Experts: Worst of Florida Housing Market Slump May Be Done By Year’s End

There’s hope for the battered Florida housing market.

“In the second half of the year, I see improving conditions in sales and home starts continuing into 2008,” Frank Nothaft, chief economist for Freddie Mac, said Wednesday during the opening of the International Builders Show in Orlando.

“But ‘improving conditions’ doesn’t mean a jump back to the wonderful days of 2004 and 2005,” Nothaft said. “Far from it.”

Still, any shred of optimism is welcome relief for the more than 100,000 home builder groups, architects and contractors attending the giant trade show through Saturday at the Orange County Convention Center.

During the past year, home builders in South Florida and across the nation slashed earnings forecasts and laid off workers as short-term investors left the real estate market and the five-year housing boom crumbled.

“This is good news,” said Joshua Fowler, executive vice president of the Gold Coast Builders Association, which represents more than 1,000 builders in Palm Beach and northern Broward County. “We were concerned that this could be a long-term recession.”

Nothaft and David Berson, chief economist for Fannie Mae, say they expect gradual improvement after following a few more months of softness as home sellers lower prices to entice buyers.

A third economist, David Seiders from the National Association of Home Builders, was more optimistic, saying the housing downturn hit bottom late in 2006 and is poised for a recovery in the second quarter.

Palm Beach County and Broward County, however, probably won’t rebound as fast as other parts of the nation, said Mike Larson, an analyst with Weiss Research in Jupiter.

During the boom years of 2000-2005, the South Florida housing market was one of the worst regions in the United States U.S. for affordability, speculative buying and excessive building, he said.

“It’s going to take this market longer to really recover than other markets around the country,” Larson said. “I would expect this year will be weak, with not much appreciation and more likely price declines.”

Even with Florida home loan rates low, South Florida may not rebound until the spring selling season of 2008, he said. By then, buyers will have had a chance to cut into the excess inventory of unsold homes.

Homeowner insurance rates and property taxes remain obstacles for the housing market in South Florida, even though state legislators lawmakers last month passed legislation that they say will cut insurance rates.

Many Florida mortgage lenders tightening requirements for borrowers also could extend the region’s housing slump throughout 2007, Larson said.

“People need to realize the negotiation is going to be a long, drawn-out process,” Larson said. “Don’t expect miracles. And if you’re a buyer, do expect to be bargained with.”

But some local housing professionals say they already are starting to see improved conditions.

Scott Agran, owner of Lang Realty in Boca Raton and Palm Beach Gardens, said business has picked up noticeably, with more prospective buyers showing interest in the past few months.

For most of 2006, his agents were thrilled if they showed properties, let alone sold any. But as prices have leveled off, Florida mortgage loan demand is picking up and buyers are returning to the housing market.

“I’m not telling you the market is going to be fast and furious,” Agran said. “I’m saying the next 18 months will be flat, but with consistent business. I think we’re seeing a return to a more normalized market not a hot market, but not ice cold, either.”