Southwest Florida Developers Forge Ahead
When a real estate developer recently submitted plans for 8,100 more homes in Manatee County mega-project Lakewood Ranch, it left some scratching their heads.
Why would they forge ahead with plans for thousands of homes there, and at other area projects in Sarasota and Charlotte County, with a housing slump officially under way?
It may seem counterintuitive to the layman, but to developers and builders who make millions by speculating on land years in advance, now is a great time to keep charging ahead with big projects.
For starters, such large projects — with home counts in the tens of thousands and commercial square footage in the millions — just take time. Most won’t build out for years, or decades, so short-term Florida mortgage rate increases and subsequent market slowdowns are no reason to panic.
Besides, most observers of the Southwest Florida housing market point to a number of recent signs that the drop-off will end sometime next year.
Beyond that, developers say they need to start early to buy up land, get through the often years-long process of getting zoning approval and the requisite building permits, then secure water and sewer rights. Land and construction prices also climb as time passes, so acting sooner is often cheaper than waiting.
The only thing that could dramatically sting the long-range speculators would be a drastic drop in the arrival of new residents to buy the homes.
But on a fundamental level, almost everyone in the housing business seems convinced that everything will be just fine. They believe that people — especially the long-promised baby boomers / retirees — will just keep on coming to Southwest Florida.
UP, DOWN, UP AGAIN
The last market “softening” spanned 1991 and 1992, and that came during a national recession. Several good and a few great years later, and it’s down a bit again. But conventional wisdom assumes the current Florida real estate market will turn around in about a year, either the last quarter of 2007 or the first quarter of 2008.
The problem now in the Sarasota area is a roughly four-month surplus of new single-family homes. The imbalance came from an artificial demand, according to Tony Polito, director of Metrostudy’s Tampa/Sarasota market, and is making it hard for home building companies to move product.
“We just saw a huge amount of speculative buying,” he said.
Everyone in the business feels the pain of rising inventory and lessening demand. Bruce Williams Homes had to lay off 15 construction workers this year because of the slowdown. Builder and developer Pat Neal of Neal Communities is discounting homes up to 8 percent.
“I expect that to continue. I think the builders who are focused will work with buyers. This isn’t a crisis, but it is a downturn that will last a year or a little longer,” Neal said.
GETTING LOCKED IN
It pays for developers to get started early. From concept to go-ahead on large developments takes about two years. And another year often is needed to get building permits to actually break ground. Winning approval sooner rather than later allows developers to get the least expensive price for land and secure infrastructure rights well before they’re actually needed.
BRING ON BOOMERS
If you believe demographers and experts on retirement trends, things will be brighter long term, even if Florida home loan rates continue to rise through the rest of this decade.
The Florida Housing Data Clearinghouse predicts that the Manatee County population will continue to grow and need at least 60,000 new single-family and multi-family homes, combined, by 2025. Sarasota County will need about 66,000, and Charlotte County will need an additional 34,000, according to those same projections.
Because baby boomers and retirees are not dependent on low Florida home mortgage costs to purchase the homes they desire, by and large, market conditions that thwart many current residents of the Sunshine State will have little to no bearing on them. The down side is that it makes many officials concerned that affordable housing is a pipe dream.
Preliminary construction of Schroeder-Manatee Ranch’s two large Lakewood Ranch projects north of State Road 70 is expected to begin next year. Freddie Mac predicts that the market will return to normal a lot sooner than previously believed — which is good news for these developers.
Todd Pokrywa, SMR’s vice president of planning, said he is unfazed by the current housing downturn. The speculators have largely left and, besides, the pendulum always swings back.
“Florida is an attractive place to live, and I think people are going to continue to live here,” he said.
