Home builders see fresh opportunities in the market: A roundtable discussion
Herald-Tribune Real Estate Editor Harold Bubil speaks with Tom Dabney, developer of The Forest at Hi Hat Ranch, and Forest homebuilders John Cannon of John Cannon Homes, Roy Dupuis of Anchor Builders, and Albert Sanchez of Gibraltar Homes about the state of local home building and the decision to restart the development’s marketing effort. Joining in is Brian Wood of Signature Sotheby’s, the onsite sales agent.
The Forest at Hi Hat Ranch, featured in the Herald-Tribune’s Dec. 13, 2009, Real Estate section, has 54 home sites on 270 acres, with each site ranging in size from 3.0 to 5.6 acres. Lot prices range from $190,000 to $450,000, and home-lot packages start in the $700,000s. Eleven of the sites have been sold, and nine houses built.
The Forest at Hi Hat Ranch is off Clark Road, five miles east of Interstate 75, in Sarasota County.
The new builders, Anchor and Gibraltar, replace original builders Lee Wetherington Homes and Arthur Rutenberg Homes/M. Pete McNabb.Harold Bubil:
What was behind the decision to bring in new builders and jump-start the development?Tom Dabney:
We were moving along really well in November 2006 at the time we had our grand opening. We had a phenomenal turnout for the two-day event. We were selling briskly, and then it just came. That market slowdown hit, and it didn’t just slow, it stopped.
Meeting with Roy and Albert and John Cannon, we were delighted to hear that there is new-home construction interest. Gibraltar had sold four homes in July or August, and Roy had had some activity. John had sold quite a few homes under his promotion he had run back in the spring, the $99-a-square-foot thing; there seemed to be interest in new construction.
Albert and I work out at Bath & Racquet together in the mornings, and we seemed to run into each other doing the treadmill time, and we started talking about, is the market ready yet. And he felt it was. So I credit Albert with giving us the confidence to move forward, because as you know, the marketing and advertising required to bring a project up is expensive, and oftentimes those are non-recurrent dollars. You have to replace those dollars with sales. We feel the time is right.Harold:
Albert, you have been building smaller houses in Bougainvillea Place near the Ellenton mall. In The Forest, you have to build at least 4,000 square feet. How are you going to make that transition?Albert Sanchez:
When we analyze a project, we start off by saying to ourselves, “Who is the buyer?” That is our threshold question, because if we can’t identify a buyer, or a group of buyer profiles, then we don’t know how to design for them and how to price for them.
What we saw, and what Tom and I talked about for more than a year, is that unlike any other community of which we are aware in the Sarasota-Manatee county area, The Forest provides an opportunity to create an estate-type home in a Sarasota environment. We consider this location to be as well-located in proximity to schools, retail, beaches, as any normal smaller-lot master-planned community. So we saw the opportunity for folks to live in a forest, in a larger home on a larger lot, and still have the same kind of proximity.
Once we then started analyzing our new model pricing, lot pricing, home pricing, we realized that we could provide a magnificent estate home and lot in this environment in the $700,000 range. Once we said, “OK, we can get into that range,” then we started saying, “There are buyers who are in their 30s and 40s, with children and one or two good sources of income, who would like to have a little bigger yard, whether it is for a tennis court or a batting cage, or whatever, in an upscale environment, next to other beautiful homes that are architecturally different.” We started seeing a more mainstream buyer opportunity, and that is what we are going to target. We’re going to target that 30-, 40-, 50-year-old group that wants a beautiful estate home on a beautiful lot in a more traditional American feeling.
We worked off of our Lakewood Ranch experience. Most of our buyers there tend to be in the second-home buyer mode (3,000 to 4,000 square feet there). The lots in The Forest give us a lot more latitude to design bigger, wider homes. And that’s a real joy. It is tougher to design a great floor plan in small spaces. We are still bringing our basic business model of homes in the 3,000- or 4,000-foot range, because we think the 5,000-square-foot buyer may be now the 3,000- to 3,500-square-foot buyer (in the deflated market). Our homes are going to be focusing on 4,000, because it’s The Forest and that’s the minimum square footage, but we’re pushing that 4,000, where in years past it might have been much larger square footages.Harold:
How are you going to accommodate the “no-repeat rule,” which states that no two houses in The Forest can look alike? Albert:
We started with different architectural styles. We have a sense that every buyer – even at Lakewood Ranch, with our 2,500-square-foot homes, buyers are customizing. They want to change the look of the homes inside and out. We are going to start out with two or three architectural styles and floor plans, with the full notion that buyers are going to come in and say, I kind of like that conceptually, now let’s customize.Harold:
Even though you don’t have to build a model at The Forest, you do have to invest in planning, pricing and permitting a house, or two, under the adopt-a-lot program so that potential buyers can see that there are houses ready to build. What gives you the sense that the time is right to start building again?Roy Dupuis:
The last few years have been slow, but recently we have seen a lot more interest in the market, both at the models and people looking to do plans in some communities. I feel much better about the market than I did six months ago. We even have some preliminary plans for a client in here.
The lots are so big and gorgeous; you have so much latitude in here. The house we’ve designed for this client is 140 feet wide. You can’t do that too many other places anywhere. Here, every lot is different. If the client wants a house with a little more width, you can do it. There is a lot of opportunity here.John Cannon:
I’ve been here since the beginning. We are seeing increased activity. We have probably three of four times the activity from ’08 to ’09 – a dramatic uptick in the market. Traffic through the models has increased dramatically in the past few weeks. We are at 44 deals year-to-date, and we were eight or nine all of last year.
Our number of projects in the pipeline has doubled in the past six months. We’re busy. We’re backed up. That’s a good thing.
The price points are definitely different. We are seeing a more frugal buyer. They are definitely evaluating their buying decision. We are seeing a lot less square footage, a lower level of finish – still a nice level, but not all the bells and whistles. Nothing is overdone.Brian Wood:
The market has really shown some signs of life, and it’s been a refreshing change. The Realtors and builders have had their challenges in the last few years, but what we are noticing in the resale market is people pricing their homes correctly, as well as some of the short sales and bank-owned properties starting to dissipate. That is creating an opportunity for the new construction to come into play. When clients come into the marketplace and they look at what is left, in terms of choice, it’s more limited.
Another thing is that we have changed the building code considerably since the market dropped off. We require impact-resistant glass. And a lot of the green features that were implemented were not required on the previous homes. So there are a lot of good reasons for people to consider new construction over some of the resales because of those factors. Insurance savings, energy-efficiency savings. When clients look at what is out there in the inventory, they may not find what they are looking for, and for a little bit more, they may be able to build a brand new home with some of the latest code-compliant features in them.
We are seeing bidding wars. It is a shock for the clients, because they have been reading the press and have been watching and waiting, and when they are ready to make an offer, they find that it has been taken already. That is a good thing. I think we are starting to see the seeds of growth being planted.Harold:
Are you seeing the fabled “pent-up demand”?John Cannon:
Some of them are asking about costs and is it better to wait or better to buy. I do think there is pent-up demand. Harold:
What about the cost to build? It fell when the market collapsed. Is it still low?John Cannon:
Dramatically. You can build a quality new home for what some of these distressed properties are selling for. I am talking about a quality one (no compromises in condition, location or features).Roy Dupuis:
The subs (subcontractors) have gotten as tight as they can. As soon as the market picks up, they are raising prices.John Cannon:
We are starting to have subcontractor-availability problems. I’m having problems getting guys off the unemployment rolls. They would rather stay at home than work for these prices. There is a window for the astute buyer to move forward and reap some real rewards.