Boomers Fuel Surge in Home Starts in SWFL

new-home-starts-swfl

Housing starts bounced at a 20 percent clip in Southwest Florida last year, but analysts say the baby boomer-driven demand still outpaces the supply of new homes. Builders broke ground on 5,591 new single-family homes in the region in 2016, and new and future retirees will continue to fuel a home construction surge for several years to come, according to a new report by data supplier Metrostudy.

Home building cooled somewhat in the final three months of 2016, with housing starts rising just 3 percent over the year. But that followed three straight quarters when the region posted the highest number of home starts in 10 years.

The Sarasota area has yet to experience the peak demand from the boomers. The new housing inventory stood at a 6.5 months’ supply at year end, which is on the “low side” of equilibrium. While 100 new finished vacant lots came on the market last year, the stock of vacant, developed lots, known as VDL, was down 1.2 percent.

Arguably, the biggest supply issue is VDL supply, and the challenge will be keeping up with demand over the next few years. Potential road bumps still include rising interest rates, rising costs, affordability issues, public sentiment towards growth, the overall economy and the ability to sell homes ‘up north.

Local builders say home sales remained strong in 2016, primed by boomers who have retired or are making their way to the Sunshine State. Lakewood Ranch-based Neal Communities, the largest locally based home builder, said it posted a record 1,109 sales last year, which beat the previous record by two sales. Closings hit $430 million, up from $369.6 million the prior year.

“If the worldwide financial environment remains the same this year, we expect further improvement in 2017,” chairman/CEO Pat Neal said.

Competition from new construction helped deflate sales of existing homes by 2.6 percent in the Sarasota-Manatee region last year.

New construction was huge in 2016. Resales took a beating because new construction communities can offer thousands of dollars in incentives that a resale cannot; money towards upgrades in the design center, and credits toward closing costs which are tough competition.

Confidence among builders in the single-family market remained firm in January in the National Association of Home Builders/Wells Fargo Housing Market Index.

NAHB expects solid 10 percent growth in single-family construction in 2017, adding to the gains of 2016. Concerns going into the year include rising mortgage interest rates as well as a lack of lots and access to labor.

In Southwest Florida, starts for new homes priced under $250,000 fell 1.1 percent from 2015, Metrostudy said, while starts above that price jumped 30.2 percent. Metrostudy expects another strong season in 2017 and several more to follow in the coming years.

To learn more about new construction in SWFL contact an expert member of the 9 Core Realty team today!

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