Please ensure Javascript is enabled for purposes of website accessibility

Hot Pockets


  • By
  • | 8:41 a.m. September 17, 2010
  • | 2 Free Articles Remaining!
  • Industries
  • Share

REVIEW SUMMARY


Industry. Hombuilding


Trend. Builders report pockets of home sales on the Gulf Coast.


Key. Top locations, amenities and different styles will attract buyers.



Homebuilding on the Gulf Coast is a shadow of what it was during the boom, but builders who have pulled through the residential collapse are scouting opportunities in specific submarkets.


Consider Fort Myers custom builder Mark Anderson.


The president of Benchmark General Contractors plans to build a dozen homes on Sanibel, the barrier island in Lee County. The island hasn't seen much new construction in recent years or great numbers of foreclosures, so Anderson's betting that a new 12-home residential development called Sea Glass will give him a competitive edge.


In Sarasota, meanwhile, Gary Johnson, president of Tivoli Homes, says the lack of supply of new homes two miles west of Interstate 75 off University Parkway will help him sell Key West-style homes at The Cottages of Callista Village. Regions Bank, which has a land-development loan on a portion of the development, has agreed to help customers with construction loans on more favorable terms than what is currently available.


North of the Sarasota, in Pinellas County, Beazer Homes is selling townhomes to first-time homebuyers in Sawgrass Village. Because Pinellas is virtually built out, there's little competition from new home builders. “That's a great niche,” says David Byrnes, president of Beazer's Florida division. “It's an infill piece, and it's very good.”


And in the Tampa Bay area, Lennar's best-selling submarket is southern Hillsborough County, from south of Brandon to Ruskin. “Hillsborough County had one of the largest population gains in the state,” says Mark Metheny, Central Florida division president for Miami-based Lennar. The company builds in 28 communities in the Tampa Bay area and expects to sell about 1,000 homes in the region this year.


Hillsborough County has benefited from the high taxes on new construction in neighboring Pasco County, which became Tampa's bedroom community in the late 1990s. Builders say the so-called “impact” fees Pasco government charges on construction can add as much as $23,000 to the price of a new home there, more than double than what Hillsborough charges.


Meanwhile, new roads and better schools in south Hillsborough are drawing new-home buyers who might have previously chosen Pasco, Metheny says.


In some hard-hit areas, such as Collier County, many builders have gone out of business and that gives those who survived a greater share of the market during the winter selling season. “We have less competition than we did a few years ago,” says Claudine Leger-Wetzel, vice president of sales and marketing for Naples-based Stock Development.


To be sure, challenges remain. These include relatively high unemployment, insecurity about the economy and the banking crisis that has made financing more difficult. Most don't expect a strong rebound until 2012 or later.


“What we see going on now is pockets of strength,” says Brad Hunter, chief economist at Metrostudy, a firm that tracks home sales in master-planned communities. “There are some projects that are selling homes at a nice pace and are really doing well, but the market still lacks depth.”



Tampa Bay leads


Overall, the Tampa Bay area leads the Gulf Coast in terms of new home sales.


“It's probably the market in the state of Florida we're the most bullish on,” says, Byrnes, the executive with Beazer. “We made recent investments in Tampa because we believe the Tampa Bay market is coming back, probably quicker than any other place in Florida.”


The Tampa area's economic diversification makes it less dependent on the retirement and second-home market than areas further south, such as Fort Myers. “Tampa has jobs, a better economy, it's more self-sustaining,” Byrnes says.


For example, Beazer recently acquired lots at Fishhawk Ranch, south of Brandon. Byrnes says the development's top-rated schools and amenities make it a desirable place to live.


Pulte Homes also is zeroing in on south Hillsborough County, where there's not a lot of competition from rivals and distressed resales. “The common denominator is A-rated schools, transportation and the ability to differentiate yourself,” says Scott Campbell, Central Florida division president for Pulte Group.


Jeff Thorson, division president of William Ryan Homes in Tampa, noticed that rising apartment occupancies in the Tampa Bay area could signal future demand. “I'm thinking maybe those apartment projects are incubators for us,” Thorson says. “That tells me those that are buyers are more comfortable renting because it gives them the flexibility that if something's going to happen to their jobs, they don't have to deal with the bank.”


When their confidence improves, Thorson is betting those renters will turn into homebuyers.


In addition to Tampa, there is a pocket of homebuilding activity in Lakewood Ranch, the master-planned community east of I-75 in Manatee County. Lakewood Ranch-based Neal Communities, for example, had its best month of 2010 in August with 41 closings — 18 of which were in the company's newest development, Central Park at Lakewood Ranch.


Neal Communities was one of the first homebuilders in the Sarasota-Manatee region to move to the trend of building smaller homes. The trend, so far, has worked: The August sales figures for Neal were a 25% increase over August 2009.



Think like buyers


Still, despite favorable interest rates and low prices relative to the boom, economic uncertainty remains the biggest challenge for buyers. “Buyer psychology,” Mark Wilson, president of London Bay Homes in Naples, calls it.


Wilson and others say the November elections could be the spark that spurs new-home sales this winter and spring. “If there's a dramatic Republican resurgence, that would boost everybody's mood,” says longtime market observer Marvin Rose, publisher of Rose Residential Reports in Tarpon Springs. “I can't think of anything else that will do it.”


The federal government's recent first-time homebuyer credit from November to April was largely ineffective because it simply distorted the market by bunching sales in the first half of the year. “Things have slowed down considerably coming out of the tax credit in April,” says Pulte's Campbell, who estimates his company will sell about 800 homes in Tampa and Orlando combined this year.


There still remains what Metrostudy's Hunter calls the four Fs: Fear, financing, falling prices and finding a buyer for the other house. To sell a home, Hunter says, “you have to do everything right in this market.” The best locations and the best-built homes will win out.


“During the boom years, you didn't have to try hard,” Hunter says. “Now, because there are fewer buyers out there, the builders who are alive are fighting tooth and nail.”


So once builders identify a promising submarket where there isn't as much competition, they try to make their homes stand out. At The Cottages of Callista Village in Sarasota, Gary Johnson is building Key West-style homes with metal roofs and solar hot-water heaters. “We positioned ourselves with a unique product and that's the only way to succeed in this market,” he says.


While there are pockets of strength on the Gulf Coast, some areas will take years to recover.


Jamie Pirrello, who engineered the sale of Fort Myers-based First Home Builders to K. Hovnanian at the peak of the market in 2005, says the Fort Myers area may not see a return to normal conditions before 2013. “There is just too much work to be done on the local employment front, too much uncertainty on the national front and too many homes either in the pipeline or coming into the pipeline,” he says.


While still living in Fort Myers, Pirrello is currently the chief financial officer for Sivage Homes in San Antonio, Texas, where he says home prices didn't appreciate rapidly, there are a relatively low number of foreclosures and there is reasonable job growth. “Following local employment trends will provide the first indication that homebuilding activity will begin to return to Southwest Florida,” Pirrello says.

 

Latest News

×

Special Offer: $5 for 2 Months!

Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.
Join thousands of executives who rely on us for insights spanning Tampa Bay to Naples.