Born-Again Communities

Few residential developments in Central Florida embodied the housing market’s tumble better than the Winter Garden community of Independence.

Begun during the heat of the homebuilding boom, Americana-themed Independence sprang up off Winter Garden-Vineland Road, not far from Windermere, and offered picture-postcard, architecturally authentic designs and an attractive amenity package. But, like many other unfortunately timed communities, the real estate collapse took its toll on what had been expected to be a hot property.

“Independence? What had been going on there was nothing,” says Dave Parker, director of sales and marketing for Lennar Central Florida. “It was a community that Engle Homes had mothballed.”

Today, however, Independence has sprung back to life, with new homes and steady sales. In fact, investment companies and builders have been buying up lots and building new homes in unfinished communities across Central Florida. New projects are being planned as well.

With distressed homesites selling at a fraction of their original prices, builders say they’re just taking advantage of good opportunities. But the larger point is this: if builders are building again, it’s a sure sign they think the market is stabilizing—and that they anticipate future demand.

“Land is being purchased by a variety of sources, including area builders and investment funds, who see the value in the reasonable prices available now,” says Jim Reinert, assistant vice president of Toll Brothers’ Florida Central Division. “Construction activity has been focused throughout Orange County, Kissimmee and eastern Lake County.”

Builders such as Toll Brothers, Pulte Homes and KB Home are investing in Central Florida once again. Toll Brothers, for example, recently began sales in Bellaria, a gated community in Winder-mere with homes priced from the $600s.

Meanwhile, builders such as Ashton Woods Homes, Meritage Homes, A & M Homes, Ryland Homes, Home Dynamics,
Surrey Homes and Lennar are helping to resurrect once-moribund communities in the Orlando area. Among the most active has been Lennar. Last year, the company closed a deal with Bradenton-based real estate investment firm Starwood
Land Ventures to acquire or option more than 2,700 homesites in communities across the state. Starwood had previously bought more than 5,400 of Engle’s homesites, including some in Independence.

“We bought most of Engle’s former assets,” says Lennar’s Parker. “We’re building in several communities. We felt like the market is at the bottom, and when it’s at the bottom, it’s time to take advantage of that. We also felt like the market is favorable for an upswing.”

Evidence of that upswing can be found at Independence, where last May Lennar hosted a grand opening to introduce its single-family homes and townhomes, priced from about $160,000.

In October, Ashton Woods and Meritage also held open houses to show off their new offerings at Independence. Ashton Woods announced plans to build three- and four-bedroom townhomes priced from $179,900 at The Parks of Independence while Meritage unveiled new single-family homes with three, four, five and six bedrooms priced from the mid-$200s.

The trend toward reviving stalled communities is spreading beyond Independence. Ashton Woods is also at work in Ocoee with Eagle’s Landing, a neighborhood within the master-planned community of Westyn Bay.

Eagle’s Landing has been a steady seller, says Ashton Woods spokesperson Mike Roche. “When the recession hit hard, the builders decided not to finish up there,” he says. “They walked away. Lots were just sitting there for a while.”

Ashton Woods and David Weekley Homes took over Eagle’s Landing after being approached by an investment firm that had acquired the project. “We thought the timing was right,” Roche says. “It took a month or two to get things going. But now we’re averaging about two sales per month. People can see homes going up, and they’re seeing kids playing in the front yard.”

Building in Eagle’s Landing made sense, Roche adds, because, “there wasn’t anything nicer for move-up buyers in the Ocoee area, so we thought it was a good niche.” Ashton Woods’ homes in Eagle’s Landing sell for between $224,900 to $299,900 while David Weekley is offering homes starting at $254,990.

“Current residents seem to be excited by the activity,” says Reinert of  Toll Brothers. “They know that a stagnant community doesn’t bode well for their home values. More activity in a community shows strength in the area.” Plus, new residents pump more money into HOAs.

Mike Moser, east region president of Starwood, says the benefits of buying in a resurgent community go even deeper than that. At Independence, for example, the company spent hundreds of thousands of dollars investing in a fitness center and cleaning up common areas and lawns of foreclosure homes.

“We now have five active builders in the community, a new signage program, an onsite property manager and we’ve made many other improvements,” Moser says.

The reality, adds Roche of Ashton Woods, is that having established builders come in and take over a community is the best option for existing homeowners.

“There are three things that can happen,” Roche adds. “One, you can have builders abandon the neighborhood, which is not good for people living there. Two, you can have reputable builders come in and finish off the community. Three, lots can go into foreclosure and a builder buys cheap land and builds cheap homes that bring property values down.”

Stephen Orosz, vice president of Royal Oak Homes, agrees that residents are thrilled to see new activity in dormant communities.

“We’re going in and spending upwards of $300,000 in one community alone,” Orosz says. “Common areas and landscaping need to be replaced and entrances need to become welcoming once again. Residents need to know we want to fulfill the expectations they had for their community when they first moved in.”

Orosz and his partners, all veterans in Orlando’s homebuilding community, have plans on the drawing board for six neighborhoods throughout the region by the end of 2011. “From our standpoint, now is the time to get engaged.”
Perhaps one of the clearest signs that the homebuilding market is changing in Central Florida is that one of the biggest busts of all – Bella Collina – is making a comeback.

The upscale community, located in Lake County near Monteverde, launched at the peak of the market and sold homesites to investors around the world for prices ranging from $350,000 to $2 million for Lake Apopka frontage, notes Roger Soderstrom, founder and owner of Stirling Sotheby’s International Realty.

In 2006, Bella Collina, developed by Ginn Clubs and Resorts, was the toast of the Central Florida home luxury market. It was even the site of the Orlando Street of Dreams event, which attracted tens of thousands of visitors. Then, when the economy tanked, the community imploded.

“Prices really plummeted,” Soderstrom says. “There just wasn’t a market for it. Banks took back some of the lots.” Today, he notes, lots are being sold at drastically reduced prices and new homes will be offered ranging in price from $500,000 to $800,000.

Luxury estate homes in Bella Collina will still fetch in the low seven figures, which is expensive in today’s market, but well short of the prices being paid when the community opened.

“We’re repositioning the community from the ultra high-end it was destined for to more of a mid-range,” Soderstrom says. “My forecast is that Bella Collina will be one of the hottest communities in Central Florida over the next 18 months. You have a huge inventory of available lots at seriously discounted prices.”

Today’s $500,000 buyer is yesterday’s $1 million homebuyer, Soderstrom adds. “Everything’s kind of been discounted in half in Florida.”

After several years of bad news, few people are ready to declare that recent signs of activity are proof of a major rebound in Central Florida’s homebuilding industry.

“We still have a ways to go to get back to a normal market,” says Ken McDonald, division president of David Weekley. “There are still concerns regarding foreclosures and how a rise in interest rates will impact the recovery.”

But for the first time in quite a while, there is some genuine enthusiasm among industry pros. In Florida, Roche says, “we have the sunshine and we have the water. When the economy picks up as a whole, we’ll rebound quicker.”

Adds Reinert: “Values and affordability are at historic lows. The ability to buy a home at a vast discount from five years ago, coupled with significantly lower interest rates, means more people that can afford to buy.”