question for local experts

[mf]

i would like to know:

why are developers continuing to build and infuse such a huge volume of inventory in the local housing market ?

obviously, it can't be because they want to make more money. we all know that more houses doesn't mean more money. and why are they denigrating the value of homes they have yet to sell instead of adding infrastructure, amenities, green space, that are sorely lacking for a successful housing market etc. how do they plan to sell inventory that's already just sitting there with nothing but more construction in site? surely with 7500 properties on the market only a dimwit would build more residential? i mean surely they must be getting some heat from their lenders about the fact that they're clueless on the marketing and development side. i'm just a business person, so it's difficult for me to understand the lack of business sense and logic here.

is it ignorance? is it arrogance? is it both? the only answer i would prefer not to hear is "that's how we do it down here". thoughtful responses only please!

 

[aquaticbiology]

a builder is a builder, that's what they do

i don't think you could pay them to stop building, especially when all their employees show up for work

 

[mf]

a builder is a builder, that's what they do

i don't think you could pay them to stop building, especially when all their employees show up for work

sorry, i guess you misunderstood.

i asked about developers. not contractors. developers are presumably in business not to construct, but to make money.

 

[bdc63]

i would like to know:

why are developers continuing to build and infuse such a huge volume of inventory in the local housing market ?

obviously, it can't be because they want to make more money. we all know that more houses doesn't mean more money. and why are they denigrating the value of homes they have yet to sell instead of adding infrastructure, amenities, green space, that are sorely lacking for a successful housing market etc. how do they plan to sell inventory that's already just sitting there with nothing but more construction in site? surely with 7500 properties on the market only a dimwit would build more residential? i mean surely they must be getting some heat from their lenders about the fact that they're clueless on the marketing and development side. i'm just a business person, so it's difficult for me to understand the lack of business sense and logic here.

is it ignorance? is it arrogance? is it both? the only answer i would prefer not to hear is "that's how we do it down here". thoughtful responses only please!

I think that is an excelent question, and I too will be interested to hear what the local experts have to say. I suspect the answer has one foot in "survival" and the other squarely planted in "greed".

They have to believe that the market is just about to come back strong (survival) and when it does, they want to be on top of the pile (greed).

Additinally, there's not much money to be made in infrastructure and green space.

 

[mf]

I think that is an excelent question. I suspect the answer has one foot in "survival" and the other squarely planted in "greed".

They have to believe that the market is just about to come back strong (survival) and when it does, they want to be on top of the pile (greed).

There's not much money to be made in infrastructure and green space.

development is more than construction it's planning and marketing.

actually, if you allow for a 1/4 acre of green space per building or ensure a safe and comfortable infrastructure, home prices show you can charge twice the amount for the actual residence. even with our land prices, it's actually financially easier on the developer because they need to invest less in construction cost and generally need to show their lender good sales movement. so the greed argument doesn't make sense at all. nyc is a great example. they alloted 6% (843 acres) of manhattan's total land for central park (only one of many parks), as a result, home prices around the park are often 200-400% more than other manhattan properties. beverly hills is another great example too. what makes properties more valuable is what ensures a good return on investment for developers.

if developers decide to aim for an urban density model (1000 people per square mile), as they have here, that's fine too, but it will also require the infrastructure of an urban environment in order to ensure a good real estate market. seeing that we do not have the appropriate transporation infrastructure for the rising population a good developer or team of developers would have invested in a tram system running down the median of 98 from destin to rosemary beach. that would increased the market value of all properties and expand the audience for this market. not to mention make things MUCH safer. that's important, because this is a family vacation area and though our highways our dangerous our hospital is classifed as "rural" doesn't have a certified trauma center.

as for survival..that's more a mentality than a business plan, but that kind of emotional approach to business might explain why they don't have an educated plan or vision for true success.

 

[SHELLY]

Additinally, there's not much money to be made in infrastructure and green space.

There is if the developer includes them on the sales brochure/pitch...but leaves them off the signed sales contract.

 

[mf]

There is if the developer includes them on the sales brochure/pitch...but leaves them off the signed sales contract.

classic sowal con move!!! in all myyears in nyc i never met people with such criminal minds! that behavior hurts sales prices in the region! our friends point to the nytimes article about st.joe's faked out "free" amenities as their reason for not shopping in this market.

actually just heard from some folks that we can expect the demise of sandestin's village in the next year. i think that will coincide with the demolition of the baytowne golf course for condos. that should create another downturn in the sandestin home market.

 

[Smiling JOe]

I can show you plenty of cases where the developer bought property, ran people off the properties, and now the property sits as vacant land, without being developed. These people must have pockets deep enough to cover the carrying costs.

There are several other small and large projects where developers are building. Maybe they bought the land at a cheap enough price point where they can build and offer major discounts to buyers. Or, perhaps they cannot sell the vacant lots, and the banker is knocking on the door -spend and pray move.

Also, I believe there is some legal stuff about development allowing an approved project to move forward, only if commencement of infrastructure or construction begins within a limited time frame.

There could also be the little part about a builder being able to borrow on home to be built. ie- they get their first couple of draws from the construction loan, and it is more than enough to cover their costs, freeing up more money to cover more debt. I know you said and repeated, that you were talking about developers, and not builders, but down here many builders are "developers."

 

[SGB]

actually just heard from some folks that we can expect the demise of sandestin's village in the next year.

If you mean Baytowne Village, I highly doubt it. They just finished adding on to it, and during the busy seasons it does get very crowded. Without Baytowne Village, the condos, hotels, and convention center there would suffer tremendously.

 

[GoodWitch58]

I am very interested in this question.

As someone who spent 30 plus years in Public Relations and Marketing, I am appalled at how many developers down here I have asked: "

What did your Market Research show? " Only to receive a blank stare in response.

I think SJ is right. For the most part, the developers here are builders who had (or have) good connections with the powers that be in local government...as well as a smart attorney!