South Florida Housing Market Slump May Linger Longer Than Elsewhere

The worst of the U.S. housing slump is over, according to experts, but some analysts are more skeptical about the future of the South Florida housing market.

The National Association of Realtors predicted that sales of existing U.S. homes will grow at an annual rate of 6.29 million in the first quarter, snapping five consecutive quarterly declines.

Existing South Florida home sales, about 85 percent of the market, won’t recover until 2007’s fourth quarter when transactions will grow to an annualized rate of 967,000.

“There’s a consensus that the beginning of the recovery is probably going to be 2007,” said Todd Vencil, an analyst at BB&T Capital Markets in Richmond, Va. “The spring selling season is going to be crucial in determining exactly when it begins.”

Luxury home builder Toll Brothers hinted last week that demand for housing may pick up in some markets next year, but experts say Palm Beach County and Broward County probably won’t recover as quickly.

While Florida mortgage rates and the number of homes on the market have stabilized, Mike Larson of Weiss Research in Jupiter said he expects people to put their homes back on the market after the holidays, creating more of a glut.

As a result, prices will continue to fall.

“A peak in supply and a bottoming in prices? I don’t think we’re there yet. I think we’re looking at a relatively weak 2007 market,” Larson said.

West Palm Beach housing analyst Brad Hunter said short-term investors who bought at the height of the boom in 2005 might have to sell at a loss. If those sellers lower their asking prices, more sales will occur, helping the South Florida market rebound.

“But people have been stubborn,” Larson said.

The so-called spring selling season ranges from March to June and is the time when more than half of all U.S. home resales occur. The busiest time for the new-home market starts earlier, in February, as it takes about six months to build a typical house and most families want to move before the school year starts in September.

Freddie Mac, the No. 2 mortgage buyer, said last week the national housing market probably will rebound in the fourth quarter of 2007. Fannie Mae, the largest mortgage buyer, doesn’t expect home sales to gain until 2008’s second quarter, according to its latest forecast, issued November 15.

“Three to five years may pass before housing starts and home sales return to their peaks,” said John Lonski, chief economist for Moody’s Investors Service. Sales of existing homes probably will sink 7-8 percent in 2007, compared with this year and new home sales may fall 9-10 percent.

Rates for a 30-year fixed Florida home mortgage likely will average 6.6 percent next year, the highest since 2001 when it was 7.2 percent. The average rate this year will be 6.4 percent.