A privately held Florida builder bought nearly 500 acres of land in its home state with plans to add more than 1,300 houses, placing a big bet on demand for new residential property in the face of persistently high mortgage rates.
In one deal, GL Homes paid $34 million for 421 acres about an hour north of Palm Beach in western St. Lucie County, CoStar records show. The company said in a statement it plans to seek county approval to build roughly 1,100 houses on the site.
In a separate transaction, GL paid $23.5 million for 225 home sites on 57 acres in its Avenir community west of Palm Beach Gardens, according to CoStar data.
“We remain bullish on these markets as destinations for discerning homebuyers seeking the quintessential Florida lifestyle and abundant business opportunities in one of the country’s strongest job markets,” GL Homes President Misha Ezratti said in a statement. "Our recent acquisitions demonstrate our strategy of identifying prime suburban areas near major employment centers, complemented by excellent schools and a wide range of recreational and cultural amenities.”
Nationally, mortgage rates near 7% have curtailed demand and hurt homebuilder confidence. But three of the largest publicly held builders, Lennar, KB Home and Toll Brothers, were able to deliver upbeat quarterly earnings reports in the past five weeks partly because they offered incentives that sellers of existing homes can’t offer.
Some existing owners don't want to let go of the historically low mortgage rates they secured during the pandemic by selling while rates are high. That has buyers turning to newly built houses to capitalize on mortgage-rate buy-downs. When a builder buys down a mortgage rate, it uses profits from sales to lower the interest rate paid by the buyer.
Florida on Its Mind
GL, based in Sunrise, Florida, has long been a major player in the state’s homebuilding industry, completing tens of thousands of single-family houses since its founding in 1976. The family-owned business closed on 2,062 homes last year, making it the nation's 22nd-largest private builder, according to Builder magazine.
During the U.S. housing meltdown nearly two decades ago, GL acquired land across Florida at discounted prices and held on to it until market conditions improved, analysts said.
While GL primarily builds for buyers looking for bigger houses, the company also heavily markets to retirees interested in moving to Florida.
GL’s 55-and-over communities, marketed under the Valencia brand, come with large clubhouses, pools, pickleball courts and other amenities. Full-time social directors organize activity schedules that include clubs, games and live performances. Prices in most of its Valencia developments across the state start at $400,000.
The Florida homebuilding market has softened considerably over the past 18 months, with some builders abandoning their speculative housing projects mid-construction, according to Jack McCabe, a U.S. housing analyst and consultant.
But he told CoStar News that GL’s strong reputation carries weight with buyers. He said the company’s focus on St. Lucie County could pay off, given that many longtime South Florida residents looking to move out of Miami and Fort Lauderdale are relocating north to less-crowded St. Lucie and other areas of the Treasure Coast.
The land it bought in St. Lucie County is just west of GL’s Riverland, a 55-and-over community where the company has sold more than 3,000 homes and is approved to build a total of 11,700.
“In St. Lucie County, the land is cheaper and they can build a lower-priced product there,” McCabe said.