The Truth About Area Lots
NOTE: This is fairly long, but PLEASE take the time to read it. It looks like there is going to be another "boom" cycle for lots in the area so this will help you understand the past, present and what may also happen in the future...
A History Lesson
We have to first go back to the 1960s and 1970s – when many of the lots in Highlands County were platted (basically, made into subdivisions with roads and some services such as electric).
This is a great little town, and people saw that back then. It is rare in Florida to sit so high above sea level and have rolling hills. Developers came in droves and “created” tens of thousands of lots on paved roads. They subdivided thousands more on dirt roads. They even subdivided tens of thousands more in areas with no roads (and 40+ years later, most of these STILL don’t have roads – we call these "junk lots").
The lots in the area went through several boom and bust periods over the next decades, but one thing is certain, we have a good supply of lots - and quite a few are not desirable (or not possible) for most people to build on.
Ahead Of Their Time
The reason so many lots were platted back then was because at that time, US 27 was the main north/south road running down the middle of the state. Developers knew if people saw the area, they’d love it. They really were ahead of their time. But, what hurt these plans was when the two big Interstate highways were built (I-75 & I-95). This split almost all the traffic from US27 to each coast, so most everyone coming to Florida never even knew what and where Highlands County was. The huge building boom was never realized.
Of course, now, as Florida has become much more crowded, people are looking for cheaper areas and have discovered what the former developers found – this is a great area of high and dry rolling land and sparkling lakes you can swim in (these aren’t swamps or mud holes). Also, costs are low and taxes and insurance are low compared to many places in Florida.
Hurricanes are also making people think about the benefits of living inland - especially here where the elevation is high. When most of Florida was under water, Highlands county was a string of islands. We can still get damage from a strong storm, but it is nowhere near the carnage you see on the coast.
So, we are seeing growth - and we anticipate this for decades to come. As baby boomers retire up north and people retire in overcrowded urban areas like South Florida, Naples and Ft Myers, they often seek a more cost effective, less crowded place to call home.
The Last Boom Cycle
As far as the market and prices, we'll start in 2003 and use a typical Lake Placid/Sebring development as an example: Placid Lakes. This development was “hot” and it has been around for decades. It has about 2000 homes about 10,000 vacant lots total. The lots were selling around $2,000 in 2003. By 2004, they were up to about $4000-5000 - and the sales were picking up steam! The prices were obviously VERY low and should have come up. We bought several ourselves and encouraged everyone we knew to buy lots in there and in the other similar developments such as Leisure Lakes, Highlands Park Estates and Orange Blossom. Soon they were going for about $6,000-7,000 – many investors saw a quick doubling (and more) of their money. This fueled more flipping ...
The boom began to really pick up steam in 2006. The lots began selling like crazy and over the course of about 8-12 months, they were up to about $12,000-$15,000.00. This seemed justified because it would cost quite a bit to develop lots like that these days – they would have to sell at perhaps $20,000 to $25,000 for each lot to make it a viable project today. So, even with a large supply, we understood these prices.
However, as the months went by, the prices topped $30,000 and they even went up to $40,000 and even $50,000 at the peak. Now THAT was absurd to occur so quickly. I knew they would crash and was actually interviewed in the Tampa Tribune in May, 2005 (this was in the middle of the boom, but I could see the mania building). I told people to have fun flipping but be prepared for a crash. I now smile thinking how people said I was crazy. It’s also interesting that many area Realtors disagreed with me the most. However, I have written literally hundreds of articles on investments in print publications with tens of millions of circulation. I knew an asset bubble when I saw one - and I was staring right at one...
The Crash: A Game Of Musical Chairs
So why was it destined to crash? It’s simple: supply and demand. What people forgot was that we’re in a small town and thousands of these vacant lots were developed with YESTERDAY’S dollars. These have been “sitting around” for decades. Most of the larger developments aren’t even half full of homes. Remember those no-road “junk lots” I mentioned, even those were gong for $30,000 and more! That is utterly ridiculous. A ¼ acre lot in the middle of the woods with no services (that it is pretty much useless) and people were spending that kind of money on them? How could ANYONE who actually paid attention NOT see a crash coming?
