For homebuilders in Greater Cleveland, 2020 was a blockbuster year. The outlook for 2021 is even better.
"It has been absolutely crazy for the last month," said Mike Kandra, president of the Home Builders Association of Greater Cleveland. "New construction is kind of what people are heading toward, simply because there's no supply of existing homes."
Scant listings and ferocious buyer demand are promising to buoy new construction into 2022 and beyond. Local builders say they're barely able to keep up in an industry that's still a fraction of what it was before the Great Recession of 2007 to 2009.
In the Cleveland metropolitan area, construction permits for new single-family homes rose by 7.5% last year, according to preliminary data from the U.S. Census Bureau. But annual permits still are down more than 50% from the early 2000s. And builders say they're contending with escalating costs, scarce land and labor shortages, along with some pandemic-induced hiccups.
"If I could have 200 units in the ground tomorrow, I think that the majority of them could be absorbed if they were in the proper neighborhoods and proper price points," said Bo Knez, the owner of Knez Homes in Painesville.
Last year, Knez sold close to 100 homes in Cleveland and the suburbs.
The company is on track to complete a similar number of houses this year but has dramatically ramped up its efforts to develop land for other builders. Demand from both local and national builders surged in early 2020, said Knez, who estimated that he has 500 to 600 lots in the pipeline from Brunswick to Akron to Perry.
"I think we have a good run ahead of us," he said, citing the movement of millennials, in their 20s and 30s, into the first-time buyer market and demand from move-up buyers looking to downsize.
In Cleveland's Fairfax neighborhood, just south of the Cleveland Clinic's main campus, Knez has tied up more than 60 lots to build single-family homes. The first house will be complete in mid-March, and buyers have agreed to pay about $300,000 each for the first five. The houses carry 15 years of property-tax abatement, so owners will only pay taxes on the land.
"We don't have any finished product anywhere in the city of Cleveland that's not sold," Knez said.
Chardon-based Payne & Payne, a family-owned builder that offers in-house design services, is preparing for a record year. In 2020, the company sold 38 homes. The firm's average project costs $750,000 to $1 million.
Mark Verdova, vice president of Payne & Payne Builders, said buyers have shifted away from open floor plans in favor of creating "away spaces," such as home offices. They're focused on outdoor living areas as well, such as screened-in porches and decks. Verdova predicts that those design features will have staying power long beyond the pandemic as remote work grows.
At Edgewood Homes in North Royalton, Kandra has seen a shift to ranches, a preference for first-floor master suites and more spending on upgrades. His company builds in the suburbs south of Cleveland at prices of $600,000 to upward of $1 million.
Edgewood sold five homes last year and already has six on the books for 2021.
Kandra and other builders are anxiously watching the costs of construction materials rise. So far, skyrocketing lumber prices — which hit a record high in February — aren't dissuading buyers.
"It's really difficult to price homes out," Kandra said, citing a recent project where lumber price fluctuations added 3.6% to the total cost of a home. "We're fighting through it. People don't balk at it too much because it's cheap to borrow money. There's a counterbalance."
He's also still grappling with supply chain disruptions that make it difficult to get garage doors, appliances and other materials on time.
"I don't know when people are going to be able to catch up," Kandra said. "Maybe when housing slows down a bit."
But nobody's expecting that to happen anytime soon. "Hopefully," Verdova said, "we have another three to five years of a really booming homebuilding market."
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February 27, 2021 at 04:00PM
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Homebuilders in Greater Cleveland were busy in 2020, and 2021 looks even better - Crain's Cleveland Business
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