Builders blessed

Last year was very good to the construction business. Low interest rates and job growth fueled a boom, particularly in apartments.

By BILL COATS

© St. Petersburg Times, published February 27, 2000

Residential building permits increased 22 percent north of Tampa last year, to the highest total since 1984, when Carrollwood's building boom hit overdrive.

Now, construction is everywhere but Carrollwood. Hammers are hammering from New Tampa to Citrus Park, from Westchase to Lutz-Lake Fern Road. Hillsborough County in 1999 authorized construction of 14,951 apartments, houses and other dwellings in its northern suburbs.

"It was a real good year for the building industry," said Jim Hosler, research director for the Hillsborough County City-County Planning Commission, which recently compiled the 1999 numbers.

It was so good that many experts think 1999 will represent a construction peak, at least temporarily. A flood of new apartments, particularly in New Tampa, is triggering a scramble for tenants in the local apartment industry, which could signal the slowing of a boom cycle there. And rising interest rates could impose the first drag in years on construction overall.

Low interest rates have provided much of the fuel. Additionally, corporate relocations have created thousands of new jobs, making Tampa one of the nation's fastest-growing metropolitan areas.

That has attracted the builders, particularly apartment builders, to north Hillsborough.

"We find that job growth, more than any other factor, drives apartment demand," said Greg West, development manager of ZOM Development Inc., the Orlando-based company that is building the 477-unit Arbors at Carrollwood on Ehrlich Road.

After going dormant in the early 1990s, West's industry surged in the past four years. North of Tampa, more apartments than houses were permitted in 1996 and last year.

In a normal year, permits for new homes are roughly double those for apartments, Hosler said.

Home building has accelerated slowly as builders and lenders -- unlike their counterparts in the apartment industry -- enjoy the luxury of testing the market house by house.

"It's much easier to slow down quickly," said Tarpon Springs analyst Marvin Rose, publisher of Rose Residential Reports. "If they see they have six months of houses under construction and not sold, they may stop."

But they haven't so far.

Instead, Rose said home builders have been working at capacity for several years, and still haven't kept up with demand. Customers who have chosen lots and floor plans now have to wait six to eight months for their new house, compared to a traditional three to six, he said.

Demand is driving the prices of new homes higher, Rose said. In New Tampa, the average price of a new home rose to $240,000 last year, up from $230,000 the year before. In northwest Hillsborough, west of Interstate 275, a new home averaged $205,000, up from $188,000 in 1998, he said.

Higher interest rates, which would price some buyers out of home mortgages, are likely to change the demand this year, Rose said.

"I expect the single-family (home) market will back off a little bit, somewhere in the 5 to 10 percent range," he said.

Likewise, Rose believes that apartment builders may hesitate as they see the new 300- and 400-unit complexes filling more slowly with tenants.

"I think everybody who hasn't broken ground is going to take a hard look," he said.

Within north Hillsborough, Rose sees home building shifting eastward to New Tampa.

"The northwest is building out," he said. "It consists now of smaller communities, now that Westchase is winding down."

New Tampa, he predicted, "will have an ample supply for the next 10 years or so."

- To reach Bill Coats call 226-3469, or e-mail him at coats@sptimes.com.

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