Simple affordability for residents was also forgotten. How can an “investor” expect locals to pay well over $100,000 and even $200,000 for an acre of land in a small town? (If a ¼ acre lot was 30-50k, that’s what people were thinking.) The average working person, snowbird or retiree simply doesn’t make that much in Highlands County. If land was that much, how much would home prices climb, taxes, etc.?
I likened the mania to a game of musical chairs. It was the investors themselves buying the lots then immediately listing and selling them and buying more that fueled the fire. Sure, people were building, but not enough to justify that ultra fast price appreciation. So, why musical chairs? The last people (investors) standing would be “it” – the ones that got caught!
We advised all our clients to “play the game” if they wanted, but to be careful and sell at the first signs of trouble. Most listened, but a few disagreed – and they were among the people stuck with many lots they paid WAY too much for - and the ones who later called us saying they should have listened!
We sold the rest of our lots (at that time) when they were in the 20s - about half peak prices for these lots. So, this shows we don’t have a crystal ball as we missed the peak by a good amount, but we made a very nice profit on them. We’re not greedy and I would have felt bad selling lots for way more than I KNOW they were worth - I wanted to sleep at night (and that is another reason I write these articles - so people understand the truth and plan and invest accordingly).
So What's Next?
No one knows the future, but we can make educated guesses. The lots have been gaining momentum. In 2017, we started to get more calls and emails from buyers - not only sellers like the few years before that. This slowly increased until early 2018 when we started getting multiple calls and emails from potential buyers nearly every day.
When people buy in increasing numbers, it creates price appreciation. Right now, area lots are nowhere near their peak prices during the last boom cycle (not even close to half), but we see prices going up during 2018-2020 - possibly 3-4 times their 2018 value. I actually hope they do not go up much more than that very quickly - I will then be concerned about another big bust cycle. That said, just like last time, I can and will use ratios such as the number of lots going under contract compared to new listings to chart the market (price alone does not tell an accurate story). And like last time, even if there is a big boom followed by a bust, there will almost certainly be plenty of time to plan and act accordingly. I charted the ratios for years and saw over the last 10 months or so of the last boom that the market was changing. Prices were still climbing very well, but less and less were being sold and going under contract and more and more were being listed. Educated investors can and should watch these ratios (or ask me - I'll be watching them!).
For the sellers who bought at or near the peak last time, they are still most likely looking at several years before prices go that high (and I honestly do not think they will reach the absolute peak prices this cycle - $40-50k for a typical non-waterfront lot).
The bottom line? I think investors can and will make a LOT of money flipping lots again as long as the economy is doing at least fairly well, but they should be smart about what they are purchasing and keep an eye on the market. It is also just beginning as of mid 2018 so there should be several great years in this cycle...
A Note About Waterfront
Most of this article pertains to "dry lots" only – waterfront lots area an entirely different matter. Good waterfront lots are in short supply and once they are “used” you can’t do much about it. We see waterfront lots being a great investment for the short, mid and long term and we think we'll see possibly a doubling in price during the next few years.
Location, Location, Location!
In the future, investors should consider location more closely than last time. Look for paved roads or at least a nice graded road. Even though the no road "junk lots" may double or even triple in price, I stay away from these myself. If you DO buy any, be prepared to sell and take profit. I'd never suggest holding these long term (at least not during the next 20 or so years).
Selling Your Lot?
Email Here with the name on the taxrolls or an address, and we can drive out to your lot, check it out and email an estimate of what your property may bring.
Interested in Investing/Flipping?
Email Here and let us know what your budget is and we will email the best options with the best chance of appreciation that fits your investment budget.
Of course, you can also call: 863-840-2870. Zachary (Zack) DeBono is heading up the land and lot sales in our office.