Are prices falling-and example from watersound

Yeah, I was assuming away a whole lot with the building the next day scenario. Just wanted to do the bare math, first. The build-out devaluation could be even more pronounced, in my view, because of Joe's restrictions and requirements. Not like you can just throw a mobile home on the lot.

...and I know builders who are paying $15,000-$20,000 for house plans in WaterColor.

Joe,

Here are the most recent and very similar sales of lots on Salt Box Lane where this lot is located (per walton county records).

Lot 8--Oct 2004--$780k
Lot 63 (passages area)--Sept 2004--$899k
Lot 11--July 2004--$810k
Lot 2--July 2004--$690k

Just thought I would clear up the fact that this price is CLEARLY below the most recent market prices paid. Might be a great deal or the start of a trend. Too early to tell for sure. But, you know my opinion.

Once again, it easy to try and compare prices of properties. However, it is not a like kind comparision if you are comparing the sales prices of lots with reasonable contractual build out times to lots that may be contractualy close to non-building penalties and buy back clauses. In my opinion the sale of fee simple houses gives you the best indication of market health. Their prices are not tied to artificial contractual terms which can affect prices.

I believe that this is the strategy many people hope to use. It shows the drawbacks, for investment purposes, of buying a lot with build out times. Unfortunately, it won't work without the new buyer having to pay significant fines for missing the build out. Those buying lots now that have build outs coming next summer will be lucky to get things going by then. Architecture itself could take up to 1 year and then the plans have to be approved by the Architectural Committee before a permit can be pulled. That is assuming you've got a builder ready to go, which is very difficult. Also, once construction is started, you've got only one year to complete the project so you better make sure you've got a builder who is on the ball. Many builders around here are taking anywhere from 9 to 24 months to build a house.

If a seller had some good house plans to go with a decently priced lot, that lot would be more attractive to a potential buyer.

Several people have told me that St. Joe is the reason Watersound has taken so long to get going. St. Joe is concentrating all its efforts on Watercolor. There are few amenities completed at Watersound and, frankly, not a whole lot to do right now. Many people are turned off by the isolation of Watersound and choose Watercolor over Watersound for that reason.

The build out time frame is still over one year away on the lot based on the original sales date per Walton County records. Also, you must simply start construction by the drop dead date, not be complete. My understanding of the penalty situation is that the penalty for not starting by the drop dead date is $1000 per month--not very much versus taking a whole lot less than market value to sell quickly. Also, if you are actively in the design review process, St. Joe is not enforcing the penalties due to the significant backlog in the DRB. So, in this case, the price dropping does not appear to be due to impending doom on the build out date.

...and I know builders who are paying $15,000-$20,000 for house plans in WaterColor.

That is actually a good price. Many architects charge a percentage of cost, usually 10%. So for a house budgeted at $400,000 for materials and labor, architechure would be $40,000. Of course, a builder building a spec house would have lower cost than if he was building a custom home.

The build out time frame is still over one year away on the lot based on the original sales date per Walton County records. Also, you must simply start construction by the drop dead date, not be complete. My understanding of the penalty situation is that the penalty for not starting by the drop dead date is $1000 per month--not very much versus taking a whole lot less than market value to sell quickly. Also, if you are actively in the design review process, St. Joe is not enforcing the penalties due to the significant backlog in the DRB. So, in this case, the price dropping does not appear to be due to impending doom on the build out date.

Several lots have build out dates coming up later summer/fall of 2006, which is just over a year away. Everything I've seen says that there is a COMPLETION date of one year after the "drop dead" date (or build out date). I guess this is to ensure that a home is actively being built (as opposed to putting in the footers and letting it sit for several months).

Of course the drop in price is because of the build out date. My husband is a contractor so I'm very familiar with what is going on. Owners in Watersound are paying association fees, taxes, and probably interest on their lots already and surely don't want to add $1,000 per month. Many of the current owners bought their lots with the intention of flipping them and there is the possibility that they can't actually afford to keep them long term.

