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This is a little departure from my normal posts that are mainly informational - call it an Opinion Piece.

Right now, the entire Real Estate Industry in Florida is hurting as evidenced in all the bad news being reported.  It isn’t all bad, though.  Houses are selling because there are people that need to buy and there are those that are finding bargains already.

Builders are sitting in a precarious position, though.  As prices were rising so rapidly in South Florida and Florida as a whole, Builders got greedy and kept up with the curve rather than controlling pricing.

 Now builders are spending much time marketing value and affordability into their homes… the reverse of the trend when they were marketing luxury and amenities.  Honestly, they should have caught on sooner.

Every balloon that is overfilled is going to burst at some point… and there are many big name developers who are sitting on the verge of bursting. 

• Was it from greed? maybe…
• Was it from blindly following where the market led? partly…
• Was it from overdeveloping? not really… Florida is still growing rapidly
• Was it possibly because shareholders wanted more returns and that put pressure on management to increase risk?  definitely

Now to force a turnaround in their own fate, the builders are finally paying attention to a niche that was lost in rapid ascent in house prices - the middle income brackets. 

These are professionals with families - often just outgrowing a starter home and desperately in need of some space.  They don’t have a choice but to move up in house size because their 1400 square feet just won’t support their family anymore.  But with the high taxes and huge prices to jump to the next housing tier, many are at a standstill…. and some are simply leaving the state.

Affordability… Value… Attainable… Steven Webster at the Florida Workforce Housing Network discusses how these new buzzwords are showing up in builders’ marketing efforts.  He cites that Lennar challenged local builders to build affordably and Centex chose the path of becoming Florida’s leading affordable housing builder. 

This is a huge departure for both who kept prices riding higher and higher with new communities throughout Florida.  The problem is that they need to remain focused in their efforts and still provide housing for those people outgrowing their first homes and those that are in search of 4-5 bedrooms for their growing families.

This article would not be complete without discussing the other side of the story… the Real Estate Industry has another industry that it works hand in hand with that needs to be a consideration of these builders - the Lending Industry.

You see… builders can control land costs… building costs… materials costs…. and other issues directly related to the homes they are building.  What they can’t control is mortgages…. only the market itself can do that!

So… if you can’t beat them, join them!  My recommendation to builders is to keep in mind what buyers need - affordable payments.  This means making sure that the larger homes stay within conforming lending limits so that the interest rates stay low.  It also means to quit blackballing lenders and mortgage brokers from projects.  The buyer should have free choice of who they use and all the enticements from the advertisements to buy.

One more note on conforming loan limits.  Remember, they’re capped at $417,000 in Florida.  So the bigger properties need to remain priced so that $417,000 is 80% or more of the purchase price to get the best financing for the buyers.

For buyers who will need 100% financing, builders should make sure to keep an eye on the median home prices in the area - that will be the lending limit for FHA, Fannie Mae and Freddie Mac 100% loan programs.  Builders could offer to pay closing costs up to 3% of the loan amount as an enticement for $0 down homes.

It will take a concerted effort by the entire Real Estate Industry and its peripheral industries to help correct the current market conditions… and these builders are taking a good first step.

More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
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