Lee County permits to build new homes in 2013 spiked up 40 percent while foreclosures fell 45 percent in 2013 as the area’s given-up-for-dead residential construction industry roared back to life. But with the burst of activity came some old worries: a tight labor market, ever more expensive building materials and the prospects of higher interest rates. For the year, builders pulled permits to put up 2,386 single-family homes compared to 1,707 in 2012.
Meanwhile, statistics released by the Southwest Florida Real Estate Investment Association showed that foreclosures fell from 7,600 to 4,212 in the same period as the firestorm of failed mortgages by homeowners and investors gradually burned itself out. All in all, builders were happy with the sudden availability of work.
The market in Southwest Florida is picking up pretty good and of course there are more new builders that have taken the opportunity to break into the building market buying up most of the available Southwest Florida land for sale. Still, as the market heats up issues are arising. There’s not a large enough labor force in the area and there have been price increases for materials as well as wages.
Several factors combined to create a more energetic market. Chief among them was the cheap money for mortgages and the fear that they would be going up, so you have a lot of buyers, particularly young and first move-up buyers, concerned that if interest rates went up much they’d be out of affordability. Many of those buyers had the down payment and had gone through the two-year period they had before they were allowed to apply for a mortgage again after a foreclosure or short sale destroyed their credit.
That trend was amped up by the fact that there’s pent-up demand for new housing because few new homes were built in the years since home prices collapsed at the end of 2005. It’s not a situation that can last forever. Clear interest rates will eventually have to increase as the Federal Reserve scales back its efforts to keep money “cheap”. For every point the interest rate goes up, say for an average house in Lee County, a $250,000 house, that’s $20,000 less borrowing power the buyer has. For bigger houses the effect is dramatic.
One problem that isn’t coming back soon is the prevalence of foreclosures that drove down prices as foreclosed homes came pouring back on the market after prices fell apart. Most of the people vulnerable to a foreclosure have already lost their homes.
But ongoing economic uncertainty may have an effect on how strongly the baby boomers’ retirement plans continue to support this market as boomers decide how long to work before retiring and buying a home or lots and acreage for sale in the area.
To buy into the robust Lee County, FL real estate market contact a member of the Gratia Group Land Sales Team at (239) 333-2221.