Homebuilders reviving stalled developments
By Prashant Gopal and John Gittelsohn
Bloomberg News
Construction crews are returning to the Cascades of Groveland, a gated 55-and-older community west of Orlando, Fla., almost three years after its bankrupt developer left owners of the existing 238 houses surrounded by empty lots, partially built homes and an unfinished clubhouse.
Shea Homes bought the remaining 761 lots from Bank of America in June and reopened the project Aug. 25 with a new sales office, lower prices and a changed name: "Trilogy."
Residents, who had taken over the guardhouse for bingo and poker games, will get a 38,000-square-foot recreational center with indoor and outdoor pools, tennis courts and a card room.
"For the people here, the activity of construction equipment is music to their ears," said Eric Sorkin, president of the homeowners association at the development, 35 miles northwest of Walt Disney World. "There's a future."
Builders across the country are buying lots at less than half their original prices from lenders eager to move distressed construction loans off their books.
"This is a natural progression of the cycle," said Brad Hunter, chief economist for Metrostudy, a Houston-based housing researcher.
"Projects fail, the price of the asset drops until it reaches a point where it's profitable for someone else to pick it up and remarket it. They reposition the project and then what was formerly infeasible, is feasible."
Builders, facing record low demand, are trying to boost margins and revenue by pulling unfinished projects out of mothballs.
They're benefiting from cheap land and falling construction costs as they seek to adapt floor plans to today's market and lure buyers with prices that, in some neighborhoods, are little more than the cost of a foreclosed home. The 12 largest homebuilders by market value added 16,631 lots in their past two quarters, according to data compiled by Bloomberg.
Builders are cautious
The revived projects could contribute to a delay in the housing recovery by adding to the supply of available homes, according to Hunter.
At the same time, builders are being cautious about flooding the market by limiting the numbers of houses they are constructing without having buyers lined up, he said.
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