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The combination of investors making full-price — and often above — cash offers for houses and the pandemic-driven surge of new residents has made Florida, and the Gulf Coast in particular, increasingly unaffordable for both homebuyers and renters.
According to a January 2023 study by researchers at Florida Atlantic University, the Sunshine State is home to six of the country’s 10 most overvalued housing markets. No. 1 on the list is the Cape Coral-Fort Myers metro area. Tampa checks in at No. 6, followed by No. 7 Lakeland and No. 10 North Port-Sarasota-Bradenton.
In the case of Cape Coral-Fort Myers, FAU found that homebuyers are paying 62.29% percent more than they should for housing, based on the area’s sales history.
Even more shocking? FAU conducted the same study two years ago and not a single Florida metro area cracked the top 10.
“It used to be that you didn’t need a big salary to afford a home in the Sunshine State, but those days are over because this has become a market mostly for move-up buyers and empty-nesters,” says Ken Johnson, a real estate economist in FAU’s College of Business, in a statement that accompanied the release of the study. “Florida’s relatively low incomes should make housing affordability a key issue for a long time.”
Higher interest rates have slowed inflation but with the job market remaining red-hot, demand for housing has not cooled off, leaving many people priced out of the communities where their jobs are located. That’s had a noticeable ripple effect on homebuilders such as Homes By Westbay and Pulte Group, who are having to look farther afield for land for new residential developments.
Mark Metheny, president of Casa Fresca Homes, a division of the privately held, Riverview-based Homes By WestBay, says builders are scrambling to figure out where spillover growth from Hillsborough, Manatee, Pasco and Pinellas counties is going to materialize.
“We’re looking at where demand is and trying to understand where that matches with affordable land opportunities,” he says. “Florida is seeing high demand in terms of new housing.”
The Tampa Bay region’s lack of affordable housing has been well documented. But Metheny says there’s also a lack of what he calls “attainable housing” — homes in the $300,000-$450,000 range. “We’re trying to fill that void.”
A municipality in which Casa Fresca Homes sees great potential is Haines City, in Polk County. Situated east of Lakeland and south of Orlando, its population has boomed dramatically over the past decade, rising by about 8,600 people to nearly 27,000 — an increase of nearly 33%. Rewind the clock 33 years, to 1990, and it had just 11,000 residents.
Moreover, the median age of Haines City residents has fallen to 35, a sign that it’s attracting young workers and families who need a place to live that won’t bust their budgets, but is still within a reasonable distance of jobs in Lakeland, Winter Haven, Kissimmee and even Orlando.
“We’re seeing a lot of demand in that market, the Orlando area, particularly the Disney tourism corridor where attainable housing is very much in short supply,” Metheny says. “Tampa, a little less so, but certainly the Orlando market is pushing them into this area.”
Another trend Casa Fresca Homes and other builders are capitalizing on is the decline of the citrus industry, particularly independent, family-run operations, in places such as Haines City. That’s made more developable acreage available in the form of what used to be orange groves and farmland.
“Most of the citrus farming now is done on a larger scale, by large corporations,” Metheny says. “So, the smaller farmers, who have the type of land we’re building on, they’re no longer able to be profitable. That’s been a big shift — land that had once been plentiful for citrus now has not a lot of value, other than development opportunities, and single-family residential appears to be the highest and best use for a lot of these parcels.”
Metheny’s company is so high on the area that it has seven communities in the works, with a total of more than 1,000 homes, that will open by mid-2024. Not all are in Haines City, proper, but in what he calls the “Highway 27 corridor” that includes towns such as Dundee, Winter Haven and Lake Wales. “Everything south of I-4, along Highway 27,” he says.
Our percentage of buyers that are coming from California is at an all-time high." –Sean Strickler, president of PulteGroup’s West Florida division
The first of the bunch to get underway is Scenic Terrace in Haines City. “We expect that we will start building in April with models open and homes for sale in late Q3 or early Q4 of this year,” Metheny says, adding that Polk County is already friendly turf for the Casa Fresca brand, which Homes By WestBay established to appeal to younger buyers who are moving up from starter homes and rentals.
“We have two communities in Polk now and they’ve been very well received,” he says. “We’ve focused on a product that we feel is a little more architecturally sensitive. We use Hardie board siding, which we think has more architectural appeal, and we use more colors. As we were branding, we were trying to figure out what would be appealing to the Gen Y group or millennials.”
Similar market dynamics and trends are driving the strategy of PulteGroup Inc., a publicly traded national builder that has a strong presence in the Tampa Bay region. Sean Strickler, president of the company’s West Florida division, says Hernando County, particularly Spring Hill, is an area where his company is making a concerted effort to acquire land for residential developments.
Much like Polk County to the east, Hernando County stands to benefit from spillover growth from the Tampa Bay region’s core counties: Hillsborough, Manatee, Pasco and Pinellas. That’s why Pulte is developing Calderra, a 253-acre community that has more than 800 home sites.
“We’re kind of repositioning,” Strickler says, “but Pulte has a history in Hernando County. We closed our last community up there in 2018, called Trillium Farm. This is our first foray into Hernando since then. Generally, we're pretty busy in Pasco County and of course, Hillsborough, and North Manatee and Pinellas — when you can find something. But Hernando offers an affordable alternative to what we're seeing in the greater Tampa Bay area.”
The numbers bear that out. According to Strickler, PulteGroup — whose brands include Centex, Pulte Homes and Del Webb — can deliver houses in Hernando County for $60,000-$80,000 less than comparable new homes in Pasco County. That should allow PulteGroup to price Calderra homes starting in the mid-$300,000s, he says, though pricing hasn’t yet been finalized.
“We’re still working through costs and figuring out where everything's going to come in,” Strickler says. “But I think mid three-hundreds would be a safe bet.”
Although transportation infrastructure improvements are coming to the area, it can still be a 45-minute drive to Tampa from Spring Hill. The pandemic, however, has lessened the importance of quick commutes for many homebuyers, especially those who are coming from out of state — and that’s a high number, according to Strickler.
“Pre-pandemic, about 20% of our buyers were coming from out of state,” he says. “After the pandemic, it got as high as 50%, and now we’re seeing it settle around 30%. But those buyers who are coming in, they’re looking to enjoy the outdoors. Our percentage of buyers that are coming from California is at an all-time high.”
Walking trails, resort-style pools, outdoor living and entertaining spaces and plentiful natural light are a few of the most in-demand amenities, Strickler adds. Including such features requires a lot of land to build on, and he says the competition for acreage is fiercer than ever.
“Tampa Bay has long been one of the top housing markets in the country, and it's become even more so,” Strickler says. “I'd say it’s become one of the top five markets in the country in terms of demand over the past three or four years.”
To succeed amid the land grab, PulteGroup, Strickler says, has leaned on its reputation and relationships in the market. He’s been with the company’s West Florida for 28 years — his entire career — and has helped the firm become a trusted partner for the towns and cities in which it does business.
“We’re built for the long haul,” he says. “Our developer partners and land sellers take peace of mind in the fact that they know Pulte is not going anywhere, and we’re stable. And municipalities, when it comes to getting a particular piece of land entitled and bringing it to market, they know that we do what we say we're going to do.”
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