Paul’s work in the Florida real estate market began over 25 years ago, and he joined real estate developer DR Horton in 1999. He holds responsibility for Florida, Mississippi, and coastal Alabama, where the company has over 250 active communities.
Paul provided the following overview of the residential market in Florida which has continually promoted strong growth since the time of this recording. In 2017, the market represented about $140 billion worth of sales and industry with about one-quarter of that activity in new homes.
A Robust Construction Industry
Building permits for residential units indicate the health of the construction industry. In Florida, 117,00 permits were issued in the previous year which equaled about 10% of the total U.S. market of 1.2 million. The I4 corridor was the heart of the market in Florida with about 45,000 single-family home permits. However, robust activity began to spread throughout Florida and across most demographics.
Paul noted that DR Horton focuses on more affordable price points, and highlighted the company’s new Express Homes. The houses, while simple and affordable, have highly-desirable floor plans. In the affordable housing market, DR Horton is the 6th largest builder in the country.
Factors Driving Florida’s Growth
Jobs and sunshine are the main factors that drive growth in Florida. Jobs have always driven new home production, and that has yet to change in Florida as more and more people move to the Sunshine State. As in-migration continues, the baby boomer demographic drives strong demand for second homes available for pre-retirement and retirement. In Florida, retirees are still a powerful force.
At the end of the day, consumer confidence is vital. Consumers will purchase property when they are comfortable with the conditions and environment. First-time homebuyers also need to be able to purchase a home they can afford.
Residential Land Market Trends And Opportunities
In today’s market, we’ve enjoyed great opportunities to buy homesites and lots below replacement value. The key challenge has been the ability to produce. Oversupply has yet to be an issue in the current Florida residential market.
We are at historical lows in inventory and we learned hard lessons from the downturn in 2008. Today, a homebuyer needs a job and a good credit score to secure a mortgage. We must continue to keep checks like these in place.
DR Horton serves the market to buy land and is always looking for the next valuable lot opportunity. Foreclosed lots from the previous downturn have proven suitable for development, but residential building is still a process.
The goal has been to defunct land and tie up that raw piece of ground through an entitlement process. It is not realistic to just put a shovel in the ground, develop in six months, and build houses in 12. The development process generally takes around two to three years.
Attributes Of Desirable Residential Development Land
In the past, you would typically want a homebuyer to be lined up before building. Today, the inventory shortage provides enough confidence to recognize that development will succeed and homebuyers will come later.
When looking at potential properties, we look for access points where people can commute to work. We also look for access to services and retail. This is all while keeping a watchful eye on that next interstate exit down the road for future development.
Homebuyers sometimes follow the “drive till you qualify” rule for finding affordable housing. Because of this, we built many homes just outside the core of the I4 corridor. We have built in the Panhandle, Ocala, Melbourne, and even in St. Lucie. Second-tier markets have proven very productive for us thus far.