By Kevin Chiu
The second home-vacation market, long slowed by the housing crash is showing signs of improvement amid growing buyer interest. It appears a rebound of sorts is developing in many vacation markets.
The real first sign of improvement in the second home market developed in Miami, where bargain hunters are picking up some of the best deals in the country. But markets from the mid-west to Las Vegas are also seeing more activity that could finally shed light on a rebound in the nation’s worst hit single real estate sector.
Luxury home builder Toll Brothers, which builds homes in 22 states, sold just 69 fewer houses across the country in the last quarter compared to year-ago levels, according to the company. But the number of contracts signed nearly doubled that of a year ago – 526 to 266. One in every four regions experienced an increase in contracts signed. In New York, neighboring New Jersey and New England the number almost tripled. While Chicago also saw nearly as much growth in high-end condo sales.
“We believe the housing market is still in choppy waters,” said Robert I. Toll, chairman and chief executive officer. “But the seas are getting calmer.” The company posted a loss of $40.8 million for the quarter, less than half its first quarter loss of $88.9 million.
The prices on new homes and condos have been reduced substantially to keep up with market demand experienced in other sectors, including resale homes where prices have dropped the most. New builders have struggled to keep up since bankers, who are financing their projects are less inclined to cut.
In fact, much of the turn around in new home building depends on just how much builders and bankers are willing to cut prices. In Miami bankers have adjusted to the downturn with developers on many projects, but stubborn investors are unwilling to give in on others.
In Naperville, Illinois one condo project has slashed its prices by $50,000 a unit to sell off remaining inventory. The Marquette Companies, a developer in the area for more than 30 years successfully negotiated a new loan enabling them to make the price cut at their “Ponds” development.
While many developers have gone from boom to bust, and thousands of home builders and developers have filed bankruptcy the older companies in the industry seem to be the most resilient. “We are a solid company with long standing relationships with our lenders,” said Jeff Prosapio, senior partner of Marquette. “Because of that we were able to renegotiate the development loan which allowed us to offer pricing that is way below market, and pass along the savings to our buyers.”
The development offers one and two bedroom floor plans starting at $124,900 for a two-bedroom unit.
In Miami the longer companies have been around the more willing bankers seem to be willing to negotiate. The artificial inflation in prices fueled in part by Wall Street hedge funds has many investors strapped to make a deal to unload towers of high rise condos in Miami, once seen as the epicenter of the crisis.