- Home Permits In The Basement

The Good News: Cutbacks By Builders Mean Less Inventory Is Left Over
By ROBIN STANSBURY
Tuesday, February 19, 2008

Permits for new housing construction plummeted throughout most of Connecticut in 2007, marking the fewest permits issued in more than a decade, according to a state report released Monday.
But some experts said the drop contains some good news: Builders apparently cut back their construction plans as the housing market slowed, meaning the inventory of unsold houses is lower in Connecticut than it might be.
There were 6,619 housing permits issued in 128 Connecticut towns last year, a 17 percent drop compared to the almost 8,000 permits issued in 2006, according to the report from the state Department of Economic and Community Development.
The permits are issued for all new residential home construction, including single-family houses, apartments and condominiums.
The number of permits issued has not been lower for the 128-town region surveyed by the U.S. Census since 1996, when 6,582 were issued. The number of permits issued for all 169 Connecticut towns is not expected until May.
"With the credit crunch, the economy on the way to recession, soaring energy prices — all of this combined following a boom of several years resulted in this correction," said Kolie Sun, a senior research analyst for the state. "It's a very low number and not a good sign about the overall housing market."
Some housing experts said the drop in the number of houses being built — permits issued are down 35 percent since 2005, when more than 10,000 permits were issued — could indicate an impending housing recovery. It usually takes about nine months from the time a permit is issued until a house is built.
"The good news is builders cut back early. They saw the slowdown and wisely cut themselves back," said Ron Van Winkle, a West Hartford economist. "It's a good sign for the market because it says there isn't going to be a lot of inventory to sell off — certainly not as many homes on the market as there could be."
Permits varied widely by town. In Manchester, 326 permits were issued in 2007, an increase of 63 percent compared to 2006.
In Farmington, there were only 53 permits last year, a decrease of 48 percent. Stamford permits jumped by 87 percent, from 273 in 2006 to 512 last year.
In Hartford, permits dropped 62 percent, from 312 to 116.
Bill Ferrigno, president of the Home Builders Association of Connecticut, said that builders are simply responding to the market.
"We are building at a rate that is sustainable for the economy we're in," he said. "In the old days it was build, build, build. Now a lot of us are responding as we should."
Those "old days" were the boom years of the 1980s, when Connecticut's housing market was soaring and prices increased statewide by 25 percent two years in a row. Then, more than 20,000 permits for new construction were issued in one year, many built on speculation without a buyer lined up.
Following the crash in the early 1990s, new home construction came to a virtual halt. In Bridgeport, for example, only one residential building permit was issued in the first three months of 1991. In 1986, 633 had been issued.
"Builders are far more cautious. Even if you pull a building permit builders are cautious about starting construction," Greg Ugalde, president of Torrington-based T&M Building Co., said Monday.
Ugalde said his company has six subdivisions under construction, in Bloomfield, Ellington, Colchester, East Granby, Windsor Locks and Torrington, but plans to build between 15 percent and 20 percent fewer homes in 2008 than last year.
"We're still signing contracts, but not at the pace of those record years in 2004 or 2005," he said. "We are better off than most parts of the country, without a doubt, but we are influenced by that."
Ferrigno, however, who owns Sunlight Construction in Avon, said he plans to build more this year. He has two projects under construction, a modestly priced active-adult community in East Hartford and a 14-unit luxury development in Avon with homes priced between $1.5 million and $2 million. He even plans to build two spec houses there before he has buyers.
"I think there's pent-up demand," Ferrigno said. "In the past two months we've talked to more people than in the last four months before that. Are they more cautious? Yes. They are seeking more options. But we're planning on 25 percent more