Hmmm, from what CCK says, wouldn't there be a point in the build-out period where the lot is for all intents and purposes unsaleable to the general market? (And thus, would have a "market value" of zero). Owner could alter this date by getting plans, approvals etc., which would involve more sunk costs. But, it would seem at a particular point in the three year build-out, owner pretty much is going to have to build (or resell back). Not a bad thing if you intended to build and can, at all. Not such a good thing if you didn't or really can't.

Hmmm, from what CCK says, wouldn't there be a point in the build-out period where the lot is for all intents and purposes unsaleable to the general market? (And thus, would have a "market value" of zero). Owner could alter this date by getting plans, approvals etc., which would involve more sunk costs. But, it would seem at a particular point in the three year build-out, owner pretty much is going to have to build (or resell back). Not a bad thing if you intended to build and can, at all. Not such a good thing if you didn't or really can't.

The whole point of a build out period is to get people to build. Obviously many people have ignored this at Watersound and are now stuck. There is no way the houses are going to get built in such a short time. Rather than have to sell back to St. Joe at the original price (around $250,000) I'm sure investors/owner's would rather take a smaller loss. If I paid $550,000 for a lot last year, I'd much rather sell it at $550,000 than $250,000!

The whole point of a build out period is to get people to build. Obviously many people have ignored this at Watersound and are now stuck. There is no way the houses are going to get built in such a short time. Rather than have to sell back to St. Joe at the original price (around $250,000) I'm sure investors/owner's would rather take a smaller loss. If I paid $550,000 for a lot last year, I'd much rather sell it at $550,000 than $250,000!

Yeah, I am not crying in my beer for them. When I was in the market, I felt like a freak because if I bought I lot I darn well intended to build on it. What an odd alien concept.

Wow, I forgot the remote owner problem. So, Buyer 1 buys at 250k. Buyer 2 buys at 550k. Buyer 3 buys at 850k. Buyer 3 if they can't build has to resell to Joe at 250k, Buyer 1's price? If so, that too would depress value further as buildout period continues. Shorter period of time to get your stuff together, and real financial loss for Buyer 3 if you can't. No problem if Buyer 3 wants to build, again, and can in the short time frame, but sort of an idiotic move if they don't or can't.

I ran detailed statistics on the real estate asking and sold prices for the area for the last 12 years recently and posted an article with the results. I have not run new statistics for the time since I did that just before summer and now. I'd like to do it. My own personal feel is that you may see some lower prices after a hurricane when tourism traffic is not as high as it could be because of walkovers being down, bad publicity from the hurricane, etc. But, these are temporary issues. Historically, these are the best times for investors to grab some deals. The statistics I compiled gave the yearly change for the last 12 years in the average sold price and the % the average sold was of the average list. I then took the average increase for every 2 year period. i.e. 92-94, 93-95, etc. What I found is that over some 1 year periods there were some incredibly high returns and some low returns and that over a 2 year period the were very good. If you're buying for a 1 year quick flip, my personal opinion is we're lower this summer after the storm than we will be next year at this time without another major storm. It could be a very good time to buy. But, if you count on keeping the property 2+ years, it's a great time to buy. The average return over the last 12 years for each 2 year period was over 40%. Can that keep up? I doubt it because we've hit a new market. Where our prices are now take a lot of people out of the market. But, remember, those returns are on leveraged money in most cases. You're not putting out $2M for a $2M investment, you're putting out maybe $400k to $500k sometimes more sometimes less of course financng dependent. If you even clear 10% over a 2 year period on the whole investment amount, you've made a 40-50% return on the funds you actually use. If you hit on one of the 2 year periods that's 40%+ you can literally triple your actual out of pocke investment. The market didn't go down over any 2 year period over the last 12 years I had access to the data. There is still a significant difference in the prices a home sells for in a community like Rosemary, Seaside, Watercolor, Watersound, etc and the price an identical home would sell for elsewhere. There always will be a difference, but, I think indication of prices stabalizing would be indicated by prices around the most desirable communities approaching those communities.

