Gulf Shores - Builders & Buyers Move Inland

Sunday, April 02, 2006
By KATHY JUMPER
Real Estate Editor

Larry Alexander of Beach Bay Homes didn't build any homes last year in Orange Beach, where he serves as a city councilman.

He said high land prices and the lack of available land for subdivisions sent him north of Gulf Shores and into Robertsdale. There are some 50-foot lots available for $100,000 or more in the Bear Point area of Orange Beach. But those lots will be covered with homes priced at $1 million or more, he said.

"I'm selling houses in the $250,000 range in north Gulf Shores on County Road 8, and mine are going to be some of the least expensive homes in the area," he said, referring to Raintree Place.

Last year, Orange Beach issued 247 building permits, allowing more than $277 million in single-family home construction, according to Baldwin County Home Builders Association. Many of those permits were for million-dollar-plus homes, city officials said.

Single-family homes are selling better than condominium units at the Gulf since Hurricane Katrina hit last August, Realtors said. In February, 223 single-family homes were sold in Baldwin County at an average price of $261,449. There were 38 condo units sold that month at an average price of $422,688, according to Baldwin Realtors.

Many buyers have moved inland to Foley, Loxley and the Eastern Shore in Baldwin County, while Mobile has captured many of the Katrina victims looking for a new home.

There were 402 homes sold in February in Mobile County, according to the Mobile Area Association of Realtors. The average sale price was $166,478.

"Everything we're building we're selling fast," said Rick Twilley of Twilley Brothers Builders in Mobile. "Unfortunately, you can't find any land to build something in the $100,000 to $150,000 range. That market is lost. It's a tough market for a starter home."

New home prices have increased as much as 15 percent to 18 percent, local builders say, with much of the blame placed on higher labor costs. Many subcontractors left Alabama to take higher-paying hurricane cleanup and repair jobs in Mississippi, builders said.

"It's difficult to get subs," said custom builder Dan Mooney of Spanish Fort. "My painter just called me and said everybody quit. They went to Mississippi for some quick money. It's terrible, labor-wise."
But the demand for new homes is there, Mooney said. "I've got enough contracts for the rest of the year." He's building presale homes in GlenLakes in Foley as well as Stillwater in Spanish Fort and Avalon in Fairhope.

The new home construction market is strong, but it's beginning to stabilize, according to Dan Garland, senior vice president for construction lending at Colonial Bank. Much of his business had been in Baldwin County for the last 10 years, but now he's busy in Mobile.

"The under $200,000 market is stronger than I've ever seen it in Mobile," he said. "Anything under $300,000 in Baldwin County is selling immediately. That's why the market in Mobile seems to be moving, the lower the price range, the quicker it sells."

The increase in interest rates could put a dent in the new home construction market, according to Len Zumpano, director of the Alabama Real Estate Research & Education Center at the University of Alabama.

A 30-year fixed-rate mortgage was 6.35 percent as of March 30, according to Freddie Mac, a mortgage lender. The 15-year fixed rate was at 6 percent for the same time.

Higher prices for lots and construction have not seemed to stop buyers so far, local builders said. Single-family lots in Mobile are averaging $40,000 to $50,000, and in Baldwin County, $75,000 to $80,000, according to local builders and lenders.

Construction costs to build a custom home averages $125 to $130 per square foot or more in Mobile, builders said. In Baldwin County, construction costs average $135 to $140 per square foot and up.

Mitchell Homes, based in Mobile, is launching a new, custom home concept in Baldwin County, where home prices are higher than in Mobile, according to David Kahalley of Mitchell. The house that sells in the $120,000s in Mobile will sell in the $150,000s in Baldwin County, he said.

Mitchell's custom homes with upscale amenities will be priced in the mid-$200,000s to low $300,000s in Landsdown, a 66-lot subdivision on Baldwin County 27 in Daphne, and 135-lot Brookhaven at Whispering Pines and Baldwin County 13 in Daphne.

The new home buyers are a mix of move-up buyers, post-hurricane buyers and families who work in the Pensacola area but can't afford even higher prices there, according to builders.

"Lower Alabama is in good shape, although I have no numbers to verify it," UA's Zumpano said. "The local economy in Mobile and Baldwin counties is healthy. There are still buyers moving there as a result of Katrina."

Still, he said it could take six months to a year for condo sales to rebound at the Gulf. "The condo prices grew at a rate too fast for people to afford, and speculators have been driven out of the market," he said. "Eventually that supply will be absorbed, and the market will be strong again."