Building Slowdown, Higher Home Loan Rates, Tepid Investment in Palm Beach County

Linda Rawls, the Palm Beach Post real estate writer whose column had been missing from the publication for several months, has returned with a pair of humorous explanations for her absence:

• She won the lottery and ran off to Tahiti with Dr. McDreamy.
• The prices in the Palm Beach County housing market became so startling that she succumbed to a heart attack while covering the International Builders Show in Orlando in January.

It turns out the Rawls did require heart surgery (though probably not actually as a result of South Florida home prices), but is now back in the saddle a the Post. In her first column in several months, she asks the question we have all been wondering: Is the real estate market in boom or bust or somewhere in between?

Is it “correcting” itself, and do things have to get worse before they get better? Is our market in South Florida immune to the pressures that other areas are subject to? Will houses here forever hold their value, or even increase? And what about all those new condos?

If there’s one thing we should have realized by now, it’s that no one knows for sure. So, whom do you trust? The National Association of Home Builders has a pretty good track record for accurate forecasts, and a disconcerting report from last week may hint at things to come.

“In March, starts in buildings with five or more units continued a roller-coaster ride — climbing 18 percent to a seasonally adjusted annual rate of 334,000 units, after dipping 34 percent the previous month, and climbing 25 percent the month before that,” the NAHB report said.

The forecast also noted that rising Florida home loan rates, combined with strong job growth spurring new household formation, could tilt the balance in favor of rental markets. Bancinvestment.com also weighed in last week with a prediction that rents will increase by 5-6 percent this year as rising costs of Florida home loans force people out of the home-buying market and into apartments.

It’s a landlord’s market, in other words.

Even though rate increases have been relatively mild so far, they’ve gone far enough to price (or frighten) investors out of the condo market, or at least the NAHB believes this. The organization believes it could have a particularly depressing effect on the production of condos.

NAHB economists are predicting a total of 313,000 “new starts” this year in multifamily buildings with five units or more. That’s nearly the same as last year, but by the end of next year, the NAHB predicts, new construction will slow to under 290,000 apartments.

Declining apartments mean… higher rents. The more things change in the Florida housing market, the more they stay the same.