Not long ago, you couldn’t find a new house priced for under $250,000 in Cary, N.C. Today, every builder’s product there is “priced to sell,” says Mark Ward, who with three partners owns ForeverHome in Raleigh, N.C. He points specifically to one of ForeverHome’s townhouse communities in Cary—where prices range from $210,000 to $240,000—that sold 78 homes last year.
ForeverHome closed a total of 225 homes last year in the four North Carolina counties it serves and ranked fifth in closings in Raleigh-Cary, according to our annual Local Leaders list, a ranking of the top 10 builders in the 50 largest markets by closings. The list is developed from research conducted by Hanley Wood Market Intelligence (HWMI), a division of Builder’s parent Hanley Wood, LLC.
Local leaders held their ground by adjusting prices and retooling house plans. ForeverHome took over a community in Cary whose previous builder had tried unsuccessfully to sell 3,500- to 4,000-square-foot homes for $900,000. Those houses, says Ward, were too spacious and pricey for empty-nesters, their primary target, even after prices dropped into the $600,000s. On the 115 lots it acquired, ForeverHome offers 2,500-square-foot homes with $380,000 starting prices. “That’s working for us,” says Ward, whose company entered 2011 with a backlog of 50 contracts and saw sales rise 20 percent in the first two months of the year.
After opening Signature Place, a 36-story, $200 million, mixed-use tower in St. Petersburg, Fla., in 2009, Cantor + Partners, the project developer, took a second reading of consumer demand and last year lowered prices for that building’s 244 units “to where our buyers wouldn’t be underwater,” says Joel Cantor, a principal with the firm. That translated, on average, to 30 percent reductions. The result: Homes at Signature Place “sold like firecrackers last year,” Cantor says.
He concedes that Cantor + Partners and its trades “took a haircut” on margins in order to move these homes. But the company—which ranked ninth in closings in the Tampa-St. Petersburg, Fla., market in 2010—made money by “working on controlling the supply chain,” says Cantor. “We survived when other condo developers failed.”
Price reductions have become the favored leverage of high-rise builder/developers in many overbuilt condo markets. The Related Group ranked first in Miami, where it more than doubled its closings last year compared to 2009 by lowering condo prices by between $100 to $200 per square foot, says Alan Losada, Related’s vice president of condo operations. He notes that the sales velocity at 500 Brickell Avenue, Related’s 633-unit tower in Miami, particularly benefited from discounting. In Chicago, Belgravia Group has dropped prices for its condo properties by 5 percent to 30 percent. Belgravia sold 100 units last year in its tower at 565 West Quincy, where a junior one-bedroom condo that had been priced at $231,000 was reduced to $159,900. A one-bedroom, one-bathroom condo once priced at $319,000 went for $255,900; and a two-bedroom, two-bathroom unit priced at $421,000 now sells for $321,000.
“If you adjust your prices to what the market value is right now and have good advertising and good salespeople, you can sell homes,” says Belgravia’s COO Alan Lev. The company’s website promoted deals at 565 West Quincy with blunt warnings to prospects about missing out. As of mid-March 2011, the building was 85 percent occupied.