The State of The Construction Industry in SW Florida. 


The State of The Construction Industry
in SW Florida. 

January 15, 2017

Since the year 2016 has ended, I have been asked by numerous
people how the past year went and what my expectations are for the coming year
(2017).  First I will review the year 2016.  We finished with almost $32,000,000 in
sales.  This was our highest total since
2005 before the recession hit.  And,
while it is still just over half of our sales of over $56,000,000 in 2004
(pre-recession) it is just less than 3 times our sales of 2008 (bottom of
recession).  Further, by the end of 2016,
we had sold all but one of our finished models/inventory homes, and 2 of our
unfinished model/inventory homes.  So for
us it was a great year.
In breaking down the years sales, we had very good activity
in Miromar Lakes and Marco Island.  Both
of these areas were very active for us. 
We also had sales in Twin Eagles and the City of Naples.  While there were misses along the way, the
year ended well.
This coming year I expect to be similar to last year.  I am not expecting an increase in sales, but
do expect a wider range of areas where our homes will be built.  Certain communities will be impacted due to
lack of available land, and others may slow due to the rapid increase in land
This brings us to the question.  What will new construction prices do in the
coming year?  First, new construction
varies from resale home prices for several reasons.  Supply, demand, and homeowner expectations
effect the asking prices of resale homes. 
In a good economy, homeowners expect to make money on their homes and
tend to price them high.  The converse is
true in poor economic times.  During the
recession, homes were selling well below their replacement costs.  Since a builder is building a new home using
their current (and expected) costs, the two types of housing don’t always
follow.  However, since we are currently in
a positive market, I can reasonably state the following.  I expect the escalating prices of resale
homes to slow and stabilize at or near current levels for a period of time to test
the price levels the market has soared to. 
Given the expectations of a better economy and current lack of fear, I
don’t expect prices of resale homes to fall across the broad areas of Collier
and Lee Counties.  For new construction
my expectations are that prices will escalate. 
In the 4th quarter of last year almost every construction
material posted increased prices, almost without exception.  The availability of construction workers
continues to be a concern which will lead to continued higher labor costs.  Last year we had a 3-5% increase in the base
prices of our homes.  I would expect at
least that increase to occur in 2017. 
Finally, there is the expected energy efficiency code change which will
be announced in March of this year and put into effect for permits applied for
after June (usually). 
So to summarize, expect much of the same in 2017 with generally
increased new construction prices as the year progresses.  If something unexpected comes out of the code
revision, prices could increase at a greater rate than I mentioned above.
Written By,
Stephen Kaufman, CEO of DIVCO Custom Homes