Interest Rate Roundup

Friday, March 09, 2007

Thoughts on the FL housing market

Yesterday, I spoke with a reporter at the Tampa Tribune about the Florida housing market. She was working on a story about a University of Florida study. The study drew from a survey of professionals in the real estate industry -- bankers, brokers, appraisers, etc. The conclusion: That the single-family home market appeared to be putting in a bottom, even as the condominium market remained weak. Here's a key quote from the Tribune's write up:

"I expect that for most of Florida, prices are as good as they're going to get," said Wayne Archer, director of the Bergstrom Center for Real Estate Studies, which conducted the report. "This is comforting news."

My take is more bearish, frankly. We are one of the most overbuilt states. We were one of the biggest hotbeds for speculation during the boom. That means tons of our existing home inventory is in "weak" hands, the kind much more likely to walk away and give homes back to the bank.

We are also one of the states showing the sharpest year-over-year sales declines. Single-family home sales plunged 27% YOY statewide in January, for instance, while condo sales were down 30%. That compares with a national YOY decline in existing home sales of 4.2% (SFH) and 5.7% (condos).

I am also seeing evidence of the "March of the Re-listers" -- people who couldn't sell last year giving it another try now that we're entering the key spring selling season. That's driving supply in the wrong direction ... up.

I would also add that a couple of the major, public home builders have specifically said their Florida business stinks ...

* Levitt Corp. said on the 7th that "Market trends in Florida continue to reflect soft demand, declining new orders, lower conversion rates, and an increase in buyers failing to fulfill their contractural obligations to purchase homes." The company reported net orders of 82 for the fourth quarter, compared with 490 a year earlier. That's an 83% decline for anyone keeping score.

* Hovnanian Enterprises, for its part, said net contracts dropped 23.3% YOY, with its Southwest FL operations particularly weak. In fact, it took charges totaling $93 million partly to write off the purchase of a Florida builder.

Long story short, I believe 2007 will be another weak year for Florida real estate, with lackluster sales, elevated inventories, and declining prices. Once we get further into 2008, it's possible the situation will improve if the economy and interest rates cooperate. But we'll cross that bridge when we come to it.


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