There are few states that have felt the pain of the housing downturn more acutely than Florida. The state has one of the highest levels of foreclosure activity at the same time sales volumes are way off, leaving pockets where housing inventory remains bloated and prices under pressure. But the new-home builders who've managed to survive the odds are starting to see some shifts in the market that while still a far cry from a market rebound may make it possible for more builders to eke out a living.

But for some builders who have carved out a legacy in Florida markets at the entry level, tapping into this flow of activity may mean evolving their brands because much of the notable sales activity has been happening in the move-up segment of the market.

Jay Lewis, president and CEO of start-up builder Surrey Homes, for one, told Big Builder the move-up market has been treating his company fairly well given the overall economic and market conditions. While the company has a couple of first-time buyer communities, the bulk of its sales are coming from its move-up communities, where homes are mostly priced between $425,000 and $525,000.

"It's an absolute dogfight in terms of price and incentives [at the entry level]. You've got to worry about doing so many units of traffic to get the sales," he said.

But at the move-up level, it's a bit of an easier sell, Lewis said. Move-up buyers generally have fewer financing issues because they have higher incomes and more savings. However, there are still financing issues to confront given the dearth of jumbo financing. The move-up product that is moving isn't the luxury product of lore; pricing is limited to conforming loan limits.

Many builders credit the resurgence of the move-up market to the economy's disproportionate toll on certain buyer segments. While many lower-income earners in the state were hit hard by the economic downturn, higher-income earners appear to not have been hurt quite as badly in many cases.

"I think they see that home prices are the lowest they're ever going to be and interest rates are the lowest they're ever going to be," said Lewis. "I mean, this is the buyer that was in the market three years ago and the house they wanted was $750,000, and now it's $450,000."

According to a Hanley Wood Market Intelligence (HWMI) ranking of geographic markets where the Top 25 builders had most of their building activity, four of the biggest Florida markets--Jacksonville (No. 22), Miami (No. 7), Orlando (No. 15), and Tampa (No. 16)-- moved up the rankings from 2009 to 2010, even as closings shrunk. This change would suggest they held up relative to other markets even as overall volumes shrunk across the industry.

When asked whether the move-up buyer activity could be driving those market trends, Jonathan Dienhart, HWMI director of published research, said it's possible, although he cautioned that in such a low-volume environment, it doesn't take much activity to move a market's needle up or down. "It may be that [move-up homes] are being perceived as a better value," he said. "Buyers look at them as something they can hold on to as a good investment."

But with the move-up market showing some signs of strength relative to the entry-level market, Lewis said he expected competition to heat up as builders chase what they perceive as a market. "I think the secret's out," he said.

Florida staples like GL Homes, David Weekley, and Taylor Morrison have a tradition of building in the move-up space, but they are quickly finding they have company as other builders try to adapt to meet the market. Meritage Homes, for example, recently opened some move-up communities, after it pursued an entry-level strategy during the early years of the housing downturn. More recently, local sources say entry-level king D.R. Horton has been looking at several parcels where homes would start at $500,000; however, no deals have closed.

But Lewis cautions builders to look before they jump into the move-up market, if it's not already in the company DNA. "This customer demands a high level of service," he said. "So, you have to be ready to hold their hands. They are they old custom home buyer."