19 Sep Demand for new suburban housing grows amid pandemic concerns
The coronavirus crisis curtailed the U.S. spring home-buying season, enjoying a revival this summer as consumer confidence returned. Locally, builders are seeing a rising demand for suburban housing, due to low interest rates and companies allowing employees to work remotely.
Petros Homes, a custom builder based in Broadview Heights, puts up around 75 homes annually in four counties — Cuyahoga, Lorain, Medina and Summit — in Northeast Ohio. The virus threat shut down operations for six to eight weeks. But thanks to tight regional inventory and attractive interest rates, the company’s suburban construction side is steadily recovering.
“The fundamentals are still there, or they got better,” said Petros Homes president Gary Naim. “People looking for homes can’t find inventory from a resale standpoint, so they’re being driven by new construction.”
Office work shifting from commercial business districts to homes is leveraging the market, at least from an anecdotal standpoint, Naim said. Hours stuck inside during spring quarantine highlighted the need for larger home workspaces, or more room for remotely learning children. Interest rates at 3% sealed the deal for many of Petros’ newer clients.
“There was a shock to the system initially, with a lot of unknowns,” Naim said. “Once people got a handle on what this (virus) was about and how they could work through it, they were back out.”
Petros is partnering with younger customers relocating from urban areas to lower-density markets, mirroring a mounting national call for single-family homes in rural areas and large metro suburbs. Socialization in downtown bars and restaurants is now taking place on porches or in backyards, inspiring millennial buyers to build equity rather than dump money into monthly rent.
Andrew Gotlieb, business development director of Keystate Homes in Pepper Pike, said the pandemic is changing the urban-living adage that views the city itself as one big social space.
“People will say, ‘Why don’t I have a bigger home compared to people renting in downtown Cleveland and worried about touching the elevator button,” Gotlieb said. “They’re looking to move into a custom home on big acreage.”
Per Commerce Department data, U.S. housing starts jumped 12.3% in August to a seasonally adjusted rate of 1.364 million units, the highest level since June 2007. Single-family homebuilding increased by 4.4%, while multifamily housing swelled 32.8% to a rate of 445,000 units.
Payne & Payne, a family-owned design and build firm in Chardon, constructs 50 homes yearly throughout Cuyahoga, Geauga, Lake, Portage and Medina counties. The company remained steady during the pandemic’s early days, finishing projects already slated to begin in March and April. Payne’s client portfolio grew further in May amid Ohio’s stay-at-home order.
“People saw they didn’t have enough space to work comfortably from home — that’s where we saw those needs change,” said vice president Mark Verdova. “A couple projects were delayed, but the majority went forward at the same pace. That made our year for us.”
Even for families staying put, Payne has bagged added business on its home renovation side. Exterior projects, including decks and screened-in porches, are as popular as new home offices, gyms and other interior endeavors. Verdova did not expect such optimism in an uncertain economy, but he’s happy to have been mistaken.
“It was surprising to see homeowners looking at the long game and having that foresight,” Verdova said.
Owners are searching for properties on wider swaths of land, with these transactions largely taking place via teleconference. Payne & Payne has an in-house design center, making it easier to show customers tile or paint selections alongside siding, stone or trim. Although virus-related work stoppages have delayed acquisition of certain items and materials, the company solved that issue by ordering ahead of time.
“For cabinets, we’ll pick them up front while digging your foundation,” Verdova said. “That makes our partnerships with suppliers valuable. If we were constantly trying to get new guys here and there, it probably would be hurting us right now.”
Keystate, a custom suburban builder launched in 1979 by Andrew Gotlieb’s parents, Mina and Avner, is busy building high-end custom residences in Cleveland’s eastern and western suburbs. In the meantime, the firm is adding luxury amenities such as movie theaters, golf simulators and indoor pools to existing homes.
“People are at home more and thinking of ways to entertain in their own house,” Gotlieb said. “They might put stadium seating in a movie theater with a small arcade. That’s spilling over from mega-mansions to a little bit more humble of a home with a 2,000-square-foot basement.”
Though the local suburban housing market has improved, lack of new land on which to build is preventing the sector from truly soaring, Gotlieb said. Lumber prices, now at a two-year high, are another impediment for would-be homeowners, while new virus hot spots could lead to additional lockdowns and economy-deadening unemployment.
Still, area builders have reasons to be bullish about a sector that’s done more than just survive the storm thus far.
“The best way to say it is we went from uncertainty to certainty pretty quickly,” said Naim of Petros Homes. “That’s great for people, and great for the economy.”