I've seen a number of deals I would buy if I were shopping. Just bought one myself though in May and I'm not looking right now. I'm still thrilled with the deal got then.

I'm confused CCK..why does a spec home cost less to a builder vs custom..

I'm confused CCK..why does a spec home cost less to a builder vs custom..

We're talking cost as it relates to architecture fees. The builder is the owner of a spec house and takes his profit at the sale of the house. Therefore total cost will be less.

A custom home has higher total cost to the homeowner because the contractor's profit is added into the total raw cost of the house. Therefore, an architect who has a fee of 10% of total construction costs will make more on a custom house than when he/she works with a builder directly.

I was just commenting on SJ's remark that builders were paying $15-$20,000 for houseplans at Watercolor. This is actually a very good price considering that costs are at least $200 sq ft not including the contractor's fee.

We're talking cost as it relates to architecture fees. The builder is the owner of a spec house and takes his profit at the sale of the house. Therefore total cost will be less.

A custom home has higher total cost to the homeowner because the contractor's profit is added into the total raw cost of the house. Therefore, an architect who has a fee of 10% of total construction costs will make more on a custom house than when he/she works with a builder directly.

I was just commenting on SJ's remark that builders were paying $15-$20,000 for houseplans at Watercolor. This is actually a very good price considering that costs are at least $200 sq ft not including the contractor's fee.

I saw a lot for sale in Rosemary several months ago. Forgot the price but they said it was a good buy because it included the $50,000 (yes that's $50,000) architectual plans :shock:

A realtor at W/C also said they allow a "grace period" i.e. no $1,000 fee to builders they know who can't get the house going on time but will soon and are building for themselves and the sale will be listed with Joe. Also if you allow St. Joe to build you get alot of "grace period".
WaterSounds like alot of speculators got caught with their hand in the cookie jar. Now I wonder about the multi owners of condo's in PC?

I saw a lot for sale in Rosemary several months ago. Forgot the price but they said it was a good buy because it included the $50,000 (yes that's $50,000) architectual plans :shock:

$50,000!!!!!! Is that normal, or even ballpark for architectural plans in the area?

Architectural Design Fees can range from 6-14% of estimated building costs.

From personal experience, our architect is charging us 7% on a $1.3mm building budget. Another point of reference is a friend of mine whose architectural design fees were around $105K.

Custom plans from well know architects in the area are expensive.

Hope this helps.

Yup - RO - those plans were probably alredy approved by RB and ready to go which adds value, not having to go through the process.

We just went through the process of designing our house for Watercolor. We about fell over when we started getting quotes back from architects. The local architects (local to 30-A) all quoted numbers of $50K/10% of the project. They all had busy schedules and could not start for 6 months or so.

We finally found a great architect in Atlanta for around $20K including the engineering and landscaping docs. We already had a clear idea/sketches of what we wanted and just could not see paying that much to have an architect CAD up the plan. The "percentage of project" mentality seems like a conflict of interest to me as it does not encourage the architect to keep the price low.

Wow! 50K? I should have finished the Masters in Architecture program. 50K for a few weeks work when a draftsperson does the working plans anyway? That's the only problem with "approved" architects in our communities. They can really slam you and you have little choices. I have mixed feelings about approved architects. Yes our communities are beautiful and I understand approved builders but if plans meet the design criteria established by the DRB, what does it matter who designs them if they are sealed? If structural integrity are concerns, wouldn't it make sense to have an architect on the DRB and just pay a higher fee for review of the plans? It's not like we're putting skyscrapers where there's major structural issues. Don't know, just wonder if specifying approved architects really helps the communities that much.

