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Building Permits Drop in S.W. Florida
| | Monday, July 16, 2007 @ 03:38 PM EDT
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Contributed by: Michael Thompson
Michael Thompson Properties
Read more archived articles about Construction and Building
Remember the Good ‘ole Days? Not long ago you could contract with any builder in just about any area in S.W. Florida, but more specifically in Lee County, FL., wait several months while making no-payments during construction and sell the house upon the C/O (Certificate of Occupancy) being issued and make $50,000 or more. Times are a changin’.
In April 2007, the new construction building permits issued in unincorporated Lee County were at 264 permits. Unincorporated Lee County includes Lehigh Acres, the Town of Ft. Myers Beach and Bonita Springs. The same month a year earlier, in April 2006, there were 865 permits issued, that’s a serious drop. As the market has sky-rocketed with excess inventory, specifically in Lehigh Acres and Cape Coral, speculators are less and less likely to build solely on speculation. Same can be said for banks. Every bank from here to California would loan someone money to build on speculation, now, good luck in finding them as well!
The excess inventory in our market not only affects the absorption rate, which is a ratio compiled to track how fast homes are moving in a market, but also large developers like W.C.I. and Lennar Homes are laying off employees. Some local builders in Cape Coral and other areas are just shutting their doors altogether. Let’s not forget how the excess inventory has affected the Rental Market. Rental properties flourished for a few years, especially in East Ft. Myers, but now, times are a changin’. Renters are able to rent brand new homes for the same price they could rent one for that is smaller and 30 years older. Is this good or bad for the local economy? I my own personal opinion, unfortunately I think it is a good thing. I say unfortunately because its awful people are losing their jobs and landlords are unable to break even with their rental properties. It’s a good thing because the market is correcting itself. This is Tough Love.
With the mania now over regarding new construction, the market has been correcting itself. Foreclosures are extremely high, which means banks now hold a real estate portfolio and they do not want to be the fall guy for all of the bad debt. The market is still being saturated by builders, realtors and mortgage brokers alike by advertising build “Affordable Homes”. Does our area need affordable homes, well of course, but creating more inventory is not the answer. One thing that would help ease the market conditions is to stop building unless you are the end user, or truly building as a 2nd home or Retirement home and not just applying for the loan as such.
Unfortunately I was one of the speculators who saw “The American Dream” instead of the “Overall Picture”. It’s also tough getting phone calls from all over the country listening to speculators tell me they have a house in the N.W. Cape and they owe $350K on it and it’s worth $240k at best. This is a great time for “Investors” to make money. In business, if you cannot adapt to change, you will be run over. What I am doing is learning ways to adapt with the times by studying the market, numbers and how it impacts the overall picture. If anyone knows me, they know I am no rocket scientist, but that’s ok. As long as you can learn from your own mistakes, and able to keep a positive attitude and be motivated to do better, then you can live to fight another day. If you sit back like some people I know and just give up and bury your head in the sand, then don’t be surprised when someone comes along and kicks you in the rear.
One way I am learning to survive in this market is by making offers. I cannot make money if I am not making offers. What I have realized is this really is the land of the plenty right now because the majority of people do not want to work hard. That goes back to the old saying, 10% of people make 90% of the money. Opportunities exist all over the place, make offers. If the numbers fit, you must submit. I have a client who made an offer of $55K on a property that was listed for $90K, seller agreed to slightly above the $55K offer. Don’t be embarrassed by your offer, in this market, people would welcome most offers, just ask your realtor.
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