Everybody back in the pool!
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Whether or not you trust big production home builders judgment on
when to get back into the real estate market, it seems that the moment has
arrived.
Residential developers and homebuilders
who survived the housing bust
now are feasting on the remains of those who didn’t.
They’ve been on a buying spree, using cash savings to acquire
finished, but unbuilt lots and subdivisions that have been stalled or
lost to foreclosure or bankruptcy. They’re paying up to 75 percent off
peak land prices during the housing boom, and planning to succeed where
others have struggled or failed.
“It’s survival of the fittest among the developer set,” said Jack
McCabe, a real-estate analyst and consultant in Deerfield Beach, Fla.
Observers say it is happening throughout Florida, but especially in
regions where raw land generally is less expensive and in greater
supply.
In Manatee County, D.R. Horton Homes, Medallion Homes and Minto
Communities have been among the most active buyers.
Horton, a national homebuilder from Fort Worth, Texas, has purchased
170 lots and has contracts or options on 110 more in several
developments. Local builder Medallion has paid $9.26 million for
finished lots in four subdivisions. And Minto, a subsidiary of a private
Canadian firm, has bought an undeveloped condominium project on Perico
Island and several lots in Lakewood Ranch’s Country Club area.
All say discounted land prices attracted them, but it was the local
housing market’s long-term potential that made them buy.
Insofar
as it signals an upward
trend in the market, that's good news. But it might spell trouble
for the smaller builders and developers who compete with the big guys
for land.
Even industry veteran Larry Webb, who has
started a new home building
company and has been a stout champion of the advantages of being a
private builder over the years, said he thinks private builders have it
tougher because financing has all but dried up for land purchases and,
in some cases, land development and vertical construction.
"Publics
can grab a giant share of the market," Webb said. "If a private guy
buys lots, it comes out of their own pockets."
There are ways
private builders can compete against publics, including building homes
in markets where the publics aren't; capitalizing on specialized niches
where the publics don't excel, such as infill development; knowing their
local markets better than the thinly spread multi-market builders; and
being more nimble in general.
"The inner-city opportunities are
going to be large," said David Weekley, chairman of David Weekley Homes.
"I don't see the large builders going into that. I see that as a good
place to play for privates."
No event as big as the
Great Recession will pass without leaving major changes in its wake.
2015 is going to be a lot different from 2005. Stay tuned--and hang on.
--B.D.S.
