Writer: Max Crampton-Thomas
2 min read July 2021 — Kolter Homes President Robert Rademacher told Invest: that COVID helped create a “perfect storm” for Southeast Florida due to the significant influx of people moving from the Northeast. He also spoke to the current demographics for homebuyers in South Florida and how this is benefiting their operations.
What are the main factors impacting the housing market in Palm Beach?
There are a number of factors. There has been an ongoing shortage of homes built across the country to the tune of 3.8 million to 4 million homes. When that is done over a 10-year period, this creates a supply issue. There is also the delay in the millennial first-time homebuyers who decided not to purchase a home as early as other generations. The delay in homeownership creates a greater pipeline of demand. Another demand driver is COVID and the influx of people from large cities in the Northeast. People want to upsize and leave the cities. This has created a perfect storm at this point in time for Southeast Florida because it is such an attractive place to relocate to. People now realize they will be able to work from home more often and they want to live in a location that offers a great lifestyle. We’re seeing a lot of demand now for dens and especially dual dens for working spouses who want separate workspaces. We have created more versatility in our structural options.
What is the current focus for the Florida market?
In Palm Beach, we have three large communities: Cresswind in West Lake, and Alton and Artistry in Palm Beach Gardens. There are 1,400 units between Alton and Artistry and another 800 in West Lake. The demand has been outstanding and we are controlling our releases to maintain delivery schedules and quality. This is an unprecedented level of demand. At the same time, our industry has seen costs go through the roof due to supply chain challenges and commodity prices which has led builders across the region to increase prices dramatically.
How has supply chain disruption improved in the last year?
In my estimation, it has not really improved. We’re still seeing a shortage of lumber, metal, concrete, windows, appliances, PVC and anything resin-based. We’re managing this process by altering how we order, placing orders about two months ahead of need. Lumber prices rose 300% in the last year and the average home in the United States increased $36,000 due to lumber costs alone. It is challenging to price a home that will be sold for a fixed amount without knowing how raw material costs will progress in the future.
How are demographics shifting for homebuyers?
The baby boomer market has been fantastic. For the next eight years, 10,000 people per day will turn 65 and 30% of that market wants an age-restricted gated community resort environment, which is our Cresswind brand. We have property managers and staff and provide entertainment and facilities for the residents, and this is all included in the purchase of the home. This brand has grown since 2010 to account for well over half of the company. The brand will probably make up 75-80% of our business going forward. The baby boomer generation is still the wealthiest in the history of mankind, controlling 56% of household wealth. I think we are positioned extremely well to attract that market. We’re expanding into other markets in the Southeast across four different states. Some in this demographic are “baby chasers,” who move to the same location as their kids so they can remain close to the grandchildren. We’re betting on that market remaining strong.
What is your outlook for the next 18 months?
For all markets, we need to get some consistency in the supply chain, and we need more consistency in materials. I don’t know where the lumber situation will end up and that needs to be resolved everywhere. The supply was shut down because of COVID and the inventory was eaten up in the meantime. This year, we have record-setting sales. The biggest question mark for the whole industry is whether the shortages will be alleviated so we can offer our best price to customers. There is a lack of people looking for work recently and this is compounded by the fact we are expanding and constantly recruiting. In today’s environment, we need to be creative to find the talent we need.
The potential risk of foreclosure as government support tails off will not be a problem for our customer base. The active adult tends to pay large down payments. For first-time buyers, the demographic seems strong because they have saved for more years than before.
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