“Cash will be king for awhile,” Knight notes. “You’ll force yourself to cut back. We’ve downsized the company. I had to reduce my overhead to meet the size of sales. I was profitable in 2007. In 2008, maybe we’ll break even, for which I’ll be happy.”
Opportunity from failure
There are glimmers of hope in all the upheaval. Labor costs are down, and land prices have returned to the pre-boom levels. At the height of the boom in 2005, basic, cleared quarter-acre lots in Cape Coral were selling for $85,000. Now, they’re available for $15,000. In Lehigh Acres, they’re under $10,000.
Credit: John Curry
That’s created an opportunity for first-time buyers and retirees of modest income who had been priced out of Southwest Florida for the past several years. Hansen Homes, a Cape Coral–based, family-owned builder, has turned heads in recent weeks with full-page ads for a new, three-bedroom, two-bath house, including the lot and all appliances, for $99,900. Other floor plans in its affordable series run from $119,900 to $179,900. With the spiraling land prices during the boom, none of those price points would have been possible.
Even now, it’s tough, but Hansen has hung on by sticking to the same business model it’s used since opening its doors in the early 1990s—low overhead, no inventory, and long relationships with subs and suppliers who give them competitive pricing.
“We are designed to survive hard times,” says sales manager Tracey Hansen, whose father, Paul, owns the company. “We’re not doing things that cost us money. We don’t have spec homes. We don’t have a model center.” The company will help buyers find lots, but doesn’t own any.
Hansen says she finds the current environment “refreshing” because the buyers are primary residents, not speculators. “It gets you excited again,” she says.
The best news for the builders left in the market is that the newcomers who swarmed there during the boom—who lacked solid business skills, undercut the legitimate builders, and helped fuel the housing frenzy—are gone.
Knight likened the market situation for builders in Ft. Myers to a redwood forest, which propagates through fire.
“The market here was very much like the forest,” he says. “The shrubbery was much too thick. Will [the fire] hurt? Yes. Your legs will get burned. But in the end, the forest is very clear. The survivor in the forest will be the strongest. It’s not easy, but it’s a good thing.”
Other stories in Field Report 2008: