. Industry insiders say the amoeba-like creep from the city's collar counties escalated within the past 24 months as the region's market heated up and buyers could not find new homes they could afford.

Permits for single-family homes during the first nine months of the year fell to 5,948, down 17 percent from the corresponding period in 2002.

"Clearly, this is an ongoing trend," said analyst Anna Pitheon of Pitheon Marketing Productions in Annapolis, "one I don't see reversing any time soon."

Builders warn that the construction jobs that have helped the Maryland economy hum since 2000 could one day be lost to other states where more building is occurring. And some experts worry that shoppers who want new homes in Maryland but can't afford the escalating prices will move farther from their jobs. That will increase the sprawl that so many planners are trying to correct, builders argue.

But state officials and smart-growth proponents charge that builders are looking for a quick and easy way to make money by constructing homes on large pieces of open land. Smart-growth proponents argue that builders can rebuild in areas where infrastructure already is in place.

"If it is easier to build above the Mason-Dixon Line, then builders naturally are going to go there," said Maryland Department of Planning spokesman Chuck Gates.

But to homebuilders, they are simply meeting that demand with the cheap, available land north of the state.

"We're addressing a market need," said Susan Stroud Davies, co-director of governmental affairs for the Home Builders Association of Maryland. "To suggest it's wrong to make a profit is un-American."

Builders acknowledge that the market has been good to them: More Americans own homes than ever before, and industry analysts expect a third consecutive year of record home sales. They say that they can't build houses fast enough to meet demand, in part because Maryland is running out of room.

Some researchers agree that Maryland's market is facing problems.

According to Meyers Group Real Estate Information Inc., the average cost of new single-family homes in the region rose to $392,886 between July and September, up 17.2 percent over the past year's corresponding period. Permits during the third quarter fell 17.5 percent to 2,048.

A November study by the University of Maryland's National Center for Smart Growth Research and Education explains that these economic indicators - rising home prices amid declining permit approval - indicate that supply is not keeping up with the region's demand.

Development constraints - including building moratoriums, confusing state and local laws, and what is known as adequate public facilities ordinances - appear to be limiting new housing production, said Gerrit Knaap, the center's executive director. The study was sponsored by members of the building industry.

Knaap said these land-use controls in the Baltimore suburbs, many perhaps well-intentioned but poorly applied, push growth to outlying areas, increase housing prices and commute times and inhibit economic growth.

He called such results "distressing."

"[Growth management strategies] are good things if they ultimately provide facilities," he said. "But they don't - they send growth elsewhere."

But people are willing to trade a commute of an hour or more for a comparable house that costs tens of thousands of dollars more in Maryland, said Masonry Homes President Bob Lacey.

In the southern sections of York County, Pa., the average selling price for all single-family homes is between $130,000 and $150,000. In southern New Castle County, Del., new homes can cost between $150,000 and $200,000, building industry statistics show. In Harford County, real estate data show, new homes average $290,000.

"To us, it's an just extension of the Baltimore market," said Lacey, who began building in York County 13 years ago and is returning after a brief hiatus. "It's like Westminster and Bel Air - they used to be far-away places to live in."

The lack of land drove Ryland Homes, one of the state's top builders, to enter the Delaware market several months ago, said Earl Robinson, vice president of marketing and sales.

"We're giving Pennsylvania a good, hard look," he said.

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