Randy Thibaut knew some people in the construction industry weren't going to be pleased with his presentation at a sold-out event recently hosted by the Lee and Collier building industry associations.
But it's hard to argue with the emerging conflicting data, says Thibaut, the president and CEO of Land Solutions in Fort Myers.
Speaking to a gathering of about 350 construction industry executives, Thibaut warned that the threat of higher taxes, labor shortages and rising land costs could slow the nascent homebuilding recovery across the region.
“We may be seeing the first signs of a plateau,” says Thibaut.
For example, Lee County has threatened to reverse the 80% cut in taxes on new construction it enacted during the downturn to spur economic growth. So-called “impact fees” could add as much as $10,000 to the price of a new home. “This could be a game changer,” Thibaut warned.
The fact is that many homebuyers may already be priced out of some submarkets because of the rising cost of land and labor shortages. “Now we're in a cost-driven market,” Thibaut says.
Although Lee County's commissioners are generally considered friendly to business, there's growing pressure on them from anti-growth and conservation groups. The commission is scheduled to consider raising taxes on new construction in March.
Thibaut says most homebuyers in the region paid less than $200,000 for a new home, so $10,000 in taxes makes a big difference. “That's the bulk of the market,” he warns.
Already, the cost of land has pushed prices up and forced builders to scout for cheaper land. “Now we're jumping up over the river and through the woods of North Fort Myers,” Thibaut says. “Next, watch Port Charlotte.”
The cheap land that banks acquired through foreclosure has now been sold. “Most of the distressed deals are gone,” Thibaut says. “Now we're getting back to a regular market.”
Thibaut says he's heard some builders balk at escalating land prices. “When I hear that, I've got to listen,” he says.
Builders have been raising new-home prices because of labor pressure, too. Many of the trades say labor left the area during the bust and subcontractors are scrambling for employees. “We're stealing each other's labor,” Thibaut says.
But new-home prices can only rise so much before buyers become resistant. “You can't raise prices $50,000 every year in this market,” Thibaut says. “That's runaway home prices.”
In the end, Thibaut says flattening home prices could be beneficial because it may impose discipline on the market. Builders are pulling about 8,600 homebuilding permits a year in the three-county region that includes Charlotte, Collier and Lee counties. That's more than the 2,066 permits they pulled in 2009, close to the 10,000 permits they pulled in 2000 but a fraction of the 44,000 they pulled in 2005.
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