🔒In Vegas, CT homebuilders sort through industry headwinds, opportunities

Choices. Choices. Choices.

When more than 70 members of the Home Builders & Remodelers Association of Central Connecticut made the 2,500-mile trip to the recent International Builders Showcase in Las Vegas, they came to learn and be challenged.

Mission accomplished.

As they made their way earlier this year across 2.5 million square feet of exhibition space, natural gas vs. electric was the most discussed topic. But there were choices everywhere in the form of new tools and roofing materials, new moldings and cultured stone, and new designs, appliances and lighting.

As they made their way to the educational classes and strategy seminars, Connecticut homebuilders in attendance wrestled with the economics of the day and the impacts on their businesses. Is the sky really falling, or talk of recession overblown?

Is shifting into the still-hot multifamily sector worthwhile, or is it too late? Is build-to-rent a strategy to explore? Is affordable housing still realistic?

In a sea of 107,000 people from around the world, the answers are intensely personal and shaped by local conditions.

For Matt Gilchrist, principal of Southbury-based EG Home LLC, the choice is to stay the course.

“I’m a single-family homebuilder. That’s who I am,” he said.

Gilchrist has been building homes for a decade and is hard at work on two communities — Chatfield Farms, a 55-plus community of single-family homes in Beacon Falls, and The Reserve at Stonebridge Crossing, a 140-unit townhouse community in Cheshire.

His 21 employees seldom pick up a tool. The core of their operation is a state-of-the-art home design center. They also handle marketing and administrative functions while leaving the building to subcontractors, many of whom have been with Gilchrist since the firm began.

Yes, inflation and interest rates are concerns and erode buying power. He acknowledged a flirtation with helping consumers buy down rates but he’s backed away from the idea.

“My people aren’t mortgage brokers,” he said.

Instead, he’s adopted a market-driven approach.

“I am not apologetic about price,” he said. “Some who set out to buy a $1-million house will have to settle for an $800,000 house.”

And there are good $800,000 houses available, he added, pointing to his portfolio.

That approach is working. Gilchrist said he sold nine homes from Christmas to the end of January, and he expects 2023 to be a good year.

Connecticut’s single-family housing market overall remains competitive, with limited inventory leading to higher prices and lower sales.

Inventory of for-sale homes in Greater Hartford was down 24.8% in January, to just 545 available dwellings, according to the Greater Hartford Association of Realtors.

The number of closed sales that month was down 22.4%, while the median sales price grew 10.8% to $318,000, according to GHAR data.

Affordable housing

There’s a similar story unfolding in a different sector of the business and different Connecticut market.

Greg Chandler, owner of Gold Shield Construction in Berlin, is a remodeler. He reports being busy with in-law apartments and remodeling work for empty nesters.

Most of it is cash work, often financed with home equity, he said. Yes, those rates are higher than they were a year ago but most of these homeowners are old enough to recall double-digit mortgage rates.

They have the equity now; they have the need now. Why wait?

Greg Ugalde of Torrington brings a national perspective and a longer view. He’s a former chairman of the National Association of Home Builders — the only one ever from New England. And he sees dark clouds on the horizon that transcend the short-term blips in the economy.

Top of mind for him is the impact of regulations and fees on home prices. National data finds regulation and fees add 24% to the cost of a single-family home and 41% to the cost of a multifamily project.

Interest rates get more public attention but regulations and fees have a larger impact on the total price.

And there’s no fix in sight. That means in a state like Connecticut, affordable housing is a challenging concept, unless government subsidies are involved, which will inevitably bring more regulations and fees.

Some financial help for Connecticut multifamily builders and developers could be on the way.

In his proposed $50.5 billion budget, Gov. Ned Lamont outlined plans to double the state’s annual investment in affordable housing over two years to $600 million. That includes investing $200 million in workforce housing, with an overall goal of incentivizing developers to build 6,400 housing units in the next two years.

But then there’s the matter of the long-term labor shortage.

A briefing during the convention set the number of vacant construction jobs at 388,000. And there’s no relief in sight.

Construction jobs have historically provided steady work and good pay. But the next generation is saying “no thanks.”

Connecticut reported 62,200 construction jobs at the end of December. The industry has regained all the jobs it lost during the peak of the pandemic in 2020, but it’s thousands of jobs below where it was prior to the Great Recession of 2008-09.

Ugalde acknowledges that more can be done to explain and market a career in construction. And some allowance for skilled immigrant labor could help too.