A three-year decline that's slowed construction crews and cut profits for Lancaster County home builders resumed with a fury in the past two months as residential building fell 75 percent compared to the same period in 2007.

McGraw-Hill Construction reported that contract values of new single- and two-family houses and apartments dropped to $17.9 million in January and February from about $71.3 million for the first two months of 2007.

At the same time, the number of residential building permits (including those for apartments) issued in the county fell to 1,098 in 2007, according to the U.S. Census Bureau — the lowest since 1980.

Commercial construction also fell in the county, but not as badly; it's off 40 percent for the year to $17 million compared to almost $28.3 million during the same period in 2007.

Stephen Black, president of Stephen Black Builders Inc., 306 W. Brubaker Valley Road, Lititz, said his business has been off for some time. In 2007, the company, which builds homes priced from $400,000 to $800,000, saw business drop off by 50 percent from 2006, Black said.

"Last year we were off between $2 million and $4 million," Black said Tuesday.

Values on new housing contracts fell in all nearby areas, but Lancaster County's dip is the worst, according to reports released Tuesday by McGraw-Hill Construction, a New York City-based company that tracks data for the construction industry.

Residential housing contracts in the Lebanon area are off 15 percent for the year; Berks County, 45 percent; York County, 36 percent; and the Philadelphia area, 32 percent.

Randy Hess, president of the Building Industry Association of Lancaster County, said the local numbers are skewed by a huge disproportion in the number of apartments built early last year compared to this year.

Residential home building is actually off 26 percent, Hess said.

"No doubt that 75 percent figure catches your eye," Hess said. "But the apartment units built went from well over 200 units to zero so far this year."

Hess said it's likely more apartments will be built later this year and the numbers will tend to even out.

Still, Hess said the numbers also are off because of the poor economy and stricter lending practices by banks, which have forced builders to "peel off on inventories" from previous years and limit the number of homes built on speculation.

Black Builders had been constructing about 25 houses a year, but in 2007 it built only 10.

The dip in building coincides with a decline in home sales in Lancaster County, which dropped by a full third in January compared to the same month last year, according to Lancaster County Association of Realtors. Home sales fell almost 22 percent in February compared to a year ago.

Despite the troubling numbers, Hess, Black and other real-estate professionals expect business to pick up soon.

"The last three months have been pretty active as far as properties going under agreement," Hess said. "I'll be interested in seeing the numbers that come in this summer, which will be an indication of what's going on right now."

Contract values for new residential properties in February were off 26 percent compared to a year ago, while commercial contract values actually went up for the month to $10.6 million compared to $789,000 a year ago.

Nationally, sales of existing homes rose 2.9 percent from January to February of this year after six months of declining sales. That could signal a slowdown in the record number of foreclosed homes that banks put on the market in recent months.

"I think in 2009 our sales will increase gradually into 2010, and 2011 will be good — foreclosures will be off the market," Black said. "A steady climb out of this slowdown is better for the consumer and the builder."

But it will take a huge reversal to bring residential building in Lancaster County back.

The number of residential building permits has been dropping for the past three years, starting with 2,040 in 2005, then 1,887 in 2006: the first time in 11 years that the number slipped below 2000. That was followed by the drop to 1,098 in 2007, the lowest number in 27 years.

There were 2,690 permits issued in Lancaster County in 2003, according to Census Bureau data.

Some contractors, such as Black Builders, have turned to remodeling projects to help them through the down cycle.

"I've been in business for 30 years, and this is the fourth down cycle I've experienced," Black said. "It happens, but not very often around here."

Black has five houses on the market, which is not unusual, he said. The problem is that the homes that once took six months to sell are now on the market for up to a year.

Hess said the market has changed to one in which buyers are looking for smaller, "less appointed" homes. Charter Homes began building smaller homes last year after its revenues dropped 44 percent from 2005 to 2006.

In separate developments, Charter Homes and Keystone Custom Homes of Willow Street plan to build 510 new homes — including semidetached homes and townhouses — and 86 apartments in West Lampeter Township.

While Hess remains optimistic that Lancaster's building woes have peaked and better days are ahead, he said you never can tell.

"The only thing I do know for sure is we're not going to know the bottom until a year later," Hess said.

E-mail: pburns@lnpnews.com