Home builders hit tough times
By Dick Hogan
Originally posted on August 10, 2006
WHAT THEY SAID
• Lee Building Industry Association executive vice president Michael Reitmann: "There's a significant drop in new permits applied for, and that shows the customer base, the people who are buying, has slowed quite dramatically."
• Real estate broker John McWilliams with Coldwell Banker Preferred Properties: Sellers are finally coming to their senses, he said. "The obstinance is over with the sellers who didn't want to believe this."
• Ed Bonkowski, a Fort Myers-based real estate broker: "We don't think the bottom is here yet, we think the bottom is six months away."
Bonita Springs-based WCI Communities said Wednesday that orders for its condominium towers have screeched almost to a halt — and businessmen across
Lee County said the residential construction industry as a whole is slowing dramatically.
"We are backing down on the tower business, we can't offer the incentives or financially motivate people" to buy, said Jerry Starkey, president and CEO, in a conference call Wednesday on the publicly traded luxury home builder's second-quarter earnings.
For the three months ending June 30, WCI reported a 69.9 percent decrease in net income from the same period last year. Revenues were down 21.1 percent to $529.4 million.
Total new orders were down 62.4 percent to $238.4 million, but towers were down 82.6 percent to $57 million — and the number of units ordered fell 88.8 percent to 36.
Meanwhile, people in business across the county said the home-building industry is softening and will get worse before it gets better.
"We don't think the bottom is here yet, we think the bottom is six months away," said Ed Bonkowski, a Fort Myers-based real estate broker who said he represents $25 million from investors who want to get in on the ground floor.
"The sellers of property are in denial right now that they're not going to lose money on their deals, and they will. The main thrust is the speculators: They have completely disappeared off the face of the Earth."
Condominiums will be the worst hit, as they were in the last downturn in the early '90s, Bonkowski predicted.
But the signs are everywhere that the downturn is taking place throughout the industry.
"The answer is an unequivocal yes," said Rad Hazen, general manager of Soaring Eagle Nursery on Pine Island, which provides landscaping plants for builders locally and around Florida. "It's statewide. Almost everybody is saying there's a downturn in major projects. A lot of the business seems to have dropped off."
Underlying the doldrums, said real estate broker John McWilliams, with Coldwell Banker Preferred Properties, is the huge 2005 run-up in prices that came to an abrupt end early this year.
"All day, every day I've been in price-reduction meetings with the sellers," many with lots or houses in Lehigh Acres, he said.
Sellers are finally coming to their senses, McWilliams said. "The obstinance is over with the sellers who didn't want to believe this."
The numbers bear out the coming hard times, said Lee Building Industry Association Executive Vice President Michael Reitmann, who notes "there's a significant drop in new permits applied for and that shows the customer base, the people who are buying, has slowed quite dramatically."
In Cape Coral, only 184 single-family home permits were issued last month, down 62 percent from the 481 issued in July 2005. For unincorporated Lee County, including Fort Myers Beach and Bonita Springs, the number was 583, down 19 percent from 721 in July 2005.
There likely will be an 18- to 24-month slow period while the market comes into balance, Reitmann said.
Only the strong will survive, he predicted. "It's going to affect those people who are not good businesspeople and aren't watching very closely what they're doing. The days of just being order takers in the residential market are over."
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