Wow! 50K? I should have finished the Masters in Architecture program. 50K for a few weeks work when a draftsperson does the working plans anyway? That's the only problem with "approved" architects in our communities. They can really slam you and you have little choices. I have mixed feelings about approved architects. Yes our communities are beautiful and I understand approved builders but if plans meet the design criteria established by the DRB, what does it matter who designs them if they are sealed? If structural integrity are concerns, wouldn't it make sense to have an architect on the DRB and just pay a higher fee for review of the plans? It's not like we're putting skyscrapers where there's major structural issues. Don't know, just wonder if specifying approved architects really helps the communities that much.

Hold on there bobber.

Many designs take tons of work to complete, and involve a lot of engineering and permitting as well. The challenge of permitting alone, which is often but not always taken on by a firm, takes a lot of time and effort. Also included may be overseeing the building process, or at least monitoring along the way.

These guys have more business than they can handle for good reason. They are great at what they do, have experience with builders and developers, and have powerful reps. They also carry a lot of liability.

Also consider that more than a few owners building in SoWal developments are not always the easiest customers to please. And there is also the desire to be unique, and quite often a prestige factor. I've heard many a homeowner brag how much their design process cost and who did it.

The cost of draftspeople you mention, which quite often have degrees (even Masters') and experience, are very expensive in SoWal. Not to mention other overhead.

There can be sticky situations with DRBs and approved architects, but they add a lot of value to a development. A cost of doing business in situations where the returns around here have been off the charts.

I have a feeling you would have made a good architect. It's never too late. ;-)

Yup - RO - those plans were probably alredy approved by RB and ready to go which adds value, not having to go through the process.

:shock: Unbelievable!

River<--won't be building a home in Rosemary Beach anytime soon-->Otter

Hold on there bobber.

Many designs take tons of work to complete, and involve a lot of engineering and permitting as well. The challenge of permitting alone, which is often but not always taken on by a firm, takes a lot of time and effort. Also included may be overseeing the building process, or at least monitoring along the way.

These guys have more business than they can handle for good reason. They are great at what they do, have experience with builders and developers, and have powerful reps. They also carry a lot of liability.

Also consider that more than a few owners building in SoWal developments are not always the easiest customers to please. And there is also the desire to be unique, and quite often a prestige factor. I've heard many a homeowner brag how much their design process cost and who did it.

The cost of draftspeople you mention, which quite often have degrees (even Masters') and experience, are very expensive in SoWal. Not to mention other overhead.

There can be sticky situations with DRBs and approved architects, but they add a lot of value to a development. A cost of doing business in situations where the returns around here have been off the charts.

I have a feeling you would have made a good architect. It's never too late. ;-)

Don't forget the liability issue. The more projects an architect completes, the more expensive his/her liability insurance. They must cover each project for seven years from completion. Architects have very high overhead.

Don't forget the liability issue. The more projects an architect completes, the more expensive his/her liability insurance. They must cover each project for seven years from completion. Architects have very high overhead.

Hi CCK! Thanks for expanding on my brief mention of liability.

Hi CCK! Thanks for expanding on my brief mention of liability.

Err, yes I see that you didn't forget the liability . I must learn to read all of the words. Sorry

Joe,

Who was the architect in Atlanta that you used? I might be building on my lot in Rosemary and I live in Atlanta. Let me know. Thanks!

Brett

Uh Oh Kurt, got your dander up. Certainly didn't mean to imply that an architect doesn't have liability or value. Only questioning the value of "approved" architect restrictions which is sometimes a "who knows who" situation. No doubt, we have some real talented people here who are fortunate enough to be in an area where we have people that are willing to pay for good design. Only questioning the cost of paradise. 50K is still a lot of money to me. I'm a registered pharmacist and when I was making IV bags that stopped people's hearts, I had just as much liability. I had to work 6 months full time to make 50K. I can only assume that like many professions, there's a shortage of professionals here.

BTW, it is too late for me. As you know, it takes many years for an architect to mature professionally. My next metamorphosis will be into a person who isn't killing themself with work and can just chill and enjoy everything this great life has to offer.