Southwest Florida Housing Market Showing Some Signs of Life

According to the Naples Daily News, new 2006 fourth-quarter housing market data indicated early signs of hope for the Naples-Fort Myers market.

“The annual pace of new home starts fell to a level that can allow inventory to decline — a milestone on the path to equilibrium,” said Bradley F. Hunter, who directs Metrostudy’s market research operations in Southwest Florida.

Quarterly starts in Lee County and Collier County combined fell below the level of demand (1,260 starts v. 1,963 move-ins) for the first time in two years.

Metrostudy counts home starts and move-ins by driving past each lot or home in each active Southwest Florida housing market subdivision to verify the construction status of each new home every quarter.

“The reduction in starts was the first step. Soon, inventory of both unsold homes and homes that have been sold but are still vacant will diminish,” Hunter said.

The number of resale listings is still increasing, but Metrostudy expects a peak in that supply indicator during the next few months, and not just because of the “season.”

“Many MLS listings are those of market testers — sellers who were hoping for a high bid, but who are now letting their listings expire. The reduction in this number will be a reassuring sign,” said Hunter.

Although improvement is at hand, Metrostudy’s research suggests that there will still be months of adjustment ahead despite Florida mortgage loan rates that are still hovering at or near historic lows.

Lee County recorded 852 single-family housing starts in subdivisions during the fourth quarter of 2006, a decline of 43.4 percent compared to the third quarter of 2006 and 41.8 percent compared to the fourth quarter of 2005, said Hunter. The annual starts pace was 5,367 units, 23.8 percent below the pace reported in 2005.

The pace of fourth-quarter move-ins (1,255 units) fell 12.0 percent from the third quarter of 2006 and 9.3 percent from the fourth quarter of 2005. The annual pace of move-ins was 5,030 units, 2.5 percent below the pace reported in 2005.

The inventory of finished vacant homes in Lee County subdivisions rose to 1,607 units, a historically high 3.8 months of supply, based on the current pace of move-ins, said Hunter. At the end of the fourth quarter of 2005, there were 532 finished vacant homes, a 1.1-month supply.

As Florida mortgage costs skyrocketed for years and ultimately knocked the wind out of the market, the supply of vacant developed subdivision lots rose during the fourth quarter to 8,355 units (compared to 7,419 units at the end of the third quarter of 2006 and 6,103 units at the end of 2005).

In Collier County, single-family housing starts totaled 408 units during the fourth quarter of 2006, a decline of 43.3 percent compared to the third quarter of 2006 and 32.2 percent compared to the fourth quarter of 2005. The annual housing starts rate (2,621 units) was near the 2005-2006 average.

Quarterly absorption rose 22.1 percent, with 708 move-ins during the fourth quarter of 2006, 22.0 percent higher than the third quarter of 2006, and 138.4 percent higher than the fourth quarter of 2005. The annual pace (2,297 units) was 13.8 percent lower than the pace of 2005.

As in Lee County, the quarterly pace of absorption in Collier County just surpassed the pace of new home starts, which led to a decline in housing inventory during the fourth quarter of 2006, said Hunter. There were 701 finished vacant homes in Collier subdivisions at the end of the fourth quarter of 2006, a 3.7-month supply at the current rate of move-ins.

There were 1,391 new home construction units in subdivisions at the end of 2006, a portion of which are owned by real estate investors and some of which will be added to the finished vacant inventory during the first quarter of 2007.

The supply of vacant, undeveloped lots rose to 3,750 in the fourth quarter of 2006, up from 3,120 in the third quarter of 2006 and 2,510 at the end of the fourth quarter of 2005.

It will be interesting to see if Florida home loan demand picks up by a significant margin in 2007, or if the market remains tepid from now until at least 2008. Given how volatile the Southwest Florida region is, would either surprise you at this point?