As published in the Sun-Sentinel November 11, 2007
By Paul Owers
| South Florida Sun-Sentinel
Three years ago, home builders held lotteries to deal with hordes of people, mostly short-term investors, overwhelming their sales centers. Today, with housing markets crashing, builders practically beg for buyers.
"During the boom, you were developing strategies to manage demand," said Jill DiDonna, a vice president of Sunrise-based GL Homes. "Now your whole modus operandi is trying to stimulate demand. It's come 180 degrees."GL has grown substantially since beginning as a small local company in 1976. At the end of 2006, GL was ranked as the 36th largest builder in the nation, according to Professional Builder magazine.
The privately held builder also is one of the largest in Palm Beach and Broward counties and is feeling the brunt of the slump because its business is concentrated in the Sunshine State. California, Nevada and Florida were out front in the housing boom and now are leading the downturn.
GL, with revenue last year of $871.7 million and about 250 employees, builds homes for young families and retirees in Broward, Palm Beach, Indian River, Lee and Hillsborough counties. About 35 percent of its business is the growing active-adult segment.
"People are still moving to Florida to retire, and retirees don't have time to wait on the sidelines," said DiDonna, 37, in her 14th year at GL.
She discussed the state of the home-building industry during an interview last week at the company's headquarters. Portions of her answers are paraphrased.
Q: In your opinion, when will the housing market improve?
A: Home builders and sellers are reducing their prices. Over time, the market will be stimulated by that adjustment. How long do I think that will take? Eighteen months to two years.
Q: Until then, can builders afford to keep offering deep discounts?
A: Buyers' psychology today is that they expect to get good deals. Very few sales are happening without incentives. We just sold 40 homes in Vero Beach. We knocked anywhere from $60,000 to $100,000 off the price of the homes. That seemed to be the magic number. If a house is selling for $300,000, and it cost you $250,000 to build, and you have to sell it for $225,000, at least you have some cash flow coming in. Something is better than nothing.
Q: Are there any silver linings in this slump?
A: The active-adult market is very encouraging. That 55-and-older segment hasn't seen the downturn that other segments have. At our Valencia Pointe development in Boynton Beach, we're selling 26 homes a month during season. I go in there when I'm really depressed.
Q: How can consumers take advantage of a buyer's market?
A: Get pre-approved for a mortgage before making an offer. You will have more credibility. Base your offer on something, like a comparable sale. Negotiate for items that carry value and affect the total purchase price, such as lot premiums, options, closing costs, deposit requirements, closing dates and interest rates. Builders are motivated by quick closings. If you can close quickly, that can play to your advantage in negotiations.
Q: What tactics should buyers avoid?
A: Don't lowball. It gets the process off to a bad start, and builders won't take you seriously. Don't expect the builder to rebuild the house for you to include some unusual feature. Don't blow the deal over $10,000 or $15,000 when you've already negotiated significant savings. Finally, don't expect that a home will be there when you're ready. Unique properties at the right price will sell quickly.