Manatee builders taking advantage of low land, material costs

jsalman@bradenton.comFebruary 6, 2012 

MANATEE -- Residential developers across Southwest Florida are back to the business of building new homes as depressed land values and shrinking material costs make prices more competitive with existing homes.

Developers have been buying up bank-owned parcels in Manatee at a heavy discount, especially within the past year. Some are building immediately. Others are adding to their land position to prepare for a resurgence in demand.

New residential building activity has risen to its highest level since the days of the boom. Even national builders, chased from the market in 2008, slowly are making their return.

“We’re still in the mix of new homes versus existing stock but the price points are coming together,” said Alan Anderson, executive vice president of the Manatee-Sarasota Home Builders Association. “There are land deals out there, and developers are looking at that. If you can bring that portion of your cost down, prices to build will be lower, and you can sell the homes for less.”

The prices of building material, like drywall and concrete, have come down drastically in accordance with the drop in new home demand -- a trend fueled from the proliferation of foreclosures.

Coupled with a 60 percent slide in undeveloped land prices, and a recession-battered labor force willing to work for less, developers can now build communities at the lowest cost in years.

Many are doing just that.

In Manatee County alone, developers have pulled 361 new residential building permits between Oct. 1 and Jan. 31.

That tally represents a 31 percent increase over the same four-month period in 2010-2011 and a 22 percent jump from that time in 2009-2010. It’s also a 160 percent surge over October 2008 through January 2009, according to a Bradenton Herald analysis of the records.

Residential building permits have climbed each year since 2008, with 1,109 new permits issued in 2011 -- the best since the collapse of the housing market.

A return to about six months worth of existing home inventory has bridged the gap on the price difference between similar used and new homes. Four years ago, that ratio was closer to 50 percent, builders estimate.

“People got back to the reality of what things are really worth and not the inflated values of 2004,” said Carlos Beruff, owner of Bradenton-based Medallion Homes. “When the price between new and used gets tight, people will always buy new.”

Medallion Homes is coming off a record year in 2011, when the company posted slightly more than $60 million in gross sales. The year’s 142 homes sold was up from 112 in 2010, Beruff said.

To take advantage of the land market, Beruff recently purchased a 289-acre tract of depressed property on Upper Manatee River Road for $4.7 million. The former owner, a group that developed property for Lennar, lost the site to the bank.

Medallion Homes is still finalizing plans for the property, with development likely two to three years out.

The story has been the same with Lakewood Ranch-based Neal Communities.

The builder has just purchased two properties, is under contract with three, and is engaged in active negotiations on several more. All but one are bank owned.

Neal Communities recently bought 41 acres on Village Green Parkway in Manatee for $1.8 million, and another on State Road 64 for an undisclosed amount.

Neal Communities announced last week it will expand out of the Manatee-Sarasota market for the first time when it builds a 120-unit villa development in Estero this year. Two other small properties in Naples are still under contract, as is one in Englewood.

To accommodate the southern growth, the company plans to open a satellite office in either Lee or Collier counties within the next six months.

CEO Pat Neal said he’s just preparing for what lies ahead.

“This is the sixth time I’ve seen this movie, the last being 2002,” he said. “Now, we’re going through it again. Florida is a boom and bust economy. We saw the bust, now we’re headed for the boom.”

Similar to Medallion, Neal had its best year ever in 2011, with 376 homes sold and more than 400 under contract. The company reported total revenues last year of $126.3 million.

There are several factors at play. Aside from the drop in new home prices, many retirees who put off buying during the recession, now are making the move to Florida. They’re generally not the type of consumer interested in a fixer-upper foreclosure or the waiting game of a short sale, experts say.

Bank financing for residential developments -- which had been put on ice -- also is slowly becoming more accessible, opening the door for smaller developers with less capital.

“The money is there for projects as long as the developer has 30 to 40 percent,” said Michael Otis, principal with Development Financing & Construction Accounting Inc. in Lakewood Ranch. “The banks are still taking a hard look at the developer, and they have to have some skin in the game.”

Most builders are preparing for a year with sales they see as a healthy normal.

“The phones are ringing off the hook, and things really appear to be picking up,” said George Dudas, owner of McKenzie Homes in Parrish. “A lot of the (existing) stuff on the market is in some cases not desirable. Some people just want new.”

Josh Salman, Herald business writer, can be reached at 941-745-7095.

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