Palm Coast Homebuilders Surviving the Housing Bust
When the housing bubble burst, home builders were the first to suffer. New housing starts plummeted from a high of 416 in February ’05 to 10 – 20 per month. So how are the builders doing now?
Palm Coast, FL – November 11, 2010 – When the housing bubble burst, home builders were the first to suffer. Flagler new housing starts plummeted from a high of 416 in February ’05 to 10 – 20 per month. So how are the builders doing now? Many have disappeared but a few resilient ones remain. Gone are all the national high-volume builders. Some ceased to exist. Others simply pulled out of the Palm Coast market. A few local builders ran afoul of the law.
Names not seen on a City of Palm Coast issued building permit for several months include D.R. Horton, Wayne Homes (Centex), Holiday Builders, Mercedes, Masterpiece, Toll Brothers, and Weekly. But some local builders, although hunkered down, have managed to survive. Palm Coast and Flagler County have issued building permits recently to a number of them including: Seagate Homes, Adams Homes, Moronda, Country Club Homes (Rutenberg), Auburn Homes, Skyway, Intervest (ICI), Charles Rinek, Lancia, Olsen Custom Homes, Vanacore, CBV, and Paytas.
Palm Coast builders moved ahead of the national curve, aggressively dropping prices on their inventory of spec homes early in the bust cycle. Their spec inventory was depleted at least a year before the excess national new home inventory.
The Flagler Home Builders Association also remains healthy under the circumstances. Current membership includes 54 Builder/Developers and 140 Associate/Trades members.
Because of the dearth of home sales, most builders have suspended building spec homes and limited the number of model homes under construction. Some builders report increasing interest in custom homes but current government restrictions on appraisal standards has inhibited contracts. Gun-shy appraisers are often using lender owned sales and short sales as comparables; an unfair comparison. There is a pent up demand if only banks would approve loans.
Seagate Homes has emerged as the busiest local builder. Seagate was founded by local resident John Gazzoli 16 years ago. Based in Palm Coast, they build homes in communities in St. Augustine, Palm Coast, Daytona Beach, and Edgewater as well as on scattered lots in Volusia, Flagler, and St. John counties.
Seagate pulled 31% of all building permits for single-family homes in Palm Coast this year; 26 of 85 permits pulled through September 30, according to city records. "We are pleased that homebuyers are showing that they have confidence in our ability to provide them with a quality home," says Michael Sawdai, Seagate’s vice president of operation. Seagate Homes also ranked high in a recently released survey compiled by the Volusia/Flagler Business Report. That survey lists the company as the second-busiest home builder in Volusia and Flagler counties in 2009 with a total of 87 homes built at an average price of $180,000.
Seagate is one of the few builders putting up spec or inventory homes. They plan to build an inventory home on one of the five remaining lots in their Palm Coast RiverGate Community. They announced plans to build an inventory home in each of two St. Augustine communities as well; St. Augustine Shores and Whisper Ridge Reserve.
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Local Builder
Toby,
When I contracted for my custom built home with Lancia, I had ordered 8 tile insets for my Mstr Bathroom walk-in shower. One day I received a call in Illinois from Giulio Lancia. He said he was standing in my shower and didn’t think 8 insets were going to look good in the size of the shower.
I asked him how many he thought would look good if it were his shower and he said at least 12. I said put them in.
Then he said where would you like them (I had a set of plans in Illinois).
I said since you are there and I am not, where would you put them if it was your shower?
He had 12 inserts put in and it looks beautiful!
That’s what I call customer service above and beyond any I have ever received before or since.
You can be assured my next home will be Lancia built!
Depreciation worse than cars
The new construction is costing more than the finished product is worth. As market prices still reflect a lack of demand. An example of that is a house built in 2010 for $425,000 that would not sell for $325,000 the day it was closed on. Back in the day, 1998 to 2005 you would walk out of a closing and have made money, as the property was worth tens of thousands more. Why? Because the demand was there for new homes and they could not build them fast enough so people would buy the just built hardly lived in for big money, just to save themselves from waiting for the typicaly 6 month buildout of a new home to there liking.
A new Honda bought in 2005 to now is worth more by percentage than a new house is worth. Because they are in demand, it’s as simple as that.
And to further dampen the housing market is the proposal to disallow housing interest and tax deductions on income tax.
Renting is better, cheaper, and putting any cash, that would have gone to a new or even used house, into gold or stocks is the way many are going. That of course would change if the federal government stops spending.
Further more lumber has just gone way up, to kill home construction even worse. That’s because it is being exported to countries that are in a building boom, like China and India, where all the USA jobs went.
We are in a heap of trouble in this counrty that will not turn around for years yet to come.
This is of course my opinion, as a retired Real Estate Broker, and Certified General Real Estate Appraiser. So I’m not just blowing off steam, I’ve been there done that, and can see through the fog of the US economy, not to mention the dead ecomony of Palm Coast area.
Lender and short sales
I can’t see why other Realtors want make difference between the different sales. I see that short sales and lender owened are all just a part of the market and sell at market price. If all houses were resident owner sold there is still a varation in condition and price. I don’t see that the banks are giving away houses and deflating the market. It looks like listers with over priced houses, just need something to blame.
Gun Shy Appraisers
Your article mentions the government imposed restrictions on appraisal guidelines and then goes on to comment that "gun shy" appraisers utilize bank related transactions in appraisals of new homes, which are not comparable.
Appraisers are also required to satisfy lender imposed requirements, many of which are more restrictive than the government imposed guidelines. Additionally, appraisers ultimately must produce a credible appraisal that meets guidelines but that will also pass lender underwriters review in order to be utilized. Due to the extremely limited number of sales of NEW homes for comparison, appraisers often times must utilize bank related transactions to meet many of these guidelines and requirements. The sheer volume and dominance of these transactions in the Palm Coast market area also makes the argument that "market value" is not only influenced by these sales but, in fact, is the only active market segment in many neighborhoods. By making the proper adjustments to reflect conditions of sale, etc., the appraiser should be able to demonstrate the market reaction to these sales in relation to new construction sales.
While I agree that there are appraisers whom do not take the time to perform due diligence in research, I don’t think that most appraisers are "gun-shy", they simply have to analyze the sales in the market area in which they work and must satisfy a large array of government and lender requirements that often times require the utilization of these bank related transactions. The overall lack of typical sales and new construction for use as comparables requires them to utilize the sales generated from the most dominant market segment in the Palm Coast market area, bank related short sale and foreclosure transactions. Appraisers are glad to support their value conclusions when there is sufficient and clear data to support those conclusions.