New homes on the rise?
Published: Sunday, June 9, 2013 at 7:45 p.m.
Last Modified: Sunday, June 9, 2013 at 7:45 p.m.
Homebuilders and Realtors are trying to steer buyers to new homes as rising demand for existing homes has cut into the inventory of available listings and increased prices to the point that new construction is becoming more attractive again.
But as new home construction picks up, builders say they can foresee a shortage of buildable lots in the future as they work their way through developments planned before the crash with few new developments in the works.
Greta Rice and Kara Bolton, the respective presidents of the Gainesville-Alachua County Association of Realtors and the Builders Association of North Central Florida, organized a wine-and-cheese gathering Tuesday so their memberships could talk about how to help each other through the opportunities and challenges of a changing housing market.
A steady stream of Realtors stopped by homebuilder Warring Homes' table, which was covered by 18x20-inch photos showing the inside and outside of homes with staircases, a pool and a kitchen with granite countertops and custom-built cabinets.
Greg Warring stood behind the table in a polo shirt answering questions about lots, home sizes and prices, and describing the company's high-end homes shown in the photos.
The scene was repeated around the conference room at the GACAR office Tuesday as more than a dozen builders showed their offerings to about 80 Realtors.
The recession is over, but builders still are finding it difficult to get financing to build speculative homes that don't have a buyer lined up, leaving them without a product for Realtors to show buyers, Rice said.
To address that, GACAR is the first local Realtors association in the nation to allow builders to include model homes that are not for sale and design plans for unbuilt homes in its Multiple Listings Service, a database of listings available to Realtors to help clients search for homes.
Realtors started working on getting the building plans in MLS about 10 years ago to strengthen the relationship between builders and Realtors, said Gainesville MLS President Patti Moser, who is also president of Horizon Realty of Alachua.
Rick Howe of Howe Development said that since the local market consists of small builders and developers who don't have the huge corporate structure and advertising budgets of big-city developers, "our Realtors are critical to our marketing."
He said the MLS idea was put on the backburner when the market tanked. Moser said it was approved earlier this year by the National Association of Realtors.
Howe and Moser talked about the MLS listings Tuesday while standing in front of two easels displaying poster boards showing the lot layout of two Howe Development subdivisions — Oak Ridge at High Springs and Millhopper Forest.
Since the building plans must have a broker to be listed, Howe is working with Moser to list plans for home lots in Oak Ridge, which he bought out of foreclosure a couple of years ago.
"That way every agent in Alachua County can see it — and that's huge," Howe said.
Rice said they also are trying to improve communication between builders and Realtors to overcome common concerns builders have that Realtors don't understand new construction and won't sell it, and concerns Realtors have about not getting paid if they bring customers to builders.
The MLS listing requires builders to include a compensation policy, Moser said.
Tommy McIntosh, president of Prudential Trend Realty, was one of the people instrumental in getting the builders' plans in MLS. He stopped by the meet-and-greet Tuesday.
"There used to be a lot of speculative inventory and there's not anymore," he said. "There used to be more builders' models in the community, so this is an opportunity for builders to reintroduce themselves to the Realtors. We don't see them because there aren't spec houses in inventory."
McIntosh said there has been pent-up demand for new housing for families. The market will need more new construction once homebuyers work their way through the available inventory.
Howe has seen that in Oak Ridge at High Springs, which he described as entry-level housing.
"The last four or five closes, there hasn't been anyone over the age of 30. Some with kids. All under the age of 30. One of the two works at UF or Shands or downtown," he said.
The big unknown to the inventory challenge is the so-called shadow inventory of delinquent mortgages that will be foreclosed, McIntosh said.
"Nobody knows how bad our foreclosures are," he said.
The nationwide trend of investors buying foreclosures from banks in bulk might help take some of those off the market, McIntosh said. An investor typically will buy hundreds or thousands of homes from a large bank, and a few of those could be in Gainesville.
The driver behind any housing recovery is a jobs recovery, and the Gainesville Metropolitan Statistical Area added 2,800 jobs from April 2012 to April 2013 for a 2.2 percent growth rate, according to the Florida Department of Economic Opportunity.
Over that same period, existing home sales were up 24 percent, and the inventory of homes for sale was down 17 percent. With 181 sales in April and 1,297 listings, the market had a 7.9-month supply of inventory compared with 11.6 months a year ago.
With new construction hit hardest by the housing bust, the crash and recovery has been more dramatic.
Permits for new single-family homes in Gainesville dropped to 20 percent of the peak in 2005, when 1,448 homes were built, down to a low of 296 in 2011. Since then, permits were up 34 percent in 2012 to 397 and another 81 percent through the first four months of this year — up to 199, compared with 110 permits for the first four months of 2012.
While sitting next to Warring, whose homes he lists, Steve Elwood of Elwood Realty Services said about 2,500 lots were ready to build when the market tanked, but of those that remain, many are tied up by a select few builders who received low prices on struggling developments.
Warring said 1-acre parcels are in very high demand but are particularly hard to find.
The lack of an independent builder subdivision has many builders nervous, said Blake Fletcher of Fletcher Construction.
"There are builders out there that are saying, ‘OK, the market's come back. How do I find lots?' and ‘Oh my lord, this will only keep me busy for a short period of time.' "
Fletcher said a rise in home construction should bring resale prices up, which will create demand to develop.
Howe said home prices probably need to come up another 20-30 percent to make it worthwhile for developers to buy raw land, put in roads and water, and deal with the costs of local government regulations.
He said there is a two-year lag time between starting development and having lots ready to build.
"It's a race against time," Howe said.