Boom and bust

Can Southwest Florida break the pattern of boom and bust in real estate? As fast as homebuilders rushed out of the area during the bust, they're coming back strongly in the recovery.

At a gathering of 325 building industry executives from Lee and Collier counties, Land Solutions CEO Randy Thibaut warned that as many as 20,000 lots now on the drawing boards could swamp the nascent housing market. That's in addition to the 9,000 lots that already are going to be developed over the next two years.

Thibaut, a well-regarded land broker in the region, says the number of vacant developed lots has dwindled from a supply of 160 months in the third quarter of 2009 to 39 months today based on current sales pace. A market in equilibrium is between 24 and 36 months, he says.

But a rush of another 15,000 new lots could push that back to an 80-month supply based on current sales pace, Thibaut warns. “It wouldn't take much for that,” he notes.

The list of builders returning to the area is growing, and one standout includes Hovnanian Enterprises. The New Jersey-based company made the ill-fated acquisition of First Home Builders of Florida in Fort Myers at the peak of the market in August 2005.

Hot areas include the Immokalee Road corridor in Naples, where GL Homes' Riverstone has sold more homes than any other community over the past year. “It is on fire, there's dirt moving everywhere,” Thibaut says.

Another busy area is along Corkscrew Road in south Lee County. “There's a lot of deals being inked,” says Thibaut, who believes that will drive interest in less desirable areas such as Lehigh Acres, North Fort Myers and Charlotte County.

In Cape Coral, for example, as many as 45 builders are building homes in what was considered the epicenter of the residential collapse. “They're not building cheap homes, they're tearing down waterfront lots,” he says.

To be sure, all that activity has boosted the price of residential land. “Land prices have doubled, tripled and in some cases risen four times,” Thibaut says.

Sensing the risk of oversupply, some homebuilders are developing strategies to mitigate that. For example, some are selling vacant lots to developers who will hold them in exchange for the builders' deposits. If the market turns bad, Thibaut cautioned that builders won't be stuck with inventory and will forfeit their deposits.

And some builders have resisted seller demands for ever-higher prices. “We're starting to see some brake tapping,” Thibaut says.

On the demand side, it's not clear how many homebuyers there really are, particularly at the luxury end that is the current focus of builders now. “Not everyone is coming to Naples and buying a $2 million house,” Thibaut says.

Thibaut says he's especially concerned about younger buyers. “They watched their mom and dad lose their home,” he says. “That's why apartments are booming.”