Volusia, Flagler saw a growth slowdown in 2023. What's the outlook for the New Year?

Drive around Volusia and Flagler counties and you'll see construction projects everywhere you turn.

New homes. Luxury apartments. Hotels. Oceanfront condos. Restaurants. Shopping centers. Two huge new distribution facilities for Amazon. A Costco store coming to One Daytona. A BJ's Wholesale Club coming to Palm Coast. A new VA outpatient clinic. And a Buc-ee's car wash that will be the biggest in Florida.

It may surprise some to learn that the number of building permits issued this past year for new homes is actually down in both counties compared with 2022 and 2021.

Still they remain well above pre-COVID-19 pandemic levels.

"We're back to normal demand," said Tony DiNizo, the newly installed 2024 board president for the Volusia Building Industry Association.

Here's a look at growth and development activity locally this past year and real estate experts' expectations for the year ahead.

What the numbers show

In Volusia County, through the first three quarters, 2,762 building permits were issued for new homes, according to the county's economic development division.

That's down 14% compared to the 3,222 issued during the same period in 2022, but up 30% from 2,127 for the first three quarters of 2019, the year before the pandemic began.

And consider this: the 996 permits issued in the third quarter of this year alone is more than double the 477 total for the entire year in 2011.

In Flagler County, builders obtained building permits for 1,323 new homes in the first three quarters, down 33% from 1,995 during the same period last year, according to Palm Coast Realtor Toby Tobin of Grand Living Commercial Realty. Tobin writes about the Flagler County real estate market in a blog called GoToby.com.

Housing starts in Flagler through the first nine months of 2023 are already more than the 1,153 permits issued the entire year in 2019. They're also more than eight times the 153 total for the entire year in 2011.

What caused growth to slow in 2023?

Realtors and builders point to several factors for the construction slowdown. Among them: rising interest rates which hit a 23-year high in late October, record home prices, high costs, and an increasing scarcity of buildable lots.

The good news is that average rates for new mortgage loans have started to come down in the final weeks of 2023 after the Federal Reserve signaled it may start lowering interest rates in the New Year. Freddie Mac reported the average rate for 30-year fixed-rate mortgages fell to 6.67% on Dec. 21 after peaking at 7.79% on Oct. 26.

Building material costs have also stabilized.

What is not expected to change is the scarcity of buildable lots. And home prices could continue to inch higher.

"As interest rates dip, it will spur more demand (for new homes)," said Tobin.

Cyrus Callum, Volusia County's director of aviation and economic resources, said he is "cautiously optimistic" about the local economy in 2024.

"People are still moving to Florida in record numbers," said Callum who recently bought a new home in Ormond Beach. "Interest rates on new 30-year fixed-rate mortgage loans have already dropped below 7%. I think they could drop into the 5's by the end of 2024."

Builder: 'Our phones are ringing off the hook'

DiNizo, the owner of Luxury Home Builders in Ormond Beach, specializes in high-end homes in both Volusia and Flagler counties.

"Ninety-five percent of my clients are cash buyers," he said. "Our phones are ringing off the hook (for new homes in 2024). We can't keep up."

The slowdown in new home sales and construction has largely been in the lower price ranges, said DiNizo. "For the (mass) production guys, we've still got a lot of headwinds. Rising home prices is putting affordability out of range for the average homebuyer. That's why we see so many apartments going up."

Carl Lentz, managing partner of SVN Alliance Commercial Real Estate Advisors in Ormond Beach, said declining interest rates combined with increased demand "could provide motivation for developers to start more projects" in 2024.

In the Daytona Beach area, it could also spur an increase in redevelopment activity, particularly along the ocean, he said.

"Developers have got about as far west (in the city) as they can go. I expect to see an increase in new (oceanfront) resort hotels, luxury apartments and condos," he said.

Margaritaville could sell out by end of 2024

Latitude Margaritaville, the Jimmy Buffett-themed 55-and-older community off LPGA Boulevard, just west of Interstate 95, has been the Volusia-Flagler area's fastest growing master-planned community since welcoming its first residents in 2018.

