Home Builders Awaiting A Spring Thaw

By Lee Howard - Published on 3/29/2009

Michael Scarpa admits that the home construction business these days can't measure up to the frenetic pace of a few years ago, but he's got a message for naysayers: “It's not all doom and gloom.” Scarpa, whose Pawcatuck-based Coastal Construction Management, LLC specializes in high-end custom homes, said building continues in small pockets on the waterfront around southeastern Connecticut and southern Rhode Island, particularly in Watch Hill, Niantic, Groton Long Point and Masons Island.

Scarpa is managing two projects - about half his typical load - including a high-end home in Mystic that he estimates will take 14 months to complete. Today's slow construction business, he said, means people who have weathered the down economy - and who can secure financing - can get good value.

Construction costs have gone down, he said, as worldwide demand for materials has lessened and local plumbers, electricians and carpenters have dropped prices to secure work in a competitive environment. ”People who can do projects can go forward with confidence that now is a great time to build,” said Scarpa, a former two-time local Builder of the Year who has been constructing homes for nearly 30 years.

Other builders agree and are hopeful that this spring will start to break a two-year construction slowdown locally. As bad as it's been in those two years, builders say, the past six months or so have been particularly dead, though they have seen a glimmer of hope in the past two weeks as warmer weather brings more inquiries.

But David Reagan and Peter Giordano Jr. of Tier One Development in Mystic said they have managed to stay busy throughout the downturn, thanks to a decision to turn to mid-priced, stick-built houses. The two partners said they have four contracts with buyers for homes in an eight-lot subdivision in Mystic just approved in November that will feature 2,500-square-foot Colonials in the $400,000 to $500,000 range.

”We're in the game,” Giordano said. “Most banks don't lend to developers today. But we work with a number of banks. ... When we go to the table, they know we are ready.”
While real estate agents say the local market is seeing interest among homebuyers looking for homes below $300,000 and above $700,000, Reagan believes moderately priced housing will sell if it is perceived as a good value. To create the value while still being able to generate a profit, Giordano said the company has become much more efficient in the way it manages its projects, from the scheduling of subcontractors to the delivery of building materials to the reduction of on-site waste.

”There's still a great interest if the price is right,” Reagan said. “We feel the market has bottomed out.”

Edward Deak, an economist at Fairfield University, said he expects housing starts to reach bottom in the next three months. Permits for new housing construction statewide last year were half the level of 2004, and the New London-Norwich area ranks last in the state for housing permit activity, according to statistics compiled by the University of Connecticut.

In January, only 92 new housing permits were authorized throughout Connecticut, and February saw only 200 permits throughout the state's 128 towns - a trend that, if it continues, would bring this year's new-housing starts to half of last year's levels and a quarter of the highs in 2004. ”How can it go any lower?” Deak asked. Deak, speaking last week at a meeting of the Builders Association of Eastern Connecticut, predicted that median sales prices of homes will start to rise in the third quarter of next year.

Barry Rosa, a vice president with Prudential Connecticut who also addressed the builders, added that a new $8,000 tax credit for first-time homebuyers likely will spur more interest in real estate this year and indirectly could drive more homebuilding.

But Bill Pieniadz of P&H Construction in Uncasville said the tax credit would have been more helpful if it were less expensive to build in eastern Connecticut. With many empty lots having been secured a few years ago in the $100,000 range, it doesn't make economic sense to build $250,000 to $350,000 starter homes, he said. ”You look at the numbers, and the numbers don't work anymore,” he said. Still, Pieniadz said at some point businesses are going to have to think about taking a risk. His company is building a spec home - a home without a particular buyer in mind - which, in the current real estate slowdown, is considered to be a big risk.

”The spec-home market is practically nonexistent,” said Renee Main, executive officer of the builders association.

Attila Keller, owner of Ricon Homes in Waterford, agreed that spec homes represent a danger in today's market, but he thinks lower-priced housing can thrive even in the current environment. He is marketing the last two quarter-acre lots in a 13-lot subdivision completed last year in Groton whose average selling price reached $278,000, but he won't build until a buyer comes forward. ”We tried to target starting house prices,” Keller said. “It's a very good value for the money.” The homes, averaging a bit less than 1,800 square feet, feature up to three bedrooms and two-and-a-half baths, with central air conditioning, a dining room, deck and even a laundry area. ”People want smaller homes, more efficient homes,” Keller said.

All the talk about the size and cost of new homes presupposes the ability to fund their acquisition, and builders say buyers are finding credit is hard to get.

Dave Hammerstrom of Chelsea Groton Bank said the major problem is that regulators have tightened loan-to-value requirements so that buyers have to come up with more of a down payment. That is harder and harder to do with home values and stock market prices plunging in tandem, he said.

No matter what the reason for the home-building bust, builders say they are doing what they can to reel in new work - some diversifying into home renovations, while others move to commercial construction.

While Reagan and Giordano preach the gospel of diversification, some builders, like Scarpa of Coastal Construction, still believe in staying true to their long-time niche - in his case, homes typically costing $800,000 or more - even if that means less work in the short term.

”This level of client has to have confidence in what you do,” Scarpa said. “Our philosophy is to stick with what you're good at.”

Regional

Restored To Life - Once Abandoned Building Get a Major Makeover

By Eileen Jenkins, MARKETPLACE STAFF WRITER - Published on 8/12/2007

By now the last tenant has moved in, completing the turnaround of the once-dilapidated Homestead building in Mystic.

The 200-year-old edifice on Cottrell Street is part of the Mystic Fire District's 14-year overhaul of the former Cottrell Lumber Co. site, a process that saw the renovation of several buildings and the creation of the Mystic River Park. The Homestead building had once been home to the Mallorys, a prominent Mystic shipping family, but at some point became a rooming house and apartment house before being left empty for about 20 years.

