Miami developer returns deposits as construction prices soar. Will others follow suit?
The developer of a Florida City residential project is giving early buyers their money back. Construction costs have risen so much, according to Brickless Developers, that it is raising prices by at least 20%.
Homestead-based Brickless Developers is returning the 5% deposit to buyers who reserved units during pre-construction sales for its Grand Palms single-family home and townhouse development at 1100 Grand Palm Drive.
When the company launched sales in 2019, it required deposits ranging from $10,000 to $14,000 for townhouses starting at $200,000 and single-family houses starting at $275,900.
Juan David Gonzalez, director of development at Brickless Development Group, blames the closure of building-material factories globally — causing a shortage of wood and other materials — and a shortage of workers for his firm increasing prices.
“The pandemic, as well as the geopolitical climate, has affected many sectors of the economy,” Gonzalez said by email. “The construction industry, despite being in a boom period, has also been affected for various reasons.”
Other developers who sold pre-construction might soon find themselves in similar situations, Gonzalez predicted. “What they had originally budgeted prior to Covid, does not compute with the current reality of costs.” According to the Federal Reserve, the price of construction materials climbed almost 7% over the past year.
Developers faced similar situations in the mid-1990s and in 2006-2007 as prices skyrocketed, said Florida Atlantic University professor and real-estate economist Ken H. Johnson.
“The supply chain on many goods, from toilet paper to building supplies, has been impacted,” Johnson said. “If you are a developer on a timeline, you are going to pay a little more to get a project done, and your margins could disappear if you don’t [raise prices].”
Brickless declined to say how many deposits it booked pre-construction and how many buyers decided to pay the increased price.
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Brickless is anticipating completing its first 165 single-family homes and townhouses at Grand Palms in 12 to 18 months. The project includes 306 townhouses with four bedrooms, three bathrooms and one half bathroom. Grand Palms will also have 571 single-family homes with five bedrooms, four bathrooms, one half bathroom and a garage.
In addition to Grand Palms, 323 other single-family homes and townhouses are under construction in Florida City, Gonzalez said by email.
“Florida City offers an excellent opportunity for the first-time homebuyer and owner-occupied residents,” Gonzalez said by email. “Buyers have shown a preference for single family homes and townhouses, with the single-family home being the most desirable product.”
Data show that Redland and Homestead were top markets in 2020 for single-family homes priced less than $400,000.
Miami Herald Staff Writer Rob Wile contributed to this report.
This story was originally published February 12, 2021 at 7:00 AM with the headline "Miami developer returns deposits as construction prices soar. Will others follow suit?."
