REAL ESTATE MARKET
Canopy, a Premier Fine Homes development, is designed to help meet a spiking demand for homes that middle-income earners can afford.
DEMAND, YES, BUT SUPPLY?
Housing market has some catching up to do
E
xperts characterize Tallahassee’s real estate market as challenging and warn it will take creative thinking to meet residents’ future housing needs. Florida’s capital city has experienced phenomenal growth over the last three decades. And given its beautiful live oakflanked canopy roads, universities, an internationally renowned magnetic lab and its status as a center of government, that growth is likely to continue. The real estate market is not keeping pace with the demand for affordable housing, however, and that is a trend that also will likely continue. Bill Wilson, president of Graceful Solutions, a nonprofit that advocates for affordable housing, said when people think of affordable housing, they often think of the very poor, unemployed or indigent. But there is a another group of people in need of “affordable housing” who are fully employed and making decent incomes. “A single adult in Leon County must earn $20,700 per year to cover the basic costs of living — housing, food, transportation, health care,” Wilson said. “For a family of two adults, one infant and a preschooler, the basic cost of living jumps to $52,250 a year. Forty-one percent of our neighbors — even those working full time or working multiple jobs — don’t earn enough to cover their basic needs.” Many Tallahasseeans are public employees.
While some local real estate experts believe home values could double in less than 10 years, there is no expectation that their wages will double in that same time. Jason Ghazvini, vice president of Premier Fine Homes, explained that the typical state worker or university employee is usually looking for a home in the $250,000-to-low $400,000s price range. “To build that type of home, you need a homesite or lot as a starting point that matches that price point,” Ghazvini explained. “Because there is so much demand to be in the northeast and other desirable parts of Tallahassee, the cost of those lots has gone up. As a builder, I have less supply, so I must pay a higher price for that lot which then means that I need to build a more expensive house on it. When that happens, I price myself out of the majority of Tallahassee’s market.” Wilson said construction costs run about $150 per square foot in Tallahassee, plus the land. “You’re over $200,000 before you even get started,” Wilson said. The high cost of building is due in part because a limited number of tradespeople and subcontractors are competing against each other for jobs, according to Wilson and Ghazvini. After the housing bubble burst around 2009, many tradespeople and subcontractors found themselves without work and moved on to other types of employment. Those who survived now find
themselves with as much work as they can handle, without much competition. That means they are very selective and set the price they are paid, again raising the cost of building a home. Tallahassee’s notoriously difficult permitting process and regulations add to costs as well. With costs so high, building homes below $400,000 is a challenge and supply is low. Joe Manausa, owner of Joe Manausa Real Estate, speaking at the Tallahassee Chamber of Commerce annual conference late last summer, pointed out that “currently, there are just under four months of supply of homes for sale in Tallahassee across all areas and price ranges (except for luxury homes).” Ideally there is six months’ supply. “This means there is far too little supply of homes to meet the current rate of demand. And demand is rising,” Manausa said. According to Manausa, new home sales represent only 8 percent of all homes sold in Tallahassee — a 28-year low. “When the supply of homes for sale is low and yet demand is rising, it is a call to homebuilders to bring more homes to the market at a faster rate. Unfortunately, this is not occurring in Tallahassee,” Manausa said. The threat of increasing interest rates only adds more pressure to act quickly. Ghazvini’s Premier Fine Homes attempted to meet this need with the development of Canopy, the largest planned development in
“FORTY-ONE PERCENT OF OUR NEIGHBORS — EVEN THOSE WORKING FULL-TIME OR WORKING MULTIPLE JOBS — BILL WILSON DON’T EARN ENOUGH TO COVER THEIR BASIC NEEDS.” President of Graceful Solutions 16 / 2019 TA L L A H A S S E E B U S I N E S S J O U R N A L
PHOTO BY LAWRENCE DAVIDSON
BY KAREN MURPHY