Are Home Builders in a Bind?

There’s a steady supply of part-time residents who want to escape the cold weather and move down to sunny Southwest Florida—but inventory is running dangerously low.

According to the Fort Myers News Press and Metrostudy, there are only enough houses available to meet 1.1 months’ worth of demand.

“That level of scarcity hasn’t been seen here in recent memory except briefly at the end of the housing boom in 2005,” Metrostudy’s regional director in the Naples-Fort Myers area, David Cobb said. “In some communities, “Builders have actually kind of put caps on sales, and they say, ‘We’ll only sell 10 houses this month because that’s all we can build’ ”

There are 11,227 finished vacant lots, but according to the Naples Daily News it’s not as bad as it seems:

“Although slightly above a normal level, this metric does not truly represent the finished lot situation in Southwest Florida, as many of these lots lie outside the core in fringe areas,” Cobb said. “All of the ‘A’ lots in this market are under development, and they are being conveyed to end users at a rapid pace,” Cobb notes in his report.

Could This Mean Buyers Will Have to Pay More?

One of the common principles of economics is the principle of cost and demand. As supply goes down, prices go up.

“One trend worth noting is the annual starts by price range. The supply of homes under $200,000 has dwindled, while big increases are noted in the $250,000 to $400,000 price range,” Cobb said.

Not All Builders are in a Tight Spot

However, Naples-based Stock Development is not in a bind.

They build “spec homes,” or houses on which construction started without a commitment from a specific buyer.

And as a result, Stock is in good shape as far as inventory goes, said Claudine Leger-Wetzel, vice president of sales and marketing for the company.

“We do have quite a bit in inventory right now,” Leger-Wetzel said. “We could close about 70 homes in the month of February between specs and models that we currently have for sale. We constantly fuel our pipeline.”

It Won’t Last Forever

Randy Thibaut, president of Fort Myers-based Land Solutions is optimistic.

“I think in 2012 and 2013 we went from an extreme surplus (of lots) to the point where we’re at equilibrium,” Thibaut said. “Right now in the hopper are 15,000 new lots coming onto the market in the next two years.”

A Run Down of Housing Starts in the Area

Also according to the Napes Daily News, in the fourth quarter, housing starts fell by 20 percent quarter-over-quarter; however, they were still up year-over-year.

Builders started 712 homes in the fourth quarter, down from 894 in the third quarter.

Several factors can explain the drop including rising interest rates, escalating home prices and a drop in consumer confidence following a government shutdown in October, Cobb said.

“It will remain to be seen if this is a trend or not,” he said. “It may just be a blip.”