Homebuilding slows, forcing companies to cut jobs

Thursday, Aug. 17, 2006

Homebuilders have not had to work hard to sell houses in Frederick County — until now.

A previously booming industry is laying off workers, offering cheaper upgrades and advertising heavily.

Dan Ryan Homes has been in business in Frederick County for 16 years and was named when one of the Top 100 builders. The company recently laid off about 20 percent of its 200 employees and, for the first time ever, is depending on advertising to attract homebuyers.

In June, Dan Ryan Homes had four sales. A new advertising campaign paid off with 78 sales in July, said Cheryl Kostreski, marketing manager.

‘‘In the building industry it used to be that we were more or less order takers, now we are reaching out, advertising our experience and value,” she said.

Other major homebuilders are also laying off workers, said Brian Patchen, director of the Frederick County Builders Association. ‘‘Builders had been building at full capacity and the layoffs are obviously a reflection that they are not at full capacity anymore,” he said. ‘‘They can’t afford to carry extra employees.”

State employment statistics, however, show a drop of just 0.8 percent in the construction industry between June 2005 and June 2006. The number does not reflect what is happening in the homebuilding industry, Patchen said, because commercial building is still going strong.

The decline in homebuilding began in the winter, industry experts said, when interest rates began climbing. The number of houses for sale in Frederick County more than quadrupled this year compared to last summer. In June 2005, 375 homes were on the market; this June, 1,690 homes were available.

‘‘We knew it was going to happen,” Kostreski said. ‘‘It has been too pretty for too long.”

The dip is part of a natural ebb and flow of the housing industry, she said.

Prices are not dropping dramatically, but there are advantages for new homebuyers. Gone are the long waits for a new home to be built, and homebuilders are advertising incentives they would not have considered offering before.

Patchen estimates that buyers waited nine months or longer for a new home, particularly in subdivisions. Help with closing costs is one incentive builders are putting on the table. Upgrades and options are another.

‘‘Upgrades in the kitchen are very popular. Buyers can add granite marble countertops, upgraded cabinets and appliances at significantly reduced prices. They can get their basements finished into family or rec rooms,” he said.

Patchen said the decline in sales is ‘‘a temporary blip,” and expects the market to march upwards again eventually.

Kostreski predicts the downturn will continue at least through the first quarter of 2007. ‘‘We are all hoping to see a great spring in 2007,” she said.

Consumer confidence is not shaken because landowners are still moving forward with residential subdivision plans, said Chris Smariga, project manager with Harris and Smariga, a Frederick surveying, planning and engineering firm. His company is involved in development, a lengthy process that proceeds construction. Smariga estimates that doing the necessary preparation work for a subdivision can take between two to four years, with larger developments phased in over 10 to 15 years.

‘‘We are in the optimistic end of the business here. Everyone is a little concerned about the uncertainty of the industry, but at the same time, there is a great opportunity to move things ahead because Frederick is still a popular place to live,” he said.