Construction, housing market growth signal local economic health

An architectural rendering of what the new Plaza on West Main, a student-oriented housing complex, could look like, as viewed from a few blocks west of the Amtrak station. Image courtesy of Riverbend Management. An architectural rendering of what the new Plaza on West Main, a student-oriented housing complex, could look like, as viewed from a few blocks west of the Amtrak station. Image courtesy of Riverbend Management.

When it comes to the local economy, the good omens are stacking up.

Recent analyses from the city and an area realtor’s association show that total construction value in the city reached an all-time high in 2012, and the volume and value of home sales is showing sustained growth. And while market watchers are hesitant to crow about broad economic recovery, they say there’s plenty of reason for optimism.

Total construction value in Charlottesville was more than $211 million in 2012. That’s not just a massive jump from 2010, when the economic downturn was squeezing Charlottesville hardest and pushing the value of development to a decade-low of $60 million. It’s the highest annual total construction value in the city’s history, 60 percent higher than in 2008, the last year before the recession torpedoed local growth. The growth in development here in the last year significantly exceeds the rate of growth across the country, according to Census Bureau data.

The number of construction plans reviewed also saw an increase in 2012, as did the number of construction inspections. Both those numbers had been falling steadily since 2007.

All of this is good news for the city, which took in more than $940,000 in construction permit fees last year—an all-time high and almost double what it collected in 2011.

Charlottesville Director of Neighborhood Services Jim Tolbert said a portion of the new construction is commercial—the rehabbing of the old Martha Jefferson Hospital by the CFA Institute is contributing to the increase in total value, as are projects at UVA, which are funded by the UVA Foundation and thus rolled into the city’s construction reports.

But “the vast majority”—perhaps 70 percent—is residential, Tolbert said. And if the growth in the housing market is any indication, there should be plenty of demand for new units when they come online.

“We’ve had nine straight quarters of improvement in volume and pricing,” said Charlottesville Area Association of Realtors (CAAR) President Denise Ramey. Most market watchers are hesitant to shout about a turnaround after even a year of upward-trending numbers, she said, “but we finally feel comfortable saying we’re in a sustained recovery.”

Other key numbers are trending up, too. The number of pending sales going into the second half of the year—usually a slower time for the real estate market here than the first and second quarters—is a marker of strength, “and the fact that we’ve got pending sales in the four-digit numbers going into the third quarter for the first time in five years is a very good sign,” she said.

While CAAR currently doesn’t track and analyze new home sales as a subset of the total market, Ramey said her sense from watching the numbers is that there are positive trends in that sector as well. In some newer neighborhoods, like Old Trail in Crozet, new home sales are far outpacing resales.

Another noteworthy construction-related indicator: Developers have started adjusting list prices while homes are being built to cover increases in construction costs, said Ramey. That’s a change from recent years, when they typically ate their losses rather than up initial estimates for new houses, “because the market wouldn’t have supported it,” she said.

The picture isn’t so rosy everywhere. “Some of the national homebuilders’ stocks actually fell a little bit when they reported their second-quarter earnings,” Ramey said, because their sales weren’t as strong as predicted. “It looks like we’re not seeing the same thing here.”

It’s hard to say why the area seems to be skipping over post-recession growing pains when it comes to new homes, she said, but it might be the absence of those national homebuilders, who are watching national trends. Locally based builders dominate our market, she pointed out, and “they are closer to the ground and better able to respond when they see market trends.”

So what exactly is fueling everybody’s newfound confidence? Digging a little deeper into the Neighborhood Development Services report offers some clues. Two parties are responsible for a big share of the new construction value: UVA, where the 200,000-square-foot Batten Building is underway, along with numerous other projects; and Coran Capshaw, responsible for the Plaza on West Main and City Walk, two of the biggest planned residential buildings in the city.

These were big projects that had been approved pre-recession, Tolbert said, but put on hold when the economy took a nosedive. What we’re seeing now is the physical manifestation of the restored confidence of a few big players—big enough that their projects are pulling the whole area’s numbers up.

Tolbert said he expects to see that confidence snowball and expand to other aspects of the local economy as demand for new housing—especially near the University—continues to increase.

“The growth in students is fueling some of the housing construction, and it also fuels some of the investment,” he said. “If I own a property or a business on West Main Street right now, with the Plaza going in and a couple of things on Wertland, I’m going to feel a lot better about investing in my other properties.”

As for whether the new builds and the upswing in the overall housing market are indicators of a broader recovery, Ramey and Tolbert exercised some caution.

“As soon as we say that, something might happen to push things southward,” Ramey said. “But we’re optimistic.”

And to an extent, the numbers speak for themselves.

“People would not be investing their private dollars if they didn’t see more opportunities coming,” said Tolbert.

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