The Boom Continues

The local new-home market will continue its boom cycle in 2006, although demand is cooling slightly from its current scorching pace and price increases are moderating. That means a more favorable environment for buyers, who are enjoying more choices and faster move-in times.

But remember: "cooling" is a relative term. By Northeast Florida standards, it simply means "slightly less hot." And even that modest easing trend may not be apparent in popular growth areas such as northern St. Johns County, the Yulee area in Nassau County and, as always, the Beaches.

Plus, look for much more multifamily development in the coming year. Land prices are making higher-density projects more economically feasible, but buyers are increasingly willing to opt for a condominium, a villa or a town home for reasons that have nothing to do with affordability.

"It's really more about the lifestyle," says Judy Watterson, director of sales and marketing for Admiral Homes/A Lennar Builder. "People are willing to pay as much, or more, to live in some multifamily developments because of the convenience and the amenities. It used to be that you expected to give something up when you chose multifamily over single-family-but that's certainly not the case now."

Watterson says that as many as half of Admiral's closings in 2006 are expected to be in multifamily projects-a situation few would have anticipated a decade ago, when local multifamily development essentially ground to a halt.

Those are just some of the predictions offered by a panel of experts interviewed by Jacksonville Homebuyer. And their track record is pretty impressive. After all, they're some of the region's most knowledgeable and successful builders, developers and real estate sales professionals.

The pros also agree that Northeast Florida real estate, even at today's prices, are a bargain compared to other areas of the country and the state. In fact, no insider we contacted expressed the slightest concern that Jacksonville is a "bubble market," meaning a market where prices have escalated beyond reason and declines are inevitable.

Of course, it's easy to get a little fearful of the heights when you look at recent history.

In Florida, the median price of existing homes climbed 33 percent in the past year, 105 percent in the past five years and 180 percent in the past decade, according to a recent regional economic review by Wachovia Corp.

Although comparable statistics for new homes weren't available, price increases appear to have followed a similar trajectory, spurred by the scarcity of land, rising materials and labor costs and more intrusive governmental regulation.

In the Jacksonville MSA-including Duval, Clay, St. Johns and Nassau counties-price increases mirror the statewide numbers. The median price of existing homes locally rose 81 percent in the past five years and 118 percent in the past decade. As of late 2005, the average price for an existing single-family home was $190,500-up from $87,400 in 1995.

Yet, despite those nosebleed-inducing numbers, Mark Vitner, senior economist and director of corporate investment banking for Wachovia, says the housing bubble idea is a myth.

"There is no housing bubble," says Vitner, who is responsible for tracking national and regional economic trends. "I don't see a bubble anywhere."

It's a matter of supply and demand, says Vitner. The country's rising population, coupled with low interest rates, has pushed demand for homes to record levels. At the same time, problems finding labor, materials and ready-to-develop land have curtailed supply.

Rising interest rates will have a modest cooling effect, he says, but rates would have to spike considerably to have a major impact on the market.

"Florida still has the best economy in the country," Vitner says.

Peter Rummell, chairman and CEO of The St. Joe Com-pany, a publicly held firm based in Jacksonville, agrees.

Last year, speaking to a group of 150 real estate brokers, Rummell noted that Northeast Florida has been largely immune to the economic turbulence experienced in other parts of the country.

"I don't see any reason why [the strong market] won't continue," Rummell told the brokers. "I don't think there's a real estate bubble here in Jacksonville."

Indeed, it's hard to see what would blunt Northeast Florida's momentum. After all, the region has plenty going for it-great weather, lots of water, small-town charm with big-city amenities and a solid, diversified economy with more jobs created every year.

With that in mind, here's what the panelists had to say about 2005-and what to look for in 2006.

BUILDER:
Vic Buscaino
President
Plantation Housing Corp.,/An Arthur Rutenberg Franchise

What kind of year did you have in 2005?
Great.

How do you anticipate the market will be in 2006?
Well, I think it'll be a challenge from the standpoint of materials costs increases. I foresee more increases there and labor will also remain a challenge. Everybody's read about the shortage of labor. That is obviously going to continue to have an effect on our industry.

What are the three most important things buyers look for when they visit a new home?
First, openness of the floorplan. They like to walk in a home and feel the openness. It's the height of the ceiling. It's the amount of glass. They like bright open areas. They don't like small rooms like they have up north.

Second, everybody seems to like to entertain, whether it's family or friends. So they like the idea of having the kitchen positioned so part of that it's part of the living area. That way, the person hosting the party doesn't feel separated from the guests.

Third, they want a separate place to either spend some time reading, sewing, doing paperwork or paying bills. Sometimes that manifests itself in multiple studies or hobby rooms.

What's the most notable trend in new home design and construction you've noticed in the past year?
Outdoor living spaces. We're getting requests to amenitize those spaces with fireplaces and larger outdoor kitchens, and to dress those spaces up with wood ceilings, beams, pools and water features-lots of water features. People are spending more outdoors, and I think that's a strong trend.

