Florida Mortgage Borrowers, Buyers Abandon Home Deposits at Alarming Rate

Scott and Kerry Bingham put down a deposit three weeks ago on a new $321,000 house at Heritage Bay, a development set on a golf course about seven miles from the ocean in the Naples housing market.

Two days later, they abandoned the deal. Like other prospective new-home purchasers, they were nervous about falling Florida home prices and the prospect their new property could tumble in value.

“We don’t want to buy if prices are going down,” said Scott Bingham, 41, an electrician who owns Power Systems Electric LLC in North Andover, Massachusetts. “At this point, we’re in a holding mode. If we wait, we might be able to get closer to the ocean and get a better deal.”

A year after the housing slump began, the spring selling season is off to a rocky start with a glut of unsold properties and buyers like the Binghams putting off purchases, thwarting any chance of a recovery. The National Association of Home Builders in Washington now expects sales to fall for the sixth consecutive quarter after last month predicting a gain. The biggest stock market rout in four years last week, a jump in subprime Florida mortgage failures and concerns about a possible recession are keeping consumers on edge.

About 10 percent of subprime Florida home loans were more than 60 days delinquent or in foreclosure as of Dec. 31, up from 5.4 percent in May 2005, according to data compiled by Friedman Billings Ramsey Group Inc. of Arlington, Virginia. The rate was the highest in seven years, according to the report.

Toll’s Flip-Flop

Builders are bracing for another tough year after seeing 2006 sales plunge 17 percent, the most since 1990. For some, such as Toll Brothers Inc., the largest U.S. builder of luxury homes, the lackluster spring market is a surprise. Chairman and Chief Executive Officer Robert Toll told investors three months ago the market may be poised to rebound. It didn’t happen.

“We’re all a little more disappointed than we were two weeks ago,” Toll said Feb. 22 on a conference call, responding to questions about February sales. “We didn’t have anywhere near the bump up that we usually see.”

Decline in Deposits

Miami-based Lennar Corp., the biggest U.S. builder by revenue, expects new home deliveries to tumble 20 percent this year. Hovnanian Enterprises Inc. of Red Bank, New Jersey, the industry’s sixth-largest company, reported a fiscal first-quarter loss after the number of contracts signed slid 23 percent in light of slow Florida mortgage loan demand.

Buyers who wrote a deposit check to reserve a Toll Brothers house - at an average price of $676,139, three times the national median - declined 5.8 percent during mid-February’s Presidents Day holiday weekend, usually the busiest time, the CEO said on Feb. 22.

While hom ebuilders track the number of visitors they get at their model units, they typically don’t divulge the data. Toll Brothers broke with that tradition. The company said it took 276 deposits during the holiday weekend, Feb. 17 to Feb. 19, down from 293 deposits in the same period last year.

Overpriced Homes

When the Binghams started their search a year ago in the Sarasota housing market, they were disappointed. That market was full of overpriced houses, said Scott Bingham. They moved their search to Naples, two hours south, and found things weren’t much better.

“I’d say about 70 percent of the homes aren’t priced competitively to sell at this time,” Bingham said. “I don’t want to be the guy who pays too much and then watches the value of my real estate fall through the floor.”

He and his wife had negotiated a $321,000 price for a 1,400- square-foot house with two bedrooms, a den and a garage at Lennar’s Heritage development, a 10-minute drive from the Gulf of Mexico. After putting down a $1,000 refundable deposit, they decided they could do better.