North Florida Real Estate: Buy Now or Later?

At first glance, the North Florida real estate market is slowing down –leveling off at worst. However, if you look deeper, and examine where we were at five years ago, the market is much stronger and analysts predict. The recent cooling off is only a trend that won’t last much longer, the Jacksonville Daily Record predicts.

The 2004-05 housing boom took homes sales and housing production well above levels supportable by demographics and other fundamental demand factors.

“The cumulative excess of housing starts nationwide apparently amounted to at least 400,000 units, and the excess supply now resides in builder inventories or in the hands of investors who may cancel contracts or sell vacant units at any time,” said David Seiders, chief economist with the National Association of Home Builders (NAHB).

“It’s clear that the housing downswing still has some distance to go, if only to work off excess supply in markets for both new and existing homes including the condo market.”

Bryan Lendry, local builder and past president of the Northeast Florida Builders Association (NEFBA), concurs, stating that builders are reacting sensibly to the demands of the market.

“Builders are not pulling permits for new homes until they have reduced their inventory — which is exactly what they should be doing. No one thought the activity we experienced in 2005 could be sustained,” he said.

Data collected from permitting offices in Clay, Duval, Nassau and St. Johns counties indicated 534 new permits obtained by home builders for single-family homes in the four-county area during September.

This brings the total number of permits issued through the third quarter to 9,267. The monthly average this year is 1,029, compared to the monthly average in 2005 of 1,479. That’s down significantly, but up dramatically from 2001 when the monthly average was 756 and Florida mortgage loan rates were at record lows.

“Looking at the data over a five-year period, Northeast Florida is still having one of the best years in terms of housing it has ever had. The market simply is adjusting after the explosion we experienced last year,” Lendry said.

The expert also noted that may area builders are offering incentives, making this an ideal time for would-be home purchasers.

“With approximately 2,000 people moving to the Jacksonville housing market every month, our property values will remain stable. So, new buyers can take advantage of near record low interest rates and the availability of homes in inventory. This time last year, builders’ inventories were low because they were selling houses faster than they could build them.”

“If this isn’t a buyer’s market, I don’t know what is.”

He said various economic and financial market fundamentals will support housing for the foreseeable future, helping to facilitate the inventory correction. These fundamentals include:

• The recession of record high energy prices from earlier this year
• Favorable mortgage rates and a strong outlook in that arena
• Mortgage credit is readily available and monetary policy has stabilized following a long run of upward rate adjustments
• Household income is strengthening as the economic expansion proceeds, perhaps lessening myriad affordable housing concerns
• Payroll employment growth is proceeding at a decent and sustainable pace

As long as the economy remains in good shape, Florida mortgage rates remain close to current levels, energy prices remain reasonable and sellers of new and existing homes adjust prices or offer incentives to fit current market realities, the rest of the housing market correction should be of limited depth and duration.

It’s projected that the bulk of the drop in sales and production will occur this year, with market activity stabilizing around mid-2007 and shifting upward again by late 2008.

“What that means to home buyers is that this situation won’t last forever. When the activity increases, inventory levels will be reduced and perhaps turned back to the builders’ favor,” Lendry said.

In the meantime, his advice for potential new buyers:

“If I were considering buying a home, I would do it now.”