What is luxury home builder Pat Neal up to?
He attracted a lot of press when he started selling Key West-style cottages in a gated community-Forrest Creek for just $122,900. The homes drew accolades from those worried about a shortage of affordable housing, but after just three weeks prices have increased 10%. Since the launch on Feb. 28, the builder has twice raised prices, adding $13,000 to the cost of the homes. In a real estate market where prices are falling, it's hard to believe.
The prices are likely to continue rising. Neal said he wants to increase the price to around $150,000 before offering the homes in other communities. "We are trying to see if we can sell the homes close to a normal price so we can have some return," Neal said. "A new line of homes always has an exciting price level and the expectation that prices will go up." The plan is to build 70 of the lower-cost homes, covering about one-quarter of the total unsold lots in Forest Creek.
Since the launch, the company has sold 25 homes. It is said that fear of rising construction costs may be behind the decision to raise prices. Mr. Neal may need to plan ahead for that possibility and also may want to slow the pace a bit and actually deliver a few of these properties.
We wonder if Neal's plan to continue raising the price of the homes may attract speculators. Banks may also be reluctant to finance purchases on homes that are significantly more expensive than the same home that sold a few weeks earlier. We all remember those days!
Even at the new price, the homes remain well below the $160,000 level that Manatee County designates as affordable. This is one product and community to keep your eye on!