But it wasn't just 20 years of abandonment that ravaged the house. Water spewing from pipes that were never shut off caused damage that Michael Scarpa vividly describes.

“It was a wreck. It. Was. A. Wreck. And it was scary. I was afraid to walk around because I thought I'd fall through the floors. It had been raining in there. The ceiling was falling in, the plaster was falling off the walls, there were holes in the floors.”

Scarpa is the owner of Coastal Construction Management, LLC,  the Pawcatuck-based firm that did the $1.1 million Homestead renovation. Once he saw the pervasive damage, the path he would have to take was obvious. “I knew the only way to do this would be to gut everything,” he said.

But it wasn't a typical demolition job, which is usually the easiest part of any remodeling project.

“To take the inside of this building apart and keep the building standing was the most challenging thing about it,” Scarpa says. “The only thing that remains is the original post-and-beam framework. That's it. So I couldn't just hire any demo crew. I had an experienced crew go in there and demo it properly. They knew what was structural, what had to stay, what could go ... ”

And what went were “layers and layers of plaster. We probably filled 12 dumpsters. We had a crew of four guys and I bet they spent three weeks on it. Usually the demo is fast, but remember we had to be careful not to knock the building down!"

“There was no exterior framing — it was basically just the post-and-beam, exterior sheathing and the clapboard nailed to that. There were no 2x4s, like you'd see these days. If you had opened the front door and looked down, you would have seen the basement. If you had looked up, you'd have seen the roof. It was just an empty shell.”

So they put in all new framing, a new flooring system and studs around the exterior to install proper insulation and wiring. They replaced all the windows and exterior doors.

“(The Mystic Fire District) wanted to keep the clapboard siding,” says Scarpa. “We had meetings about changing to a fiber-cement siding that wouldn't need any maintenance, but they wanted to keep the original so the building looked like it did before. And we completely removed the old porch framing and decking, but we kept the original ceiling and columns, and I'm glad — one of the columns is signed by one of the original carpenters.”

The result is a three-unit luxury apartment building. Each apartment has its own entrance, its own laundry facilities and its own separately metered utilities. One unit has use of the beautiful front porch, one has a large fenced brick patio, and the third-floor apartment has a deck. There is off-street parking for the tenants and, because the building is owned by the Fire District, there is a residential sprinkler system in use.

The apartments are roomy (the largest is 2,200 square feet, spans two floors and has 2.5 bathrooms), bright and all of them offer views of the water. Visitors have a hard time imagining the condition it had once been in, but Scarpa has photos to prove how big the challenge was.

“We don't usually do this kind of work, so it was intriguing,” he says. “Plus I liked doing it for the Town, because my family lives here. It got rid of a blighted building and created an investment for the town."

Mystic Fire District Finishes Overhaul of Cottrell Tract

By Joe Wojtas - Published on 7/6/2007

Mystic — In December of 1993, the Mystic Fire District outbid two other groups for the 2.3-acre Cottrell property with plans to turn it into a park.

Over the next 14 years, the Mystic Fire District and Mystic River Park Commission created the park itself, built a new dock and playground, and renovated six buildings on the site into commercial and residential space.

After 14 years the project is now complete, as the fire district has just finished the renovation of the Homestead building at 27 Cottrell St. into three apartments. Tenants are moving into two of the units this week.

A tour of the building this week revealed three large apartments with gleaming wood floors and white walls. Two of the units boast impressive views of the Mystic River and the park.

Sharon Scarpa of Coastal Construction Management, the local firm that did the renovation, said two of the units rented on the first day they were available.

“These units are unique to the area. They're large luxury units on the water with parking. There is nothing of this size left like this,” she said.

Park Commission member Marshall Yudin said fire district and park officials wanted to create the type of attractive apartments needed to cover the cost of the project. He said the most challenging part of the project was protecting the integrity of the park and the building. He credited park commission Chairman Ben Helme for working on the project on a daily basis.

The largest unit takes up half of the first and second floors in the 200-year-old building. There are five rooms on the first floor with two bedrooms and two bathrooms on the second floor. Windows overlook the park and river. The unit rents for $2,250 a month. Scarpa said there has been a lot of interest in the unit but so far it has not been rented.

Stairs to the third floor unit open into a large living room/kitchen. There is also a large bedroom with a walk-in closet and bathroom. Windows offer even more sweeping views of the park and river than the unit below. A door opens to a small balcony that overlooks the playground. That unit rents for $1,350.

The third unit has three rooms on the first floor including a dining room/kitchen that leads to a large outdoor stone terrace. The second floor has two bedrooms. The unit rents for $1,575 a month.

Outside the building, which contained seven apartments in the past, there is a parking area for six cars. New landscaping has been added.

In January of 2006 fire district residents voted to spend up to $1.1 million to renovate the long-vacant building. Executive Committee member William Cannon said the fire district took a 30-year mortgage for $1.1 million to pay for the project. The interest rate is fixed at 7 percent for the first 10 years.

The monthly principal and interest payment on the mortgage is $7,850 while the income from the units, when they are all rented, will be $5,175. Cannon said the fire district has included $96,000 in its budget to pay for the mortgage over the next fiscal year.

j.wojtas@theday.com

Stonington

Scarpa Gets a HOBI

Stonington — Michael Scarpa, owner of Coastal Construction Management, was honored by the Home Builders Association of Connecticut at the annual Home and Building Industry Awards held Oct. 19.

Scarpa, vice president of the Builders Association of Eastern Connecticut, was presented with the 2005 HOBI Special Recognition Award for Outstanding Showcase Home. Scarpa had two custom homes being considered for this year's HOBI Awards, both constructed in the new subdivision known as Lamb's Way in Stonington