Noted Economist Shares Views On Slowing Housing Market in Southwest Florida

The Southwest Florida housing market is slowing down right alongside the national economy and returning to a state of normalcy, according to today’s Naples Daily News. A noted Florida economist told a real estate group Tuesday in Fort Myers that while the market is in a downswing, it was inevitable after the past run it enjoyed.

“We are going to move from an extraordinary real estate market to a normal market,” Hank Fishkind, Chief Economist of the Attorneys’ Title Insurance Fund, said during a monthly luncheon hosted by the Southwest Real Estate Council and the Real Estate Investment Society.

Fishkind presented his thoughts on the current state of the housing market in Southwest Florida to about 250 local real estate brokers, appraisers and bankers. He also presented the findings of the Attorneys’ Title Insurance Fund annual homeownership survey, which polled more than 1,000 homeowners across Florida’s counties in June.

He compared the slowing market to driving 80-90 miles per hour on I-75, and then slowing down to 40 miles per hour after exiting the interstate. The Southwest Florida housing market has been on top and driving full speed for so long that any decrease will seem unusually slow, but fundamentally, this is a great market.

High oil prices are one of the biggest culprits for the economic slowdown. Midwestern states have been hit especially hard by the high prices and many Midwest economies are in recession. The effect of the Midwest recession is starting to be seen in Naples real estate, which has seen many buyers from the Midwest in the past, but fewer are now relocating.

Lee County has a tapering population growth as well.

Fishkind said he expects the slowdown to continue throughout the year as interest rates rise, with large economic recovery starting in 2008. He expects the Federal Reserve to raise interest rates twice more to end the year with a rate of 5.75 percent as the need to control inflation is a higher priority to the Fed than jump-starting the economy.

As a result, Florida home loan costs may continue to creep up in the short-term, but by 2009, lower interest rates and strong growth should be back in full swing.

As for whether there a housing bubble in Southwest Florida, the analyst responded with capitalized “YES” on his Powerpoint presentation. But the unusual aspect about this housing bubble, which is usually created by a glut of condominiums, is that it is made up of single-family homes. Lee County has a huge inventory of housing for sale that Fishkind said would take 2-3 years to be absorbed.

“The inventory probably will get worse before it gets better,” he said.

There is no forcing the issue, as excessive housing speculation must work itself out. Collier County has a smaller bubble compared with Lee because its housing prices are much higher than in Lee County. These facts and his conclusions didn’t surprise many who attended the luncheon, but hope and optimism prevail among industry professionals.

Commercial Realtor Eric LaHaie said he expects the market to recover much more quickly, within 18 months, rather than 24-36 months Fishkind predicts. LaHaie said he didn’t change his strategy because of the slowing market, but said he is more concerned about huge increases in Florida property insurance, especially in the commercial real estate sector.

“People that are buying commerical property, they are having a hard time getting insurance and if they do it’s very expensive,” said LaHaie, who works at the Fort Myers office of the Re/Max Realty Group.