One and perhaps two national builders are leaving the Jacksonville, Fla. market, having judged their presence there as too small to matter. It is a scenario that looks to be playing out in other secondary markets across the country as other large national builders rethink whether their shares in smaller markets are worth the effort.
Woodside Homes, as part of its post-bankruptcy plan, is pulling out of the entire East Coast, including Jacksonville, and Beazer Homes USA is reputed to be finishing up its final two neighborhoods before it exits the market. Beazer executives did not return calls and e-mails requesting information on its commitment to the Jacksonville market. But local builders said they have been told an exit by the Atlanta-based builder is imminent.
"I feel like that is inevitable at some point "that bigger builders pull out of the Jacksonville market, said Dennis Ginder, Jacksonville division president for the Canadian-based Mattamy Homes. "Jacksonville is only doing around 3,000 permits this year. I don't know how long the big guys will stick around before they figure out there is not enough business here to fight over."
Yet several national builders, including Mattamy, say they are committed to stay.
"We are trying to grow our business," said Ginder. Jacksonville was Mattamy's second U.S. market. It came to town in 2003.
Mattamy is poised to jump into any vacuum left by departing builders, he said, by taking advantage of lower priced land deals and using the downturn to create new and different product for the market.
"We've brought new product in and started to re-brand," he said. "We've purchased two new land positions this year that are set to open and working on another one we hope to get approved today. Then there are two other contracts that we are working on."
"We feel like this is a good long-term position for Mattamy," he said. "A place where we can get our share of the market."
Standard Pacific, another national builder that local builders said was planning to wind down its operations in the city, has just re-upped its commitment to the market as well.
The Irvine, Cal.-based builder recently made two purchases, its first acquisitions in the market since 2004. It spent $1.6 million for 32 estate-size lots in St. Johns County in Whisper Ridge Reserve and another also bought 111 lots in a starter and first move-up community called Samara Lakes where KB Home had been building. Both are in St. Johns County, a popular new home construction spot because of its highly rated school system.
"We want to gain market share there," said David Pelletz, Florida president for Standard Pacific. "Without trying hard we are a top 10 builderhttp://www.builderonline.com/local-markets/south-atlantic/jacksonville-fl.aspx and now we want to position ourself for the top five and then the top three."
Pelletz said that requires positioning the company for a longer-term presence.
"We feel good about the mid- and long-term future in Jacksonville and believe it's a market that we can have a reasonable size in and make money in," said Pelletz. "The lifestyle there is unique. You have water, and a professional sports team (the Jacksonville Jaguars), good restaurants and a steady economy."
Jacksonville's home-building market is down dramatically from the peak, as are most markets in the United States. Annual permits for 2001 at the end of the second quarter of 2010 were down to 4,125, and likely fell further during the summer doldrums. In 2005 25,088 permits were pulled, according to Hanley Wood Market Intelligence.
However, median home prices, which never rose at the speed of other Florida boom markets, are down just 21% from $187,300 in 2005 to $147,500 at the end of the second quarter of 2010.
Plus, the job market appears to be stabilizing, according to Hanley Wood Market Intelligence (HMI). The market, with its beaches and river, has begun to attract foreign buyers, including those from Canada and Europe who might be priced out of the more expense South and Southwest Florida markets.
There are some economic negatives as well. The city is ranked 10th in the nation for upside-down mortgages, its incomes have been falling faster than the nation, and there's negative population growth, HMI points out