4th quarter 2007

Fewer homes being built, but overall value rises;
commercial construction remains strong

The volume of building permits issued in Volusia County for new homes fell in the third quarter, compared with the volume issued in the same period last year.

Meanwhile, the volume of permits issued in the county for the construction of new commercial buildings rose last quarter, compared with the volume issued in the third quarter of 2006. But those statistics don’t tell the whole story.

KB Homes is building several new single-family homes (pictured) at a new development called Isles of
Sugar Mill in New Smyrna Beach. Photos: Brehme

RESIDENTIAL
While the number of new homes permitted in the county in the three-month period of July, August and September (518) was down from the number permitted in the third quarter of 2006 (638), the combined value of those permits ($144.6 million) was higher than the combined value of those issued a year ago ($144.4 million).

That’s significant because prices home builders expect to charge for new homes “sets the tone” for determining asking prices for existing homes in the area, said Phil Ehlinger, business manager of the county’s Department of Economic Development. In general, “people are not going to pay more for resales than for a new unit,” he said.

The increased overall value of the planned new homes suggests that the housing market downturn—which began in earnest last year when home prices and the number of homes sold plummeted, locally and across the nation—may be bottoming out, said Ehlinger.

Sue Darden, CEO of the Volusia Home Builders Association, echoed Ehlinger’s assessment.

“While there are very few homes selling in the $250,000 to $400,000 range, high-end houses are still selling and being built,” said Darden, in explaining how the combined value of new homes permitted last quarter could have risen despite the decline in the number of permits issued. “People who spend $750,000 or more (for a home) are not caught up in the credit crunch,” she said.

Case in point: while Ormond Beach only issued six building permits for new homes last
quarter, the average value of those permits was $704,554.

Demand also appears stronger for homes priced below the median for the county.

DeLand issued the most building permits for new homes of any city in the county last quarter: 108. The average value of those permits was $212,140.

Bill Mancinik, owner/broker of Bill Mancinik Realtor/The Home Team in DeLand, said one builder in west Volusia is offering new homes in the “sub-median price range” of $160,000 to $170,000. Other builders are seeking to entice home buyers by offering free “extras,” such as granite countertops, he said. “There are some outstanding bargains in the new home market,” compared with two years ago, he said.

New Smyrna Beach issued the second highest number of permits for new homes of any city in the county last quarter – 75 – followed by Daytona Beach (66) and Daytona Beach Shores (54). Unincorporated areas, mostly west of Interstate 95, accounted for 118 of the new homes permitted in the county last quarter.

Chad Lingenfelter, chief planner for New Smyrna Beach, said he expects the city to receive an increase in applications for building permits for new homes in the coming months, not necessarily because builders intend to begin construction immediately, but so their projects can be “shovelready” when the market finally does turn around. Of course, when that happens is anybody’s guess.

“We’ve got several projects being prepared even though when they’re actually going to build the homes is uncertain,” said Lingenfelter. One thing the city planner said he is certain about is: “We’ve had five years of estimated increased in population. That will continue.”

COMMERCIAL
Construction activity for new commercial projects picked up in Volusia County last quarter, with 62 building permits issued for new projects, up from 40 the previous quarter and 49 in the third quarter of 2006.

The combined value of those new projects ($95.7 million) was significantly higher than the combined value of the projects permitted in the previous quarter ($41.4 million) and in the third quarter of 2006 ($54.1 million).

Construction is underway at the Victoria Park Village Center in DeLand, which will bring several new restaurants,
retail stores and service businesses to the area, including a family medical practice operated by Florida Hospital.

The combined value of the building permits issued for new commercial projects in the
county in the first nine months of 2007 ($309.7 million) already has exceeded the combined value of the new commercial projects permitted in all of last year ($302.7 million).

Commercial construction typically picks up in areas where there’s been a surge in new
residents, real estate observers say.

“All these new people, they have to do their grocery shopping somewhere,” said Darden. “People need services and supplies.”

Daytona Beach had the biggest increase in commercial construction activity in the
county in the third quarter. The city issued 26 permits for projects that had a combined value of nearly $50.7 million, up from five permits issued with a combined value of $13.9 million in the third quarter last year.

Orange City had the second highest increase last quarter. Orange City issued 17 permits for new commercial projects that had a combined value of $30.2 million. For the same period a year ago, the southwest Volusia city issued three permits for commercial projects that had a combined value of $2.6 million.

Mike Cotton, owner of Cotton Enterprises, expects to complete construction soon on the first of two buildings he plans to build at a new commercial complex called Center Point Business Park in Daytona Beach. Demand for industrial space in Volusia County “seems to be hanging in there,” the Daytona Beach developer said. He expects “slow but steady” growth in the commercial real estate market in the coming year.