Homebuilder Mark Horan has never seen it so good.
Limited inventory of existing homes, low interest rates and new trends that have grown out of the coronavirus pandemic’s effects on consumers are creating a new-home construction boom across the Ocean State, mirroring what’s happening nationwide.
“The market is just hot right now,” said Horan, who has been in the business since 1992 and is owner of Horan Building Co. of Newport. “And inventory is drying up.”
Buyers from New York, Massachusetts and Connecticut were boosting demand over the summer, according to the latest monthly report by the Rhode Island Association of Realtors. At the same time, sales of condominiums and multifamily homes are slowing, the association said, which is reflective of a growing movement in which people are forgoing cramped urban spaces that had convenient commutes to work, trading them for larger structures on Rhode Island’s coastline.
“[These clients] were already thinking about Newport,” said Horan, who builds mostly on Aquidneck Island. “COVID just pushed the decision for them and accelerated the process.”
Horan builds homes that cost between $3 million and $5 million, and works with clients who mostly work in finance, are business owners or who just sold their company. Horan’s clients are looking for in-home offices and gyms, proximity to the Atlantic Ocean, less congestion, plenty of recreational space and extra room for extended family members, such as college-aged sons and daughters who are home because of the pandemic.
Horan’s not the only one meeting the demands of that demographic.
“A space for a desk in a quiet corner was something I was use to,” said James Estes, owner of Estes-Twombly Architects Inc. in Newport. “Now a home office is just a given.”
Estes said his firm is receiving more calls about designing new homes, and about 70% of those inquiries are from people looking to build a second home.
“My clients are looking for quality, and they have the money to spend,” said Christopher Fontaine, co-owner of Fontaine Brothers & Associates Inc., a custom-home builder in Coventry. “And they’re willing to spend more because they are at home more.”
But while high-end homes are springing up, the state is still seeing a lack of new affordable homes for lower- and middle-class families that Rhode Island needs, according to John Marcantonio, CEO of the Rhode Island Builders Association, a trade group that represents homebuilders, architects and real estate professionals.
Rock-bottom interest rates may be a reaction to the coronavirus-created economic crisis, but many low-wage and middle-class workers have lost jobs since the pandemic began in March while wealthier Rhode Islanders have been in a better position to capitalize on those favorable interest rates.
“Rhode Island absolutely does not have enough housing, enough healthy housing, affordable housing, or housing options and, unfortunately, I do not see any resolution to this issue in the short term,” Marcantonio said. “I suspect the [situation with affordable housing] will continue to deteriorate and that many middle-class and low-wage earners will struggle to find the housing they so desperately need.”
The state’s average price for a single-family home stood at $333,200 in August, almost a 13% increase over $295,000 in August 2019. At the same time, there’s a 2.4 months’ supply of active inventory, compared with 4.1 months’ supply in August 2019. In other words, it is a seller’s market.
Particularly for sellers with luxury homes. Earlier this month, the Westerly office of Lila Delman Real Estate announced the $7.5 million sale of Oceanwide, a 5,000-square-foot shingle-style estate built in 1919 overlooking Block Island Sound. It was the second-highest sale price paid for a home in the Weekapaug section of Westerly.
“It’s an incredibly active time for Rhode Island’s luxury real estate market, and I remain encouraged that there are no signs of it slowing down,” Lila Delman managing broker Lori Joyal said in announcing the sale.
When it comes to new construction, Fontaine said he won’t even take a project on that is less than $1 million, in order to keep his 17 employees busy and to make a profit.
“Every builder I talk to has so much work that they don’t even know where to start,” said Fontaine.
And the clients, Fontaine said, are spending more on extras, including turning their structures into smart homes to decrease touch points. This could involve artificial-intelligence systems, control centers and things such as thermostats, light automation, kitchen appliances and TVs that can all be controlled by a mobile app.
For Horan, who just built and sold a nearly $4 million home in Middletown, he doesn’t know how long it will last.
“People want hard assets, and they want something they can use,” said Horan. “And if there’s another outbreak, they want to have control of it.”
Alexa Gagosz is a PBN staff writer. Contact her at Gagosz@PBN.com.
