Survey indicates a small drop in NU home sales

Sales in 14 selected new urban pro-jects cooled off by 4.5 percent in 2001, after they rose 34 percent in 2000. After a year characterized by tur- moil, uncertainty, and low interest rates, the picture emerging from New Urban News’ annual survey of home sales is decidedly more mixed than in 2000 (See details in the table on page 6). Six of the 14 projects experienced a drop in sales, while four picked up activity and three remained essentially the same (we were unable to get current figures from one project). Nationally, a record 900,000 new single-family homes were sold in 2001, a 2.6 percent increase over 2000. The South and Midwest posted strong gains, while sales dipped in the Northeast and West. New Urban News’ survey is a selected sample and may not be representative of the industry as a whole. Yet, the results, coupled with interviews with developers, indicate interesting trends within the industry. Two of the projects, for instance, are located in slumping high-tech areas and suffered the biggest sales drops. High-tech woes Orenco Station, the transit-oriented development in Hillsboro, Oregon, sold an average of 10.8 units/month between 1997 and 2000, but in 2001, the rate dropped to 5.3 units/month. Computer chip manufacturer Intel is a major employer in the area —one in three Orenco residents are Intel employees — and the industry-wide downturn had a noticeable effect on Orenco’s absorption rate, especially in the high-end live/work units. At the same time, the project is approaching sellout of several detached and attached product lines. “Despite the tech woes, the community has appreciated significantly over the year, reflected in the higher prices our best units are still commanding,” says developer Mike Mehaffy of PacTrust. The effects of the ailing technology industry and rising unemployment rates were also evident in Longmont, Colorado, where Prospect saw a 37 percent drop in the number of closings. Prospect, and to a lesser degree Orenco Station, had not maintained a great diversity of home prices and were hurt when the market dropped. “Right now in Colorado, it’s the $150,000 to $200,000 homes that are selling,” sales manager Linda Keseric says, but single-family homes in Prospect begin at $480,000. In an effort to reach a new market segment, the developer is building 18 live/work units in which builders will sell the residential floors as condominiums priced in the $200,000s. In Orenco Station, PacTrust recently opened a line of lofts located above a new grocery store, with most of the units priced in the low $100,000 range, and sales showed a marked improvement in the first months of 2002. Low interest rates have made lofts and condominiums more attractive, but at the expense of rental apartments, where the occupancy rate dropped to 90 percent from 99 percent in 2000. Slow urbanism The number of closed contracts alone, however, cannot give the full picture of success in a new urban project. The developer is not just selling homes and square footage, but the entire neighborhood also. Time is the crucial factor in place making, and for developers of small communities in particular, a temporary dip in sales need not spell catastrophe. Vermillion in Huntersville, North Carolina, is a case in point. Measured exclusively by the number of sales, this was not a good year for developer Nate Bowman — he closed 73 sales in 2000, but in 2001, the number dropped to 22. His competition is getting shrewder, developers have learned to build a watered-down version of New Urbanism, and they can undercut Bowman’s prices. No matter, says Bowman, who continually tries to move his project forward. Not only is he retooling his product line, he is also incubating a school, building and running a restaurant on the town square, and helping a church establish itself. In a reference to the European slow food movement, Bowman says he’s become a proponent of “slow urbanism.” A new urban project can survive taking a slow approach, creating “third places” and building value, instead of thinking only about absorption. “While this may be a good rationalization for a slow year, it is also very true,” he says. The increasing value is evident in the appreciation of home prices; many townhomes were resold in 2001 and the prices have increased by $25,000 to $30,000. Similar patience was required in Habersham, a slow-growing community in South Carolina. Developer Robert Turner closed 41 sales in 2001, a sign that the project has reached the tipping point and can look forward to rolling down the slope after a long uphill climb. For the first time, buyers can find spec homes available for immediate purchase, and builders are eager to get a piece of the project. “And now they are willing to do what we ask them,” Turner notes. Habersham, too, has seen significant appreciation — one home built for $180,000 sold for $240,000 last year and another climbed from $140,000 to $219,000 — and Turner can afford to sell only as much as he needs. “You may have set a goal of selling 50 lots a year, but if you can sell 30 lots and make the same return, that’s better,” he says. “You will be in the project longer, but the premiums are bigger.” Middleton Hills is another project that has hit its stride in a relatively small market. Project Manager Paul Brunsell notes that any project selling more than 25 homes a year is doing well in Madison — in 2001, Middleton Hills had its best year so far, selling 54 single-family and townhouse lots, a 50-percent rise over 2000. “Builder participation has made all the difference,” Brunsell says. “They were very wary at first, but once they see that others are doing good business here, they come on board.” This despite the fact that the per-square-foot lot prices are among the highest in the area. Growing demand has led Middleton Hills to release larger lots — up to 80 by 100 feet. Negotiations are underway to add 56 condominiums on a two-acre site. “That’s a rare sight in the Madison suburbs,” Brunsell says. Sales leaders The large-scale, new urban projects that have led the sales survey in previous years continue to do well. Located in markets where the recession did not bite, Florida projects Abacoa and Celebration both sold more than 300 homes — on par with the rate from 2001. In fact, fiscal year 2001 was the most successful in Celebration’s history, with more than $100 million in sales. In Calgary, Alberta, McKenzie Towne improved on its already strong performance and closed 473 sales. Ironically, the increase follows the developer’s decision to scale back the new urban plan, based on the contention that the market for homes in traditional neighborhoods was too small. Cornell, another prominent Canadian project located in Markham, Ontario, sold at least 132 homes last year, but the project is in a state of limbo at the moment. Law Development, the original developer, is out, and its overseas partners are dividing the land into four separate holdings. Only one builder is currently working in the community. The City of Markham, with assistance from Cornell’s town planner Andres Duany, is working with the new owners to ensure that the original principles and density goals stay on course in future phases. “This was a government project and they tend to be idealistic,” says Markham planner Scott Heaslip. “Cornell has now hit the private market head on, and this step back is very frustrating because we have already passed through the hard part.” Move-up market Nevertheless, Heaslip says, Cornell is one of a few new communities with a distinct identity where residents have a real commitment to the community. “I have never seen anywhere else where people move within the neighborhood when they want a bigger house,” he adds. Interviews with developers reveal that the same trend is evident in Celebration, Habersham, Middleton Hills, and in Abacoa, where residents have bought many of the new custom homes coming on the market. In Northwest Landing in Washington state, the value of creating a strong sense of community is reflected in the fact that 35-40 percent of sales are generated through referrals from residents, according to Christine Hall of developer Quadrant Corp. u