A banner year for NU home sales

Riding the crest of a strong economy, projects in New Urban News’ latest annual survey sell nearly twice as many homes as in 1999. With the stock market in a tailspin and housing starts in decline nationally, there is room for concern that the downturn in the economy will affect the rate of sales in new urbanist communities in the coming years. But almost all the 15 projects that took part in New Urban News’ second annual survey of homes sales entered 2001 with a strong record of sales for the past year. Keeping in mind that sales figures are tabulated in various ways across the projects, and that the dynamics of local markets differ greatly, the survey does provide a snapshot of the demand for new urbanist housing. In the 12 projects where sales were up from 1999, the average increase amounted to 47 percent (see table on page 4). Sales leaders were largely the same projects as in last year’s survey. They include Lakelands in Gaithersburg, Maryland, where 415 homes were sold, and the Florida communities of Abacoa and Celebration, which sold 350 and 317 homes respectively. McKenzie Towne in Calgary, Alberta, another town-scale project, sold 370 homes, up from 230 in 1999. Several smaller projects saw healthy increases as well. Home sales more than tripled in South Carolina’s Habersham and Colorado’s Prospect, and momentum picked up Middleton Hills in Wisconsin and in River Ranch in Louisiana, both of which sold close to twice as many homes as in 1999. Across the board, the surveyed projects sold 2,235 homes in 2000, up 34 percent from the 1,460 sales counted in 1999. Only two communities experienced a drop in sales. Cornell in Markham, Ontario, is located in a market where new urbanist and hybrid projects are going up on the entire periphery of this suburb of Toronto. The increased competition has hurt the sales of Law Development, the main developer. The number of homes sold dropped from 60 in 1999 to 30 in 2000. In Park DuValle in Louisville, Kentucky, the first phase of construction was completed in 2000, and additional land for building is only slowly becoming available. Jennifer Head of the Real Estate Development Corp. explains that many buyers want to option homes, but Park DuValle has put the brakes on for the time being. “We don’t want to get ahead of ourselves in the next phase and get caught in the situation where people have already taken out loans and then can’t get going because the land is not available,” Head says. Rental apartments in the Hope VI redevelopment are much sought after. Currently 213 units are built and occupied, and close to 4,000 people are on a waiting list to get into future units. The survey suggests that new urbanist projects offer a wider diversity of housing types as they mature. The total number of rental apartment in the selected communities increased from approximately 2,500 to 3,800 in the past year. Abacoa’s growing town center added 206 units, Celebration built 600, and apartment construction also took off in Lakelands and Prospect. Base monthly rents range from $400 in Park DuValle to $1,500 in Lakelands, and at the high end some units in Addison Circle near Dallas rent for $2,400. Appreciation It is not unusual for popular new urbanist projects to experience rapid appreciation, and in many of the selected projects, prices have soared. This is evident even in the most affordable communities. The base price for a single-family home in Park DuValle, for example, jumped from $75,000 to $90,000 during the past year. In Prospect, homes sold for about $125/square foot three years ago, but according to developer Kiki Wallace, new homes are priced at $200-$210/square foot. “Our prices are the highest in the market, but everything sells — the more expensive homes before the cheaper townhomes,” Wallace says. Sales Manager Linda Keseric maintains that a greater diversity in styles and housing types — a result of Prospect’s embrace of modern architecture and live/work units — have clearly contributed to the rise in sales. Gauging how much the appreciation has to do with the new urbanist nature of these communities is a difficult proposition. Steve Eckert of the Classic Community Corp., the developer of Lakelands, ascribes a rapid rise in prices to the scarcity of supply in the local market rather than the design of the neighborhoods. Base prices for single family homes have increased more than $40,000 since last year’s survey. For Eckert and his builders, the strong demand in combination with small lots have revealed some drawbacks to building a traditional neighborhood. Little room is left to store materials and equipment, so the impact of construction is more severe than in a conventional subdivision, Eckert says. “Right now Lakelands is a nightmare, a war zone.” Lakelands is not about to slow the pace, however. “It would be bad business not to try to maximize the production when the market is so favorable,” Eckert says. Habersham’s developer Bob Turner notes that construction costs have gone up, but believes that the quality of the neighborhood is primarily responsible for the appreciation in the project. Marsh lots with the most attractive views have gone from $50,000 to $160,000 in two years, Turner says. One home has appreciated from $235,000 to $277,000 in one year. “We’re trying not to let it get out of hand,” Turner says, “we want to keep the below $200,000 market. We are trying to get more diverse groups of people into the community, more families.” The key is to balance the absorption rate and the prices, he says. With a projected buildout of a decade or more, a developer could theoretically double the prices of the lots and make the same money in half the time, Turner notes, but that could severely cut the absorption rate. “I find that with every one of these developments, you have a long uphill climb, and then as you get critical mass, you start rolling down the hill,” he says. If the economic expansion of the past 10 years is in fact drawing to a close, new urbanist communities face a momentous test. Will pedestrian-oriented communities stay competitive in a time of leaner investment portfolios? The fortunes of Orenco Station in Hillsboro, Oregon, for example, have been closely tied to those of neighboring chip manufacturer Intel. Sales dipped briefly last spring when the company’s stock prices fell. But Orenco Station braved the first storm, and sales this year remain strong. Mike Mehaffy of developer PacTrust predicts that the project can keep attracting buyers with a broad choice of housing types and home prices that begin at $89,000 for a condominium.