The Lehigh Valley Planning Commission released its subdivision activity report on April 3, which showed that subdivision activity in the Valley remained flat for a third consecutive year in 2012.
The organization said this reflects continued weakness in both the current real estate market and the economic climate. Locally, the number of plans and building lots continue to be at historic lows.
In 2012, while the number of plans was roughly the same, there was a 5.9 percent decrease in lots approved by Lehigh Valley municipalities from 2011 levels, said the organization. This is the fifth consecutive year of low numbers of approved lots.
The downturn in the economy continues to diminish demand for new single-family homes, according to the group. However, real estate agents say they are seeing strong signs of a rebound.
Lehigh Valley unemployment remains elevated at 8.7 percent in 2012, higher than the 2011 figure of 8.6 percent and higher than the 2012 Pennsylvania level of 7.9 percent. Despite record low mortgage rates, low unemployment is a key ingredient for boosting demand in housing, said the organization.
In the Valley, there is a strong correlation between the unemployment rate and subdivision activity as subdivision activity is higher during periods of lower regional unemployment, said the organization.
“In order to create subdivisions, you need access to capital,” said Michael Kaiser, executive director of the Lehigh Valley Planning Commission.
The historical trends and statistics show that there is not a new housing recovery, said Dave Berryman, chief planner for the commission.
“I don’t think you’ll see a recovery until unemployment gets around 6.5 percent, so we have quite a ways to go,” said Berryman. “It is very closely related to the regional and national economy.”
The report shows that subdivision activity was low and unemployment higher during the United States recessions of 1973-1975, 1980, 1981-1982, 1990-1991, 2001 and 2007-2009.
When people know unemployment is high, it also affects consumer confidence. A developer for a subdivision has a harder time getting a loan from a bank because the bank will question who is buying all these homes, said Berryman.
The real key for a successful developer of subdivisions is to figure out when unemployment is getting lower and to start these projects at that time, said Berryman.
“You don’t want to be getting into the market when everything is falling apart,” he said.
According to the report, a weak housing market filled with previously approved but un-built subdivisions, foreclosed properties or properties near foreclosure all create anemic interest in proposing new subdivisions and land developments.
However, some people in the real estate industry see the cycle returning to a stronger market.
“This spring, we are off to a nice start here, I think people are going to be surprised by the strength of the market this summer,” said Gail Hoover, a Realtor with RE-MAX/Central of Center Valley.
A lot more first time homebuyers are entering the market and more people are buying excess inventory, including vacant and foreclosed properties, Hoover said.
It may take the entire year, but she said once that excess inventory is gone, people will start looking for new housing inventory, including in subdivisions.
“I wouldn’t say a lot of subdivisions are selling now, but they are definitely coming onto the market,” said Hoover. “You can see as you drive by fields that signs are going up showing that land is available.”
Compared to several years ago, the new housing market is coming back this spring, said John Blair, a Realtor with Prudential Patt, White Real Estate of Coopersburg.
Blair, president of Blair Custom Homes Inc. of Lower Saucon Township, is planning “Old Saucon,” a 73-acre residential and retail community off Route 378 in Upper Saucon Township. Blair serves as the owner and developer of the land for this project.
“I’m definitely seeing a change in the market altogether,” said Blair. “On new housing construction, there’s a lot of activity on the design side over the last year.”
Word of mouth is also helping to sell houses, he said.
Though his Old Saucon project is not finalized, he said it could conceivably start this summer.
“Right now in Upper and Lower Saucon, there’s not a lot of inventory there, we need more product,” Blair said.
As the Valley moves out of the downturn, Blair said, a lot of subdivision projects that were shelved several years ago will return to the market at a lower price point.
Prices are expected to be in the $300,000 to $600,000 range for houses in Old Saucon, which was lower than Blair originally planned.
“I feel very confident that things are better, but there’s going to be the new norm, so you got to adjust to it,” said Blair.