Faced With Low Projections, Brevard Builders Cutting Staff, Hoping to Ride Out Slow Market

A slowdown in home construction has led to widespread staffing reductions among builders, as well as a marked decrease in work for subcontractors in Brevard County and other segments of the once-booming, now-shifting Florida housing market, housing officials say.

“We’ve experienced more people looking for work in the trades in the last three month than we’ve seen in the last four years. We had a great market, and it’s amazing that it lasted that long,” said Dave Armstrong, secretary of the Florida Home Builders Association and a local home builder himself.

With the market slowdown, some small contractors have gone out of business, and the bigger firms have been cutting costs by reducing staffing.

“This is just the beginning. I think you’re going to see a little bit more of that,” said Franck Kaiser, CEO of the Home Builders & Contractors Association of Brevard.

If there was any doubt that Brevard County’s housing boom has ended, a new construction report should squash it. Housing construction permitting in Brevard dropped in June to its lowest one-month level in nearly four years, according to the latest housing activity report from the Home Builders & Contractors Association of Brevard.

• A total of 374 permits for single-family homes, condos and apartment units were issued across the county in June, the lowest total since 362 permits were issued in September 2002, statistics show.
• With 3,073 permits issued in the first half of 2006, Brevard is on pace for 6,146 housing permits this year, which would be down by more than 2,500 permits from 2005 and the lowest total since 2003.
• Most of the permits issued are for single-family homes — there have been 2,461 from January through June of this year.
• That puts Brevard on pace for 4,922 single-family home permits in 2006, which would be down from a record 7,273 permits in 2005 and the lowest total since 2002.

Yes, it’s officially a buyer’s market now. After two years of sharp gains, local housing prices have leveled off in the past year, and some industry officials think it could be 2008 before the dynamics of the market change back to the favor of the seller. In other words, don’t expect the rampant appreciation seen from 2001-2005 to return before then, if at all.

With price increases drying up, investors are done flipping and are now in the midst of canceling their purchases, forgoing their security deposits and backing out of deals. They are doing so instead of taking on Florida home loans and riding it out while waiting for prices to go up again so they can turn a profit.

Some flippers who already bought homes are being forced to rent them out while waiting for the next upturn in the market.

For prospective home buyers, the time to take advantage of the housing market has come, as the upside of all this turmoil is that builders, with an excess of inventory, are more willing to negotiate on price and other perks.

“Plain and simple, the sudden slowdown in the housing market has created excess inventory,” said Mark Neubauer, President of Sales for Mercedes Homes.

“In Brevard County, Mercedes Homes has nearly 100 homes that are completed and ready for move-in. A few months ago, a buyer was lucky to get on a list to buy a home. But, now the tables have turned, and we’re experiencing a buyers’ market,” Neubauer said.

Mercedes is inviting customers to negotiate when making an offer, and is offering six months with no Florida home loan payments, as well as written price guarantees. Hence, if the base price of a house decreases before the customer closes on the sale, Mercedes will refund the difference.

According to the Home Builders & Contractors Association report, the total value of June’s housing construction permits in Brevard was $80.26 million, making it the second-lowest monthly total for 2006. The total for the first six months of 2006 is $594.60 million.

Norris Garrison, manager at Young Builders in Melbourne, said the company has not had any layoffs, but has been downsizing through attrition. Like other home builders struggling with declining sales, it is not taking on additional staff, and is not filling positions as employees have left.

“We’ve had to restructure,” Garrison said.

The Florida Agency for Workforce Innovation does not break down the number of jobs in the home-construction industry, but its latest report showed the larger category of jobs in all construction, natural resources and mining was at 18,300 in Brevard County in June, unchanged from May.

As Florida mortgage costs continue to increase, demand for housing in the area is likely to decline further. But if rates level off, and inventory levels slowly reduce, we could see a return to normalcy within the next 12-18 months. Stay tuned.