Builders of moderately priced homes are venturing back into Lehigh Acres as the housing recovery pushes sales higher.
Few areas of the state felt the homebuilding frenzy and collapse as dramatically as Lehigh Acres.
The unincorporated area of Lee County east of Fort Myers suffered through thousands of foreclosures, and homebuilders shut down operations there during the downturn. In a widely quoted February 2009 article, the New York Times labeled Lehigh Acres as “the American dream in high reverse.”
Now, long after the media glare on foreclosures has faded, Lehigh Acres is shifting gears again as the housing rebound spreads inland from pricey coastal areas. It's another indication that the homebuilding recovery is well underway in Southwest Florida.
Several homebuilders have restarted operations in Lehigh Acres and more are on the way as prices rise and foreclosures decline. They're aiming for buyers looking for a new home priced less than $200,000.
“In 2012, our top sales agent in our area was in Lehigh Acres,” says Kristi Williams, sales manager for Adams Homes' Fort Myers region that stretches from Lee to south Sarasota counties.
Adams Homes was the first significant homebuilder to return to Lehigh Acres when it started selling homes there in 2011. Since then, D.R. Horton's Express Homes opened The Grove, a community in the heart of Lehigh Acres that will have about 400 homes when it's completed. Close to Interstate 75, Lennar is building homes at Olympia Pointe.
A big reason for Lehigh's recovery is affordability. You can buy a new home for less than $200,000, well below prices for new homes in other areas of Lee and Collier counties. “There's a huge niche in the market for those who focus on selling to that first-time homebuyer,” says Randy Thibaut, CEO of Land Solutions in Fort Myers.
While foreclosures remain, many of the better-quality foreclosed homes have been sold and prices are rising. Indeed, the median price of an existing home sold in July in Lehigh Acres was $96,500, a 17% increase over the $82,250 median price in July 2013, according to the Realtor Association of Greater Fort Myers and The Beach.
“It's no competition against a brand-new home,” says Williams. “You see so much new construction going on, and it's because the inventory is no longer there.”
Boom and bust
Lehigh Acres began its life in the 1950s like many other Florida communities, as a huge speculative bet. Developer Lee Ratner bought 100 square miles of scrub east of Fort Myers and subdivided it into thousands of quarter- and half-acre lots, which he sold to northern speculators and retirees.
During the boom that peaked in 2005, lots in Lehigh Acres that had sold for a few thousand dollars spiked to $50,000 or more. Homebuilders such as First Home Builders of Florida rushed into the area, building thousands of homes for investors who flipped them. “It was a totally inflated market,” says Michael Reitmann, the longtime head of the Lee Building Industry Association and now a consultant for the trade group.
Everyone knows what ensued: Prices collapsed during the bust and foreclosures swamped the market. The construction industry's woes exacerbated the situation because thousands of workers who lived there moved away.
But as the housing recovery began to take hold a few years ago, home and residential-land prices in surrounding areas began to rise. “We are in the process of a new cycle,” says Joyce Gregory, broker and manager of Market America Realty Network in Lehigh Acres.
“We've seen an influx of people buying lots,” Gregory says. Some buyers are investors and others plan to build homes on them, she says.
The recovery has been steady. “We're not going to see prices escalate they way they did back in 2005 and 2006,” Gregory says. “The builders are being very conservative. They're not going out and pulling 500 permits like they were during the boom.”
Foreclosure glut is also waning. Gregory says some banks are holding onto foreclosed homes and waiting to sell until prices rise further. “They're waiting to see what the market's going to do,” she says.
Most of the homebuilders who have ventured into Lehigh Acres recently are larger companies that have the wherewithal to build lower-priced homes with thin profit margins and provide financing to buyers.
But some local custom builders are eyeing the area again, too. Marvin Development closed its model on Lee Boulevard during the bust. “We have been giving some thought to reopening it,” says Richard Durling, president of the Fort Myers homebuilder.
“Our challenge as builders are appraisals,” Durling says. That's because prices of existing homes remain well below new construction. “With comparable sales as the sole determining factor in coming up with an appraisal, we're still going to find challenges for people to qualify for a loan to clear that hurdle,” he says.
That makes it hard to compete against large builders such as D.R. Horton that can use their vast resources to build speculative homes and provide financing for buyers. For example, DHI Mortgage created an expedited underwriting process for buyers of its Express Homes.
What's more, Express Homes only sells houses it has completed, so buyers can move in right away and avoid the need for construction loans. For example, a single-family home at The Grove, Express Homes' development in Lehigh Acres, costs just less than $150,000 and is ready for its occupant now.
Building homes before they're sold also means the builder can be more efficient. “We remove much of the cost and time associated with design selections and options,” says Jonathon Pentecost, city manager for D.R. Horton in Fort Myers, in a prepared statement responding to questions. “Since we eliminated the customization, we have less components and can drive better costs on the items we are purchasing.”
Buyers range from first-time homebuyers to retirees, though young families so far have tended to be predominant buyers. “You're also seeing a lot of families coming over from the East Coast because it's getting very densely populated over there,” says Williams with Adams Homes.
While there may be demand for new homes, builders and industry experts say it may still be a bit early to proclaim a renaissance in Lehigh Acres. “It may take another year or two for the market to level off,” says Durling. “There's still more resales and under-priced houses.”
There are other variables too, such as the possibility that Lee County may raise taxes on new construction by up to $10,000 per home. An increase in so-called “impact fees” could make a difference for whether someone qualifies for a loan.
“How deep is the market for people who have enough credit to qualify for a new-home loan?” Thibaut wonders. “The challenge will be people getting credit.”