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Business Outlook 2006

Demand down, hopes up for new homes

Marketing dollars to be spent by large, national builders should fuel interest in real estate again soon, analysts say.

By DAN DeWITT
Published February 19, 2006


Last year, a record-setting one for the real estate market in Hernando County, ended with an unmistakable fizzle.

The inventory of unsold homes climbed steadily from a low of about 1,000 in midsummer to 2,500 in January - a clear indication of sagging demand.

The price of lots in Royal Highlands, which had risen at a dizzying pace since the opening of the Suncoast Parkway, finally leveled off and even dropped. Local home builders reported fewer new contracts and fewer visitors to their model homes.

"November and December were alarmingly slow for a lot of Realtors," said Jeanne Gavish, owner of Nature Coast Real Estate School.

It seems the number of building permits issued for new homes is unlikely to match the record set last year: 4,185.

Except, some experts said, it just might.

Builders said they still have a backlog of contracts for new homes, for which they have not yet received permits. More importantly, several large regional or national builders that have been planning projects in Hernando for years are ready to build at full speed.

These projects include:

Southern Hills Plantation, on the south side of Brooksville, which is being developed by LandMar Group LLC in Jacksonville, a subsidiary of Duke Energy.

Cascades at Southern Hills, owned by pioneering subdivision builder Levitt and Sons, which has final construction approval for its development, just south of Southern Hills.

Trillium, owned by Pulte Homes of Bloomfield Hills, Mich., near County Line Road and the Suncoast Parkway.

These subdivisions will join Hernando Oaks, south of Brooksville, where the pace of construction has increased under the ownership of South Florida home building giant Lennar Homes and Sterling Hill, a 1,250-home development off Elgin Boulevard on the eastern edge of Spring Hill.

Sterling Hill, which is being developed by a mix of national and regional builders, may be the clearest example of the power of large companies to market new houses. They had begun building 521 new houses there through the third quarter of 2005; one builder, Grant Homes of Tampa, had contracts on 170 houses, said Angela Deaton, Grant's sales manager at the subdivision.

That may have been because Sterling Hill was one of the first of the new wave of developments to open in Hernando.

"People had been watching Sterling Hill, and they wanted to get in," Deaton said.

The other factor is marketing. National companies can more easily pitch their products to buyers throughout the United States. These companies account for 70 percent of all new homes built in the Tampa Bay area, which includes Hernando, said Tony Polito, director of the Tampa Bay office of MetroStudy, a housing consulting firm.

That these companies are just getting established in Hernando may mean the new home market will crest later here than in the rest of the region.

"You will see those large builders spread their marketing dollars throughout the country," Polito said.

That includes in the Northeast and Mid-Atlantic states, where houses in Hernando County are still seen as a bargain, Polito said.

While the inventory of lots in Pasco County is shrinking fast, Polito said, the number in Hernando is ready to expand with the new subdivisions coming on line. Also, though housing prices in Hernando have risen dramatically in recent years, new homes are often several thousand dollars less than in Pasco or Hillsborough counties, Polito said; if prospective homeowners don't earn enough money to get approved for a loan in one of those counties, they might in Hernando.

"Then you have the mentality of people who drive till they qualify," Polito said.

Reine Jesel, of Levitt, said the Cascades in Brooksville had more potential buyers visiting the development than any other nearby Levitt community. The company noticed a definite slowdown in sales during the fall and early winter, he said. But that is typically a slow period.

"Forty-five people came through for the week," he said of a week in mid-January.

"That's very good because traffic had been very slow throughout the industry for the last couple of months," he said.

Of course, real estate agents don't want the market to slow too drastically. Still, a slight cooling might be a blessing.

"I don't even like the word slower. The market has stabilized and leveled, and that's a good thing," said Marilyn Pearson-Adams, president of Century 21 Alliance Realty.

"I think we were dealing in a frenzy for the past 24 months, and we forgot what a real market is like."

[Last modified February 19, 2006, 01:08:19]


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