Drive around Howard County long enough and it’s easy to find empty lots or vacant homes on land that once exemplified the term housing boom.

Home building has been particularly hard hit by the national recession. Credit markets are tight, and fewer people, worried about their own finances, have been willing to buy new homes.

“I think the boom was the best boom I’ve ever seen, and this downturn is certainly the worst I’ve seen,” said Richard Azrael, president of Columbia-based Chateau Builders Communities, which has been in business for more than 40 years.

For the first five months of this year, the number of residential development plans submitted in Howard County was about half of what it was in the same time period last year, said Marsha McLaughlin, director of the county’s Department of Planning and Zoning.

That statistic mirrors national numbers. In April, the lowest number of building permits were issued nationally since January 1960, when the federal government began tracking the data, according to the U.S. Department of Commerce.
 
The impact is felt beyond those in home building. County revenues that depend partly on permit fees and real estate taxes have dropped recently and people in related fields, from plumbers and electricians to mortgage company employees and Home Depot Expo staff, have lost jobs as a result of the construction downturn.

Still, some local builders and developers have begun to see glimmers of hope, and many remain optimistic that the qualities that draw people to Howard County — strong schools, proximity to Baltimore and Washington, and the general quality of life — will ensure a return to a healthy building industry.

“The fourth quarter of 2008 was just disastrous because of the collapse of the stock market,” said Russell Dickens, regional partner and vice president of Elm Street Development, a McLean, Va.-based developer with several ongoing projects in Howard County.

“This year started off a little slow ... but we’re finally seeing some traffic. We’re finally seeing some sales,” he said.

Bad year for builders

Last year was not a good one for home builders — to say the least.

The county issued the lowest number of building permits since 1979, the earliest year for which it has data, according to the county’s annual Development Monitoring System report, and county staff predict 2009 will not be much better than 2008.

In the first four months of 2009, there have been about 35 fewer permits issued for new homes than during the same period in 2008, county records show.
 
Some local builders, such as Altieri Homes and Dale Thompson Builders, have been hit especially hard, forcing them to step away from projects and prompting lawsuits from creditors.
 
When the economy was growing, industry experts said, people would sell their $350,000 home to buy a $500,000 one. The seller of the $500,000 house would turn around and purchase a $750,000 one, and so on.

That ladder has been broken in the current economy, with most of the sales occurring below $500,000, according to those in the housing industry. In a county where million-dollar listings are not unusual, that means plenty of unsold inventory, said Pat Hiban, a real estate broker with the Pat Hiban Real Estate Group at Keller Williams Crossroads in Ellicott City.

Through April, only 12 houses worth more than $1 million sold this year, compared to about 440 houses sold for less than $600,000, according to data from the Howard County Association of Realtors.

With 124 houses above $1 million on the market, it would take 41 months at the current rate to go through the inventory, Hiban said. By comparison, it would take only seven months to go through the current inventory of homes under $600,000, he said.

Lower mortgage interest rates, which now average about 4.75 percent, and a $8,000 tax credit for first-time home buyers that expires at the end of November are helping move the lower-end of the market, said Hiban, who blogs on the local real estate market. But interest rates are higher on bigger loans, and buyers face stricter scrutiny from lenders, factors that have likely led to fewer high-priced home sales.

Financing also remains difficult for builders to get and they have had to drop prices in order to sell homes, which reduces their profit, McLaughlin said. Still, the mood among those in the industry seems improved in recent months, she said.

Riding out the recession

Builders are learning to adapt to the current reality and some are finding ways to ride out the recession. Rob Dorsey, president of Dorsey Family Homes in Woodstock, said he has already sold more homes this year than in all of 2008.

“We’ve been very aggressive on our pricing. We’ve had to bring our pricing down to where the market has been,” he said. “We’re in survival mode right now, but we’re doing very well and have a plan to get through the storm.”

While its profit margin is slim or break-even, the company is still bringing in money to stay afloat, he said. Dorsey saves money by developing its own land instead of working with separate developers, and has been selling homes below the $1 million mark. Its townhouses go for around $400,000 and single family homes for under $700,000, mostly in the Ellicott City area.

“Assuming the economy is not heading further south, it’s a good time for those of us who can make it through these tough times,” said Bruce Harvey, president of Williamsburg Homes in Columbia. His company recently picked up a project from Altieri Homes and is building in the Emerson community in North Laurel, and in Sheppard Manor in Ellicott City.

Williamsburg has survived by not owning a substantial amount of land, dropping its prices as needed and not trimming its staff, which continues to make sales and bring in money. Although its overall revenue is down, the price of land and the cost of building materials has dropped, which helps the bottom line, Harvey said.

Developers and builders generally agree that home building in the western part of the county will remain slow for the time being, as there remains a high inventory of expensive homes and far too many undeveloped lots.

Compared to many places, though, Howard County seems well-positioned for an economic recovery.

“I think we’re a little bit insulated from it. I think the closer you get to D.C. probably the more inflated the prices were,” said Dickens, who has ongoing projects in North Laurel, Woodstock and Ellicott City. “We’re not overbuilt like a lot of other places.”
 
County looks to help

Howard County government has been trying to find ways to assist the industry in its recovery.

County Council member Courtney Watson co-sponsored a bill earlier this year that gives developers the option of revising their planned construction schedule for projects in light of the economy. McLaughlin said there has been interest from developers in the program, but many are holding off on applying, as they are unsure how long it will take for the market to recover.

In the meantime, her department has been understanding in granting six-month extensions, McLaughlin said.

The county also had to adjust its housing allocation system, a program that controls growth in the county by limiting the number of new units that can be built in any one place each year. McLaughlin said the department is spreading out unused allocations over future years to reflect the current slowdown in construction.

Under the housing allocation chart to be considered by the County Council in June, nearly 2,500 homes can be built in 2012, an increase of more than 300 units over what was previously approved for the year.

County Executive Kenneth Ulman said he is hopeful that the Base Realignment and Closure process at nearby Fort Meade will bring new residents to the county.

“People are still buying homes. There are some good values out there,” Ulman said. “We’ll get through it.”

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