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Demand for new homes spikes

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Published:   |   Updated: September 1, 2013 at 03:19 PM

APOLLO BEACH — Until recently, sales managers for homebuilding firms were sweating over broken sales contracts and ghost-town subdivisions, but today Sally McFolling is more worried about getting nails in her SUV's tires as she weaves around all the carpenters' and plumbers' trucks at work.

Her employer, Homes by WestBay, is trying to keep up with surging demand in an Apollo Beach subdivision called Waterset.

Charming bungalow-style houses with wide front porches and triangular gabled dormer windows set into roofs are popular at the moment. The four smokestacks of TECO's Big Bend Power Station look awkward hovering over the new homes' roofs, but McFolling and a representative of Waterset's developer, Newland Communities, say they don't scare off customers.

Around the Tampa Bay area, homebuilding is stronger than it's been in several years. Residential sales closings are up 31 percent across the region through the first six months of 2013, according to information supplier Rose Residential Reports, and demand is sending lot prices to near their mid-2000s peak.

The question is whether the housing recovery can keep its legs.

A surprising report in mid-August suggested rising mortgage rates are hurting new home sales far more than expected, and a shortage of construction workers is slowing the pace at which builders can finish homes.

Around the Tampa Bay area, subdivision banners for the likes of Lennar and D.R. Horton are waving again.

Some Realtors are nervous about the existing-home market, because investors have purchased so many homes so quickly. Consequently, the median sales price of existing homes has surged by more than 20 percent during the past year. Economists debate whether it amounts to a bubble, but that word is occasionally tossed around.

There's little such talk, though, in the new housing market. Homebuilders should close on about 5,400 new home sales (single-family and multi-family) in Hillsborough, Pinellas and Pasco counties this year, assuming trends for the first six months of the year hold, Rose Residential Reports says.

That's still only 40 percent of what homebuilders sold in a typical year such as 2002, and it's just one-fifth the closings they did in the wacky days of 2005, when builders closed on more than 25,000 housing units locally.

Economist, Mark Vitner of Wells Fargo said he wouldn't be surprised if new home sales double in the next five years.

So, developers are dusting off old plans for communities such as Waterset in Apollo Beach. Newland Communities launched this south Hillsborough project in 2005 at the absolutely worst time, and after a long hiatus, started selling homes again last August.

Today, its elegant entrance leads to a winding pathway of freshly cut grass, young trees and a glassy sales center with a cafe and an angular roof built like a sail.

Inside the community, builder Homes by WestBay has sold 63 homes in the past year, many with open, spacious floor plans, McFolling said. Traditional intimate dining rooms are being replaced by airy breakfast rooms that open into kitchen, which open further into grand rooms. Another common feature, she said, is a suite with a private entrance for parents or “boomerang” kids who move back home.

In Pasco County, new buyer Vincent Luce is upgrading from his 1,600-square-foot home in New Tampa to a 3,200-square-foot home in a once-dormant Wesley Chapel subdivision called Avalon Park West. The subdivision is trying to create a niche with folksier homes with garages in the rear instead of the front. Like many others, Luce's home will have quarters for his septuagenarian mother.

Why spend $250,000 for a foreclosed or existing home when he can buy new, he asks. The super-tight supply of existing homes meant his Realtor, Ken Chase, started getting offers on his previous New Tampa home shockingly quickly.

“Ken put it up at like 5:30 on the MLS (multiple listing service) and at 11:30 at night someone was calling him for a showing,” Luce said.

McFolling and other homebuilders insist the people buying new homes are like Luce — singles or families who will live there, not investors.

“I think there's a lot of pent-up demand,” McFolling said. “Would you rather buy a new car or a used car?”

Most of the new construction, to be sure, is in land-rich Hillsborough and Pasco counties. Pinellas County is largely built-out, so new home construction there tends to be one-off single-family homes and a few townhome projects, said Marvin Rose, whose Rose Residential Reports on the housing market are widely followed by builders.

The number of new permits for single-family homes issued so far in 2013 in Pinellas County is small, just 399 through the end of June, but it has nearly doubled from last year. Also, St. Petersburg has one of the area's few new condominiums under development, the Water Club on Snell Isle.

What threatens to rain on the party is concern over mortgage rates. In mid-August, a new Commerce Department report said new home sales fell 13.4 percent in July, and housing experts attribute some of it to higher mortgage rates. Those rates have risen to about 4.6 percent from a miniscule 3.35 percent in early May. On a typical 30-year, fixed-rate loan of $200,000, that difference increases the monthly payment from $881 a month to $1,023 a month.

Rose said the housing market is a little precarious right now. An interest rate of 4 or 5 percent is very low historically, but the question is whether buyers are conditioned now to expect super-low rates.

“Today's buyers have been so used to 3-percent interest rates that when they hit 6, they hit panic,” he said.

A second issue facing homebuilders is a tremendous shortage of construction workers. Homebuilders surveyed for this article downplayed the problem, but Tampa Bay Builders Association executive Vice President Jennifer Doerfel said builders privately are telling her it's causing delays in finishing houses.

As of July, Florida had about 356,000 construction workers, which is down by half from the peak in 2006, according to state figures.

McFolling said people shouldn't judge today's improvements against the euphoria of the boom years.

“This is more of a typical market,” she said. “'04 and '05 were not typical. I don't know that we'll ever see that again.”

 
msasso@tampatrib.com

(813) 259-7865

Twitter: @msasso

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