Commercial R.E. Brokers Keep Their Eyes on Florida Housing Market Patterns

The housing slump across Florida and the nation won’t be severe enough to drag the economy into recession, a real estate researcher predicted in Orlando yesterday morning.

Speaking to an outlook meeting about the Florida housing market, Bob Bach Sr., V.P. of research and client services for Grubb & Ellis Co., a national real estate company, said that fear of a disaster has mitigated as the real estate slowdown is playing out.

Bach said commercial real estate markets should be strong this year. In the Sunshine State, job and population growth and stable Florida mortgage rates should boost markets, he said.

“That’s a recipe beneficial for commercial real estate,” Bach said.

Back 15 years ago, with commercial real estate markets overbuilt and with vacancy rates soaring, investors shunned them. Not so today.

Such investments “have gone from worst to first,” Bach said.

Though speaking to a crowd of commercial real estate brokers, Bach and another expert spent a lot of time talking about the state of residential real estate, given the nationwide slowdown in existing-home sales and the slump in home construction.

He insists that despite a rough 2006, the state’s steady economy, bolstered by still-low Florida mortgage loan rates and strong job growth, should make this a strong year for commercial real estate, where large amounts of money are chasing investment opportunities.

Mark Vitner, chief economist for Wachovia Corp., said a recent uptick in home sales doesn’t mean the residential market’s troubles are over.

“I don’t think so,” Vitner said. “There’s evidence the market still hasn’t hit bottom.”

Vitner said recent sales spikes were due to the holding power of relatively low Florida home loan rates and to home builder incentives. The market’s weakness is reflected in order cancellations, which still run high.

For example, Orlando home sales are experiencing a high 50 percent cancellation rate for new properties, while the nationwide average is 35 percent. On the plus side, he predicted that the housing market may bottom out by the middle of this year.

Vitner also said that, while housing prices will fall in some Florida markets, in most areas the rate of appreciation will simply slow.

There’s a positive aspect to slowing home prices, too. Florida is no longer inexpensive, which can hurt its competitive position in attracting new businesses from other states. Soaring costs of insurance and property taxes are adding to the problem, he said.

He noted that, in 1976, Florida’s home prices were 5 percent below the national median but, today, are 21 percent above the national median.

Vitner also argued that recent uproar over the nation’s dismal savings rate is overblown. He contends that American households are in better financial shape than ever with $54 trillion in home equity, IRAs, 401(k) retirement plans and other investments.