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TheStreet Open House

Homebuilders Such as Ryland Make Bet on Once-Dormant Florida City

Stocks in this article: KBHLENMHORYLSPFTMHC

NEW YORK (TheStreet) -- A small planned city near Tampa, Fla., illustrates how U.S. homebuilders M/I Homes (MHO), Ryland Homes (RYL) and Taylor Morrison (TMHC) are betting on a rebound in the economy and a resurgent housing market.

The city is Connerton, located in the center of Pasco County, Fla., about 25 miles north of Tampa, and I've been watching its evolution over the past five years.

New housing activity began in early 2013 with four homebuilders, including the the publicly traded ones mentioned above, building their models. I attended the grand opening around Memorial Day in 2013.

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Last week, two other well-known U.S. homebuilders, Lennar (LEN) and KB Home (KBH), reported better-than-expected quarterly earnings, which prompted me to revisit Connerton to get a read on how the city was progressing.

I become interested in the Connerton story in mid-2009 after my son and I bought a Standard & Pacific (SPF) model home in a community of approximately 960 homes that borders on Connerton.

The original developer of Connerton bought the 8,000-acre Conner Ranch in early 2000 and planned to build more than 15,000 homes around three golf courses, but 3,000 acres of beautiful countryside were later set aside for conservation.

A second plan called for 8,600 homes, 1.7 million square feet for retail, another 1.4 million square feet for offices, a government center, a school system and a hospital. In other words, Connerton would become a complete city amid the beauty of Florida.

Then in 2007 the housing bubble burst. Only 280 single-family homes in Connerton had been sold. The 10,000- square foot Club Connerton was in place, the hospital was nearly complete and the elementary school was under construction. (It was completed a couple of years ago.)

In 2010 a new developer took over the project, but it took nearly three years before the new grand opening.

During my recent visit I spoke to representatives of each of the four homebuilders at their model homes. Their stories were similar. Each has been selling two to three new homes per month with one-third being of them being sold for cash. The price of a new home is up about 5% year over year, and each builder is building two or three homes on speculation and two or three under contract.

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