By: Cole Epley
Memphis Business Journal
Boyle Investment Co.’s conspicuous return to local residential development, highlighted by its $4.3 million purchase of the remaining 168 acres at Spring Creek Ranch in Collierville, heralds a long-awaited resurgence of the local housing market.
Boyle now claims ownership and development rights over the remaining 340 lots in the high-end development, which it plans to fully develop in multiple phases over the next 10 years. After a company-wide hiatus from residential development, Boyle vice president Gary Thompson is well-prepared to pick up at Spring Creek where he left off.
“We haven’t done any residential construction since 2008,” Thompson says. “We’ve been tending our fields for when it rained again, and I think we’ve reached an equilibrium where people are following what others are doing.”
Thompson has been intimately familiar with Spring Creek since 2001, when he helped plan the incipient development. Boyle came on in 2006 to assist the David Meyer family in developing the project’s first phase of homes; it was from the Meyer family’s partnership, Spring Creek LLC, that Boyle subsidiary SCR Bravo Investments LLC purchased the remaining acreage.
Lots range in size from 0.22 acres to five acres, with prices starting at $87,000. Home prices start at $300,000 on the smallest lots. On the larger lots within the gated neighborhoods of The Retreat and The Estates, homes are likely to far exceed the $1 million mark.
Seeking to apply lessons learned from the housing crash and its subsequent fallout, Thompson says the company has plans for speculative building, but any such activity will be conservative.
“We plan to have a healthy mix (of spec building),” he says. “We don’t want to flood the market, but we need to know how much we can put on to breed volume.”
Local data indicate that volume might finally be returning. Through September, the most recent month for which data are available, the volume of permits for new construction in Shelby County was up 34 percent over the same period last year.
A dearth of lots, however, is perplexing area homebuilders hungry to satisfy pent-up demand. Given the hurdles facing developers in search of vacant lots in Shelby County, Boyle’s recent transaction is as pragmatic as it is foretelling.
“We’re seeing the inventory of new homes and the inventory of serviced lots is quickly running out,” says Don Glays, executive director of the Memphis Area Home Builders Association. “If people want to get into a new home, they have to make that decision fairly quickly.”
While pent-up demand is finally creeping its way into the market for new homes, Glays admits it is “a little slower than we’d like,” though it is “certainly happening.”
He points to increasing consumer confidence and stabilization of prices and appraisals as contributing factors to a resurgence in homebuilding.
According to the Conference Board’s October index, consumer confidence is at a nine-month high. Homebuilders are feeling optimistic, as well: the most recent National Association of Home Builders/Wells Fargo Housing Market Index hit a six-year high this month.
“I think people are realizing that, with the stability in the market, now is the time to buy,” Glays says.
Other local homebuilders can attest to increasing optimism among potential homebuyers.
Greg Bridgers, president of Southern Serenity Homes LLC, says he saw high-end construction struggle to stabilize a few years ago. This year, he adds, has been “somewhat phenomenal.” According to MBJ research, Southern Serenity Homes built nine homes in 2010 and put up 19 more in 2011.
Over that same period, the average sales price of a Southern Serenity home fell from $504,000 to $455,500. Bridgers now estimates an average sales price of $550,000, excluding the price of lots, which are becoming increasingly rare — and sought-after.
“In Collierville and Germantown, lots have become a very hot and a very scarce commodity,” he says. “To go buy a lot in Germantown, you’re looking for a needle in a haystack.”
While lot prices are lower than they were before the recession, Bridgers says they are starting to climb upward. Still, he adds that “the stars are aligned” for prospective homebuyers presented with historically low interest rates and lower-than-average costs to build.
“Six months from now, you’re not going to find a lot,” he says. “And secondly, you won’t get it built then for what you can today.”
Marty Smith, an affiliate broker with Prudential Collins-Maury Inc., Realtors and owner of Artisan Custom Homes, agrees. From each of his perspectives, he says people seeking to get into a different home — new or not — have the upper hand.
“People are recognizing the houses they’re now getting for $400,000 or $500,000 would have cost another $100,000 a few years ago. That’s primarily a factor of land cost,” he says.
With Boyle now assuming ownership over the remaining lots at Spring Creek Ranch, Smith expects things to continue to look up for area homebuilders like himself.
“The high-end market is improving and has gotten better, and the fact that Boyle feels confident enough to not just develop it, but to own it, is a pretty positive sign,” he says.