Every few years, a storm—hurricane, Nor’easter or just plain storm—rips up part of the New Jersey shore. It happened in 1938, 1944, 1950, 1953, 1962, 1992, and in various places, many times in between. But until Oct. 29, 2012, there had never been anything quite like Sandy. Dubbed a “superstorm” by weather forecasters, Sandy delivered a lethal brew of rain, wind and ocean storm surge to the coast, focusing its fury on the fragile barrier islands that sit two to seven miles offshore, in some places wiping all existing real estate off the map. On and near the shores of the Atlantic Ocean, Barnegat Bay and Little Egg Harbor, thousands of homes were inundated with seawater, in many cases damaged beyond repair. This time, the rebuilding process was going to be different. And it would take years.
Barnegat, N.J.-based Walter Homes had been building in the area since 1984, when Walters and Sons Construction Company began as a single-family custom home builder. Over the years, it evolved into the Walters Group, a large-scale residential and commercial real estate operation, including land acquisition, multifamily construction, affordable housing and mixed-use development. Walters Homes, the company’s single-family unit, no longer had a custom-home division.
Then came Sandy.
“We were driving around looking at all the homes that were destroyed and needed to be rebuilt and saw a real opportunity to get involved and help people get their houses rebuilt,” recalls Ed Walters Jr., the company’s founder and partner.
Since that decision was made, Walters has shifted predominately to custom home building – its division is called ReBUILD. In 2013, it closed on five custom homes; 80 in 2014; 55 in 2015; and expects 100 closings this year. It closed on 10 non-custom homes in 2015. In some towns along the shore, local code requires all residential new construction in certain zones to be done on pilings so that the new homes are above the flood plain.
Walters custom homes are built on pilings with the first floor standing nine feet off the ground. On grade level, models can have one or two garages, or simply open space, while any enclosures are waterproof. “There’s nothing that can’t get wet,” Walters Jr. explains.
If another major storm were to hit the area, these custom built homes would most likely be untouched by floodwaters. “A lot of these properties were right on grade so they had about four or five feet [of water] in the house,” Walters Jr. says of Sandy. “Now that they’re nine feet in the air; even if Hurricane Sandy hit again they would get absolutely no water inside their house.”
With Sandy still fresh in the minds of Jersey Shore residents, the focus of Walters Homes has moved steadily toward building storm-resilient homes. It didn’t happen overnight, but it’s where the company is now and where, Walters Jr. says, the company will continue to go in the future.
Launching a Division
Matt Gaudet-Walters, regional sales director and Walters Jr.’s son, says that because the company had the infrastructure in place and experience building in the area, creating ReBUILD was something it had to do. After touring the hardest hit areas, Gaudet-Walters says, executives met with the company architect to design plans for a variety of lot sizes.
For the next 10 months, the Walters Homes staff met with clients in its Barnegat office before building a model home in Beach Haven West, on the shore of Manahawkin Bay about nine miles south and one of the hardest Sandy-hit areas. It opened a second office location and model home in Ortley Beach, about 24 miles up the coast, three months later. The Ortley Beach community also slammed by Sandy, as most homes took in at least four feet of water and others had six feet, according to Gaudet-Walters.
Competition came from all over during this time, Gaudet-Walters says, but many didn’t last. “A lot of guys from out of town came in here and thought they were just going to slap a sticker on their truck and say, ‘Hey, we’re building homes,’ and a lot of those guys have disappeared,” he says.
The Price of Business
Residents whose homes were flooded had to make the painful choice between gutting and renovating or tearing down and building anew. Walters Jr. says it costs slightly more to build a home nine feet off the ground than at grade level, but about the same if a homeowner wanted to have a basement built. But with flood insurance premiums that can go for north of $5,000 annually, it makes sense for homeowners along the shoreline to elevate their homes one way or another.
“Flood insurance is going to keep creeping up,” Walters Jr. says. “In order to get a mortgage to purchase a property you need flood insurance, and when the flood insurance costs as much as the real estate taxes, it really makes the value of the home obsolete.”
Elevating a home greatly reduces the cost of flood insurance premiums. According to the Federal Emergency Management Agency, elevating just one foot above the base flood elevation (the point that indicates the water surface elevation resulting from a flood that has a 1% chance of occurring in any given year) often results in a 30% reduction in annual premiums.
To renovate a home and elevate it, Gaudet-Walters says, is about the same as building a new elevated home. Since Walters Homes is building these storm-resilient homes on existing properties, its margins aren’t as high as a home it would build on land it owns. While the goal of the enterprise is to make money, Gaudet-Walters adds, there is a strong sense of community service involved as well.
“Obviously we have to run a business and make money to stay in business, so it’s not a not-for-profit, but I think everyone’s head and heart is in the right place,” he says. “We need to help as many people as possible, so if it takes opening another office in another area that got hit hard, it’s going to make sense to migrate to those areas.”
Walters Homes takes a 10% deposit at contract signing and next payment of 30% is due when the house is up, sheathed, and roofed. “We build out ahead of payment schedule showing real results before asking for more,” Gaudet-Walters says.
No More Beach-Front Properties
Most of the Jersey Shore homes damaged were secondary homes used primarily in the summer, Walters Jr. explains. While the summer of 2013 was “depressing” because there were fewer people on the shore, the area has since come back, with more work completed each week.
Both father and son are confident the custom home business has plenty of room to run. “It’s going to increase as the economy gets better,” Walters Jr. says. “They’re not making any more shore properties, so there’s a fixed number of properties and everybody wants to own a house at the beach.”
“A lot of these houses in these neighborhoods are just sitting ducks,” Gaudet-Walters adds. “They’re gutted, vacant, the person who owns the house can’t afford to do something with it so they’re going to sell it eventually. They’re not making any more beach-front property so it’s just a matter of time before money from Philadelphia, New York City, or North Jersey comes down to the beach to buy that damaged property and build something new on it.”
That’s where ReBUILD comes in.