Builders adapt with innovation as SWFL housing market cools

With Southwest Florida’s housing market shifting, the area’s largest home builders — and one of their biggest clients — are shifting along with it. 

In master-planned communities such as Babcock Ranch in southeast Charlotte County just north of the Lee County border, builders pride themselves on innovation with the idea that cutting construction costs without cutting corners in quality leads to sustained success selling new homes, even during market shifts like the ongoing one, said Tom Hoban, president of Kitson & Partners, the developer behind Babcock Ranch.

At Babcock Ranch, which sold its 5,000th new home earlier this year, innovation relates to how the homes are constructed and how they are financed. 

“At the 30,000-foot level, looking at U.S. housing, the market has shifted,” Hoban says. “The duration of having higher interest rates is having an impact on housing demand. There’s more supply than demand on the resale market. The housing market has cooled off, especially in the southern smile states of the Carolinas, Georgia, Florida. You saw this abnormal growth happening from 2020 to 2023. And now, in 2024-25, it’s made it more difficult for people to buy homes. Affordability has become an issue across the U.S. and really across the globe.

“When the market cools off, it affects the quality.”

It also affects financing and the ability to get more bang for your buck, Hoban said. “People aren’t as willing to move and sell their home and leave their 3% mortgage for a 6% mortgage,” he says. “So, you have a lot less mobility. People can’t afford to leave their house. The resale market is growing, because not a lot of people can afford to move. But what we’re doing in Babcock, we’re outperforming other places. We’re trending above our 2024 numbers.”

Competing building companies have experimented and even collaborated on construction innovations. Combining those efforts with financial incentives for prospective buyers means Babcock Ranch can continue its buildout goals. It might be at a slower pace than before, Hoban said, but it will be at a quicker pace than elsewhere.

“What we’re seeing is growth, not a reduction,” Hoban says. “Now, that’s subject to change — but the first five months of this year have been strong. What you’re seeing is a shift. Those new home sales, all those builders are offering lower interest rates. They’re buying down the interest rates. Pulte, Lennar, D.R. Horton, Meritage, Dream Finders, Toll Brothers, they’re buying the rate down to 4.5 to 5%. There’s incentive there. So, if you’re Mr. and Mrs. Smith, and you’re looking to buy a home, you’re going to have bigger purchasing power, because the homebuilders can buy down the mortgage rate. There’s more opportunity to wheel and deal.”

But if you’re Mr. and Mrs. Jones, and you’re looking to sell your home, there’s not as much you can do. 

“They can lower your price,” Hoban says, “but they can’t lower your rate. But builders can do all that. A lot of them have their own mortgage companies.”

Innovation is a big fundamental piece of the puzzle at Babcock and has been from the beginning, Hoban said. “Fiber, water management systems, solar — we’ve always been proactive using innovation, helping Babcock become a better place to live,” he says.

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