Lee County permits to build new homes in 2013 spiked up 40 percent while foreclosures fell 45 percent in 2013 as the area’s given-up-for-dead residential construction industry roared back to life.
But with the burst of activity came some old worries: a tight labor market, ever more expensive building materials and the prospects of higher interest rates.
For the year, builders pulled permits to put up 2,386 single-family homes compared to 1,707 in 2012.
Meanwhile, statistics released Thursday by the Southwest Florida Real Estate Investment Association showed that foreclosures fell from 7,600 to 4,212 in the same period as the firestorm of failed mortgages by homeowners and investors gradually burned itself out.
All in all, builders were happy with the sudden availability of work.
“I tell you, it’s picking up pretty good and of course there are more new builders that have taken the opportunity,” said Bob Knight, vice president and co-owner of Cape Coral-based Paul Homes.
Still, he said, as the market heats up, “We’re running into some issues. There’s not enough labor out there now. There have been price increases all over the place” for materials as well as wages.
Randy Thibaut, president of Fort Myers-based Land Solutions, said several factors combined to create a more energetic market.
Chief among them, he said, was “the cheap money for mortgages and the fear that they would be going up, so you have a lot of buyers, particularly young and first move-up buyers, concerned that if interest rates went up much they’d be out of affordability.”
Many of those buyers “had the down payment and had gone through the two-year period they had before they were allowed to apply for a mortgage again” after a foreclosure or short sale destroyed their credit, Thibaut said.
That trend was amped up by the fact that there’s pent-up demand for new housing because few new homes were built in the years since home prices collapsed at the end of 2005, he said.
It’s not a situation that can last forever, he said. “What happens is that it’s clear interest rates will eventually have to increase” as the Federal Reserve scales back its efforts to keep money cheap.
“For every point the interest rate goes up, say for an average house in Lee County, a $250,000 house, that’s $20,000 less borrowing power the buyer has,” Thibaut said.
For bigger houses the effect is dramatic, he said. “If you’re at 4 percent and it goes to 5 for a $2 million house, you say, ‘Wow, that adds up.’^”
Jeff Tumbarello, director of the real estate investment association and an agent with North Fort Myers-based Steelbridge Realty, said one problem that isn’t coming back soon is the prevalence of foreclosures that drove down prices as foreclosed homes came pouring back on the market after prices fell apart.
Most of the people vulnerable to a foreclosure have already lost their homes, he said.
But ongoing economic uncertainty may have an effect on how strongly the baby boomers’ retirement plans continue to support this market as boomers decide how long to work before retiring and buying a home here, he said.
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