Bust?

Discussion in 'Economics' started by Brandonf, Feb 15, 2006.

  1. Brandonf

    Brandonf ET Sponsor

    I was just talking to my neighbor who is a home builder. Over the last 3 years he has averaged 60 to 70 new homes per year in Port Charlotte, North Port, Englewood, South Venice and Punta Gorda. These are affordable type homes, geared towards teachers, firefighters etc being priced between $200 and $400,000. He does not build anything on spec. He just owns a bunch of lots and whatnot and when someone wants a new home he signs a contract with them and then gets at it. He does not deal with Investors. At any rate, I was talking to him this morning and he has only signed TWO new home contracts so far this year. He is shitting himself and is probably going to have to start laying off a lot of his guys.

    His cousin is a luxery builder, homes over $2millon. He does 3 to 5 of them per year and is in the same boat. He has not signed a new contract in 8 1/2 months.

    It will be very interesting to see how this all shakes out. Obviously the homebuilders would be a possible short since most of the builders are strongly dependant on Florida..but I think this whole area could be massively effected if there was a big slow down. Currently unemployment is around 2% here I think ,and a large part of that is due to construction..if those jobs start to go others go etc etc.

    Anyway, I only got this from one guy. He is someone who I trust and is "on the inside" of the industry....but I was wondering if anyone else had some insights. I know Jem is a realtor in the SRQ area..what are you seeing? Anyone else?

    Brandon
     
  2. imc

    imc

    Very interesting, Brandon. I was looking into buying a holiday home in Florida but not in the present 'bubble' climate.
     
  3. I read that Mr Bernanke thinks that housing will remain healthy, in a speach this morning.
    But then again its his first day on the job.
     
  4. Two friends of mine own a construction business. they were in the same boat. 60 - 70 homes/ year. That is not the case this year.

    Their main problem is that the huge building companies, such as pulte, KBH, etc, have moved in and built hundreds of spec homes in an area which is used to having maybe 30 - 50 specs avail at any given time.

    People don't want to build if they can look at 10 finished homes which haven't been slept in.

    My friends have moved further away from the city and are doing OK since they already had somewhat of a base in the boonies. They'll survive, but they're not happy.
     
  5. More and more companies are looking to leave the city and get into the suburban areas to take advantage of the smaller property taxes and the cost of doing business. If the companies are leaving then the employees are leaving too. I wouldn't worry about your friends to much. The business is growing outward not upward.
     
  6. jem

    jem

    BrandonF there are still buyers. But inventory has grown pretty large. In the last month we have seen over 600 pendings and backup neededs on the sarasota mls but there are about 6300 listings. (single family homes)

    I have noticed that buyers are picky. But the lower priced homes are still selling pretty well.

    I personally am a little bummed. I had a chance to sell the beautiful spec home we are building for a top price about a month ago. But my wife started crying because she wanted to move into it. I also got heat from her Dad over the phone. I was not happy then and I am concerned now.

    My wife figured we could sell the home we are living in. The home we are in has much more competition and while it has had showings, we have not gotten any offers. Needless to say I am concerned and now a few houses for sale in our spec homes price range.

    I am not quite sure what to do, but I think I will put the big home back on the market soon and I bet I will get less money for it. It will be ready the end of April and I do not want to carry two homes. I currently have substantial equity in both homes but I see some of it dissappearing.

    The big home was about 706,000 when I bought it about a year and two months and I got 3% back in Realtor fees. I could have sold it for 930-950 a month ago minus 3% to the realtor. It is 4000 square feet on a Cul de sac. Lots of upgrades and a walk to great schools. Now because of the competition I suspect it will not fetch as much.

    The house I am in was 365 in 2003. At the very peak it was probably worth 570-590 because there were tons of buyers and no sellers last spring. I did not sell it last spring because I waited until mid october for cap gains reasons. (My mistake). I have it on the mls for 540. I dropped it 10 grand about 10 minutes ago. Buyers are still paying close to 600 prices for very similar houses but those houses are a bit newer with better tile and nice views.

    So my conclusion is that if you have a nice house in a prime location the market is still fairly strong. But if you do not have a prime house the buyers are waiting for real bargains.