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A new reality: Developers ease on the brakes of building in Loudoun County
A couple of years ago, as you drove through Loudoun, you would pass several new communities under construction.
During meetings, the Board of Supervisors and Planning Commission would review large packets of rezoning requests from developers asking for permission to build more homes. Real estate ads were in the newspapers, on the sides of the roads and on TV, luring potential owners to purchase luxury property.
Today, the slow real estate market has changed the face of development in Loudoun. Some developers are still building. Some have cut back. And others have gone out of business.
“It is pretty bad out there, and I'm not sure we've seen the worst of it,” said Hobie Mitchel, a developer in the area since the 1980s. Mitchel's current project is the Lansdowne community, which he said has been selling well even in the slow market.
“This is a weird time in the sense that consumer confidence is down,” Mitchel said. “To make it, you need true grit.”
He added that in the meantime, there will be some developers that close shop, which is the case for Equity Homes, a Fairfax-based developer of communities in western Loudoun.
A call to the Equity Homes sales office at the Chestnut Hills community in Purcellville was answered by Ray Yancey, trustee of Equity Homes' properties in the county. A trustee holds legal title to property when a company cannot pay for it.
Yancey said Equity Homes turned over more than 25 homes to him on March 11 because “Equity Homes is out of business.”
Yancey said he isn't worried about selling the houses during the housing crunch because he will “price the homes aggressively.”
Another developer has not completely dissolved but has pulled out of the area.
In the beginning of March, KB Home announced it would leave the mid-Atlantic region.
“The mid-Atlantic region is one of our smaller, newer markets,” said Lindsay Stephenson, director of corporate communication with KB Home. “It was a difficult decision, but we have more efficient profitability in other markets [such as the Carolinas and Texas].
KB Home, which was building in the Martin's Chase community in Leesburg, will finish the homes that are under construction, said Stephenson, and the company will continue to offer a 10-year warranty and customer service.
While Equity Homes has shut down and KB Home is leaving the area, Oakridge Communities, a Hamilton-based developer, is cutting back but continues to build.
“We have skinnied down the company,” said Oakridge Communities owner Mike Gorman. “There is no question the market is slow, but we'll just have to see how it pans out.”
Gorman said that of the two areas in which he is building – Hamilton and Ashburn – he is seeing people purchasing homes; he just has to price them right.
He even mentioned that recently he actually had two customers in a bidding war for a home.
Hobie Mitchel, developer of Lansdowne, agreed there is still consumer demand but there is a lot of inventory to choose from.
“The resale market is big now and that affects builders,” Mitchel said.
He also shed some light on the positive of this market for developers.
“I haven't seen a huge price tag on raw ground,” he said. “I don't have [any developments] in the hopper that I am willing to propose [to the Board of Supervisors], but I am looking all over for other opportunities.”
The future of development in the county is uncertain but the market is going to come back, according to Ray Yancey.
“This gives the county an opportunity to breathe,” said Christine Windle, public policy director at Dulles Area Association of Realtors Inc.
Todd Kaufman, Loudoun County assessor, said the decline can be seen in the decrease of investment by developers and builders on new construction and growth.
New construction has “definitely diminished” and there has been a drop of “more than 100 percent” in spending, Kaufman said.
In 2005, developers and builders spent $4.64 billion, compared to the $2.05 billion spent in 2007.
Kaufman did add that the real estate market has begun to stabilize.
If developers watch their costs and overhead, according to Mitchel, they should do OK.
Bill May, president of Miller and Smith, developer of One Loudoun, is hoping his building timeline works in conjunction with the market turning around.
May said he is not worried about being able to sell any of the 1,040 residential units and filling the 3.5-million-plus square feet of office and retail space to be built at the intersection of Route 7 and Loudoun County Parkway.
“The good news is that our timing is excellent. We are getting the infrastructure in 2008 and the vertical construction in 2009/2010,” May said. “But I'm happy to not have houses for sale now.”
Contact the reporter at lwolstenholme@timespapers.com
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