Ernesto Grinds Florida Housing Market to a Halt

As has been widely documented, the South Florida housing market is in a fragile, shifting state. Hurricane Ernesto’s arrival this week? Not doing anyone any favors.

Across the state, home builders were forced to stop construction Tuesday and instead rush to secure job sites. Meanwhile, Ernesto is poised to delay end-of-the-month transactions, further dampening existing Florida home sales in August that were already were slow.

To make matters worse, home insurance companies, such as Citizens Property Insurance Corp., stopped issuing policies Monday after officials posted tropical storm warnings and hurricane watches for Palm Beach, Broward and Miami-Dade counties.

Eager buyers hoping to complete purchases so they could move in over Labor Day weekend how find themselves wondering if that’s doable.

“Everything grinds to a halt,” said David Dweck, president of the Boca Real Estate Investment Club and an agent in Palm Beach and Broward counties.

Although it looks as if Ernesto may prove to be little more than a minor inconvenience in the end, industry observers worry that a busy hurricane season for the third straight in a row could have a lasting effect on home buyers’ psyches when it comes to Florida real estate.

That’s the last thing struggling builders and concerned Florida mortgage lenders need, given what’s already transpired in 2006. Toll Brothers, a major builder in the region and beyond, is one of many companies that has already its warned investors that home sales have softened now that the recent five-year housing boom has ended.

“If there’s only minor damage, people may say, ‘No big deal,’” said Kiku Martinson, director of real estate for Campbell & Rosemurgy in Deerfield Beach. “But if there’s a lot of damage, they… may think twice.”

Since 2004, South Florida has been battered by hurricanes Frances, Jeanne, Katrina, Rita and Wilma. Some residents, especially retirees, say they’re ready to leave the area because of the increased threat of storms. Agents say buyers tell them they don’t want to commit until hurricane season ends November 30. This week is one thing, but three or four more Ernestos may adversely impact the immediate future of sales.

So far this year, Florida home loans have gotten more expensive, property taxes continue to rise amid new assessments and affordable housing fears are running rampant. Could Ernesto, or one of his counterparts, be the straw that breaks the real estate camel’s back? Mark Zandi of Economy.com, said even a relatively minor storm could influence buying decisions.

“In the long run, if you keep having storm after storm after storm, season after season, it will wear down on the desirability of the area. I don’t think it’s overwhelming yet, but it is a growing weight on demand,” he said.