Miami Developer Returns Deposits as Construction Prices Soar
Could others do the same? Builders cite rising lumber prices, closed building material factories and a worker shortage for construction costs up 20% or more.
MIAMI – The developer of a Florida City residential project is giving early buyers their money back. Homestead-based Brickless Developers is returning the 5% deposit to buyers who reserved units during pre-construction sales for its Grand Palms development.
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 and a worker shortage for his firm raising prices by at least 20%. Other developers who sold pre-construction may soon find themselves in similar situations, Gonzalez predicts.
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, says 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 says. “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].”
Source: Miami Herald (02/12/21) San Juan, Rebecca
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