Building for the future — market for new homes in R.I. improving

By Andy Smith

Journal Staff Writer

Rhode Island’s homebuilders have been in a deep slump.

But this spring, the banging of hammers and the whine of power tools working on new houses is being heard once more in some neighborhoods around the state.

“The last two years, we’ve been deader than dead,” said Bob Baldwin, owner of R.B. Homes and vice president of the Rhode Island Builders Association. “Now we’ve gone from death to life-support.”

Roger Warren, executive director of the RIBA, the trade association for the state’s homebuilders, said there are signs of an uptick in the state’s building permits for single-family houses. Statistics for January and February of 2010, the most recent months available, show 101 permits. By comparison, there were only 41 in the first two months of 2009. Still, that’s far below the same period in 2006, when 258 single-family building permits were issued.

“Two months doesn’t make a recovery,” said Warren. “But even during the last half of 2009, we saw the decline [in building] starting to flatten out.”

Nationally, figures for March from the U.S. Department of Commerce showed home-building permits climbed to the highest level since October of 2008. Houses under construction also rose in March, to an annual rate of 626,000.

In Rhode Island, Baldwin said R.B. Homes is building two houses so far this year, compared with none last year. One of them, a 4,100-square foot house with a “sold” sign already on the lawn, is being built on Wilbert Way in North Kingstown. Baldwin said houses on Wilbert Way sell for between $600,000 and $1 million.

Eric Gonsalves, a foreman for Faria Construction in Woonsocket, was working with a crew of six to install the siding last week.

“There hasn’t been a lot of work on new houses, although we just finished one up in Lincoln,” he said. “We’ve done a lot of remodeling jobs — kitchens, bathrooms — but that’s not as good as a new house. We can only keep our fingers crossed. We’re out here to make a living, and, sometimes, it’s not that easy.”

Gonsalves, 38, said he’s been working in construction since he was 16, and knows how to build a house from the foundation up. Ultimately, he said, he would like to have his own company, but the economy would need to improve before that could happen.

The RIBA has more than 1,400 members with 13,663 employees who were hit by the recession that began in Rhode Island in 2007 with a subprime mortgage crisis that resulted in a high rate of foreclosures. The recession also tightened credit, making it difficult to obtain mortgages, and left Rhode Island with a 12.6-percent March unemployment rate.

Warren said it’s difficult to say how much the wave of foreclosures affected new house construction, since the market for foreclosed properties and the market for new construction are mostly different. But, he said, declining home values, a lack of job confidence, and general unease about the economy have made Rhode Island consumers reluctant to make a big investment in a new house.

But builders say that federal tax credits, low interest rates and some renewed lending by banks, at least for those with good credit, have caused the market for new houses to improve slightly in the past few months.

But they are being very cautious, generally making sure one house sells before building another one.

Thomas McNulty, president of E.A. McNulty Real Estate, which has new developments in Lincoln, Cumberland and Burrillville, said he likes having at least one finished house in a development to show to prospective buyers. Unless there are sale contracts already in hand, he said, the company will wait before building more.

At a Lincoln development called Sableswood, he said, his company built two houses in 2009. One just sold, so the company is breaking ground on another. The development is planned for 15 houses.

McNulty said the company built about 20 houses in 2009, and is on track for about the same this year. Its peak year was 2005, when it built 50.

Single-family building permits in Rhode Island have dropped every year since 1999, even in prosperous times such as 2005 and 2006. McNulty said some of that decline is because many Rhode Island cities and towns have adopted more restrictive policies on how many new houses they will allow in their communities.

“We have a fundamental problem with affordable housing in Rhode Island,” he said. “There’s pressure to build at the higher end in terms of price in order to make the economics work.”

McNulty sees a slow recovery for Rhode Island home building in 2011 and 2012.