BUILDER:
Bruce Lingerfelt
Vice President
Toll Brothers/Florida North Division

What kind of year did you have in 2005?
It was a good to great year simply because sales were brisk. But because of that, we ran a little short of lot inventory. Typically, we were selling out communities before we had new communities ready to launch. We were struggling to pull some land together to develop. I think a lot of us were struggling with that. But it didn't hurt our year in a major way.

How do you anticipate the market will be in 2006?
Our particular outlook is very good. We're opening up a couple of master-planned communities, one being Coastal Oaks in Nocatee. We expect to begin infrastructure development mid-year, and we're going to open it up for sale sometime in the same time frame from a remote location.

We're also developing a large community south of St. Augustine called The Villages of Tuscany. We have at least five product lines going in that community.

What are the three most important things buyers look for when they visit a new home?
Location, meaning accessibility to shopping, restaurants and work, so that buyers can get where they're going in acceptable amount of time-and that amount of time is expanding each year.

The second thing is price-to-value-is the developer or seller creating a value for you? Buyers need to know that they'll make money when they sell.

The third thing is a combination of community amenities and home features. That's become more important in the last four or five years, especially in this particular market.

What's the most notable trend in new home design and construction you've noticed in the past year?
The ability of buyers today to afford options that once would have been out of reach.

They're buying bigger homes and they're looking for those fancy things, like granite countertops, stainless steel appliances and under-mounted sinks. And they're spending well over the standard 10 percent for upgrades.

BUILDER:
David Smith
President
Pulte Homes/Jacksonville Division

What kind of year did you have in 2005?
Remarkable. We grew our closings by almost 90 percent, with revenues up over 200 percent. We also secured our land position to continue to grow 25 to 30 percent a year for the next three years. Plus, we hired close to 100 people.

How do you anticipate the market will be in 2006?
Stronger than ever. In Florida, demand far exceeds supply. And in Jacksonville, we remain affordable compared to other major markets around the country.

What are the three most important things buyers look for when they visit a new home?
Location first. Plus they want a home designed for their wants and needs, depending upon their stage in life. And then there's the quality and reputation of the builder.

What's the most notable trend in new home design and construction you've noticed in the past year?
Lifestyle communities such as those built by Del Webb (Pulte's active-adult affiliate). It's not so much about a home as it is a way of life. It bucks conventional wisdom that a buying decision is all about a home's design. Clearly, it isn't.

BUILDER:
Judy Watterson
Director of Sales and Marketing
Admiral Homes/A Lennar Builder

What kind of year did you have in 2005?
It was phenomenal. We will have had over 550 closings at the end of the year. And our goal is to basically double that number in 2006.

Now that we've joined forces with Lennar (a large national builder), we're in a great long-term land position, with about 12,000 lots in the three-county area. And best of all, we're in the region's hottest communities.

How do you anticipate the market will be in 2006?
I think 2006 will be just as successful as 2005. We're in a fantastic position in the Jacksonville area, especially after the international exposure we got from hosting the Super Bowl.

We've got more people moving up here from South Florida, maybe partly as a result of the hurricanes. And relocation has continued to be strong from the Northeast and Midwest because of our great weather and because, despite the increase in home prices that we've seen, we're still a very affordable market. In fact, people are amazed at how much home they can get for their money.

What are the three most important things buyers look for when they visit a new home?
Well, quality is an overused word but I think it's still extremely important.

Also choices. They're looking for a builder who has a wide variety of designs to choose from, and who offers flexibility within those designs.

Finally, they want service and follow-up, from financing through construction. And we have a great warranty program, which is also important.

What's the most noticeable trend in new home design and construction that you've noticed in the past year?
I think the creativity of multifamily developments. They're no longer just apartments stacked on top of each other; they're architecturally pleasing and offer just as much appeal as single-family homes. But with multifamily, you also get a maintenance-free lifestyle.

BUILDER:
Howard White
President
Woodside Homes/North Florida Builders

What kind of year did you have in 2005?
We had a record year this year. We'll conclude 2005 with a 60 percent increase in revenue.

How do you anticipate the market will be in 2006?
I don't anticipate much change. I would expect maybe l5- to 20-percent increase in revenue.

What are the three most important things buyers look for when they visit a new home?
Location is important to all homebuyers. They also look at the street appeal and the aesthetics of the community. Another important element is the livability of the floorplan.

What is the most notable trend in new home design and construction you've noticed in the past year?
Fresh architectural styles-not the same cookie-cutter plans that are everywhere. Almost all buyers are spending more money on interior finishes, especially cabinets, solid-surface countertops and flooring.

DEVELOPER:
George Ward
Vice President/Senior Project Manager
WCI Communities/Northeast Florida Division

How are developers coping with shortages of close-in land? How far out might the Jacksonville market ultimately extend?
You can see the trend of the cities growing together. St. Augustine and Amelia Island were once remote areas to Jacksonville, but now they're rapidly becoming bedroom communities-especially for people who have a particular type of home and lifestyle in mind.

Land prices close to the city are so high that it culls the herd (of developers). Developers like us end up being the only ones who can compete, because you have to produce a remarkable end product that you can command higher prices for.