In 2022, it was the 16th fastest-growing master-planned community in the United States, selling 600 new homes, according a national ranking by RCLCO Real Estate Consulting.

It's on pace in 2023 to match its 2022 total, confirmed Bill Bullock, president of developer Minto Communities' Latitude Margaritaville division.

Latitude Margaritaville Daytona Beach, which has entitlements for up to 3,900 homes, is on track to sell its last new home in either mid or late 2024, he said.

As of early December, Minto had 478 homes under construction at its Daytona Beach community.

"We're actively pursuing a potential site for another Latitude Margaritaville within a short drive of Daytona Beach," said Bullock. "We're definitely not leaving Central Florida."

Plantation Bay sees steady growth

ICI Homes recently opened a new $30 million clubhouse at Plantation Bay, a 4,000-acre golf community the straddles the Volusia/Flagler line just west of I-95. The three-story 40,500-square-foot Founders Club clubhouse was built to accommodate the community's steadily growing population.

The community, which began in the early 1980s, recently topped 3,000 homes, with only 50 lots remaining on its Volusia County side where it has entitlements for 1,800 homes.

Mori Hosseini, ICI's chairman and CEO, said his company has entitlements at Plantation Bay for nearly 6,000 homes, but said it will likely only have 5,000 upon full buildout because some homes have been built on multiple lots. Most of the community's future growth will be on its Flagler County side where land is already being cleared for more homes.

"We've been adding about 150 homes a year," said Hosseini.

Developers: Daytona is ripe for 'revitalization'

Representatives with Clearwater-based Valor Capital Real Estate Development recently presented plans to city officials for a proposed 18-story, 86-unit oceanfront luxury condo tower at 3411 S. Atlantic Ave. in Daytona Beach Shores.

In an interview with The News-Journal, Darius Wilhere, Valor's deputy CEO, Mauricio Lan, executive development coordinator, and Allan Agami, project manager/chief procurement officer, said they hope to break ground by the end of 2024.

"We really love the place," said Lan of Daytona Beach Shores and the surrounding area. "It has the right infrastructure and the proximity to bigger cities. We saw a lot of potential that we liked."

Wilhere said his company is well aware of the opposition from beachside residents that some oceanfront high-rise projects have faced, but said, "We're not trying to privatize the beach. We want to activate the beach."

Lan said Valor's proposed condo tower will be in line with neighboring buildings, including the 20-story Towers Ten Condominium directly to the south. "We're not trying to build the tallest building. The skyline is going to be consistent (with other condo towers)."

Agami said his company "is very excited to become part of the community."

In a recent interview with Tampa Bay Business & Wealth magazine, Valor CEO Moises Agami noted that the Daytona Beach Shores project is his company's first on Florida's east coast.

"We found this city called Daytona Beach Shores. ... It's just a beautiful place. It's one of those cities that I believe needs a little bit of a push and a bit of revitalization, especially after the (back-to-back tropical storms in 2022). It needs a little reinforcing of the infrastructure and the systems they have out there and we are very excited to bring that to the area."

Positive signs in Ormond Beach

Brian Rademacher, economic development director for the City of Ormond Beach, expects 2024 to be a year of "steady growth."

"The one thing I find interesting, despite the economic headwinds, is that a lot of companies I talk with say they are looking forward to the New Year. I'm a little surprised, in a good way, by their optimism and desire to expand," he said.

"Ormond Crossings is a great example. Would (Scottsdale, Arizona-based) Meritage Homes be looking to develop 2,950 homes if they were worried about the economy?"

City commissioner sees need to manage growth

Daytona Beach City Commissioner Ken Strickland sees a need for more housing, but believes the growth needs to be managed to ensure that infrastructure improvements are also made to keep up with the increased strains on the area's roads and natural resources.

"I am not against development. I'm against uncontrolled, unbridled development," he said.

Strickland worries that actions by the Florida Legislature in recent years are severely limiting the ability of city and county governments to manage growth in their communities.

"We're encumbered by rules by the state that really don't allow cities to tell developers 'no,'" he said. "They chip away at home rule."

This article originally appeared on The Daytona Beach News-Journal: Daytona housing starts dipped in 2023. What will the New Year bring?