Build spec houses and they will come.
That’s a concept that went out of fashion in Southwest Florida after the real estate boom collapsed in late 2005 leaving a huge number of never-lived-in new homes for sale cheap.
But now building “on spec” — without a specific buyer already locked in — is making a comeback in some but not all of the area’s pricier neighborhoods.
One hotbed of spec building is Fort Myers Beach, where new construction was a rarity until a sudden burst of activity.
Underlying trends include a recovering economy and the retirement of the baby boomer generation, said Phil Babcock, a real estate agent with TriPower Realty on Fort Myers Beach. “And I think a lot of people have been sitting on the sidelines for four or five years” following the crash.
Joe Orlandini, a Fort Myers Beach developer and real estate agent with Sand Castle Realty Group, is building and selling new homes on the island.
He said spec homes are succeeding in part because few houses were built there between 2006 and 2012 as the effects of the recession and the real estate crash lingered.
“We had a big lapse from the time a new home was built on the island to the time the next house was built,” he said. “Not only did the homes change that people want, a lot of building styles got better and even the construction got better.”
That doesn’t mean it makes economic sense to put up just any home on the Beach right now, Orlandini said – choices are limited by the high cost of land and construction, the logistical challenges of building on the island’s narrow lots and the small numbers of people able to afford the new construction limits the choices.
“Realistically a package deal is $750,000” for land and a new house, he said, and that’s the minimum his homes are selling for with some as high as $3 million.
In a much different real estate market across the Caloosahatchee River, Cape Coral is also seeing a burst of spec building, said Steve Koffman, a broker associate with Century 21 Sunbelt in the Cape.
We’re seeing spec building mostly in waterfront lots but we are starting to see it filter down to the off-water homes,” he said.
Southwest Cape, with the best Gulf access in the city, has accounted for the bulk of spec houses , Koffman said. “Twelve to 18 months ago we saw a run on the waterfront lots in Southwest Cape and right after that we started to see specs built.”
Of the 34 waterfront homes built in 2012 and 2013, 27 have Gulf access and they went for $350,000 to $720,000, he said.
Changing styles have helped spur new construction, Koffman said: buyers these days want a more contemporary look but before last year the available homes generally were in the heavy Mediterranean style that prevailed in the years before the boom ended.
On the border between Lee and Collier counties, the upscale Quail West community is also seeing an increasing number of spec homes, said Mike Diamond of Diamond Custom Homes.
He recently purchased a lot to build his second Quail West spec home, which will be listed at $3.2 million.
Financing for spec homes these days tends to be more from investors than from banks, Diamond said, but banks are starting to loan again – although much more conservatively than in the boom.
Quail West is seeing successful spec construction, he said, because “It’s an established community” with not a lot of inventory.
Spec building hasn’t yet caught on everywhere.
Trae Zipperer of Luxury Property Firm, which sells high-end homes in Southwest Florida, said he knows of only one waterfront spec home under construction in the communities along the Caloosahatchee River in Fort Myers.
It likely won’t be long until the trend arrives there, he said.
“I sold more waterfront lots this season than I’ve ever sold in Fort Myers” including some to investors, Zipperer said.
He expects some of those will become spec homes as prices continue to rise for existing homes and inventories remain low for waterfront properties.
At some point spec builders will step in to meet the demand, Zipperer said. “There’s a demand for new homes on the water and they just don’t exist.”