Construction crews are returning to the Cascades of Groveland, a gated 55-and-older community west of Orlando almost three years after its bankrupt developer left owners of the existing 238 houses surrounded by empty lots, partially built homes and an unfinished clubhouse.
Shea Homes, a builder in Walnut, Calif., bought the remaining 761 lots from Bank of America in June and reopened the project Aug. 25 with a sales office, lower prices and a changed name: "Trilogy." Residents, who took over the guardhouse for indoor activities, will get a 38,000-square-foot recreational center with indoor and outdoor pools, tennis courts and a card room.
"For the people here, the activity of construction equipment is music to their ears," said Eric Sorkin, 61, president of the homeowners association at the development, 35 miles northwest of Walt Disney World. "There's a future."
Builders are buying lots at less than half of original prices from lenders eager to move distressed construction loans off their books. Developments are being resuscitated from Florida, California and Las Vegas to Utah and the suburbs of Washington, according to Brad Hunter, chief economist for Metrostudy, a housing researcher in Houston.
"This is a natural progression of the cycle," he said. "Projects fail, the price of the asset drops until it reaches a point where it's profitable for someone else to pick it up and remarket it. They reposition the project and then what was formerly infeasible, is feasible."
Builders, facing record low demand, are trying to boost margins and revenue by pulling unfinished projects out of mothballs. They're benefiting from cheap land and falling construction costs as they seek to adapt floor plans to today's market and lure buyers with prices that, in some neighborhoods, are little more than the cost of a foreclosed home. The 12 largest homebuilders by market value added 16,631 lots in their past two quarters, according to data compiled by Bloomberg.
The revived projects could contribute to a delay in the housing recovery by adding to the supply of available homes, according to Hunter. At the same time, builders are being cautious about flooding the market by limiting the numbers of houses they build without having buyers lined up, he said. Many homebuyers also aren't interested in foreclosures, which may be damaged or in inferior locations, Hunter said.
It can take nine to 12 months to ready a site — without attention, weeds grow, swimming pools go green, government permits expire and homeowners associations turn insolvent — and construct model homes, said Tom Dallape of the Hoffman Company, a land brokerage advisory firm in Irvine, Calif.
Shea, which had some models in place, did it in a couple months. Soon after taking over the Cascades of Groveland, the closely held company began knocking down 16 partially built homes that "were sitting out there too long, and were not protected from the conditions," said Jeff McQueen, executive vice president for Shea Homes Active Lifestyle Communities.
Developers also are adapting projects to include smaller, more efficient designs that cost less to build. "They're tailoring them to the market," Dallape said. "The average new house used to be 3,000 square feet. Today, it's 2,100."