New Home Construction Slows Considerably in Volusia County, Flagler County

New home construction plunged 47 percent last year in Volusia and Flagler counties, dropping off even more toward the close of the year, a research firm reported this week.

Some home builders voiced cautious optimism that business has started to show signs of improvement lately, but a bank economist warned the decline is likely to continue through 2007, according to the Daytona Beach News-Journal.

Last year, building permits were issued for 5,707 new homes and apartments in Volusia and Flagler County, down from the 10,858 total issued in 2005, according to Hanley Wood, a Costa Mesa, Calif., firm that monitors local housing markets around the nation.

The slowdown worsened during the October-December time period. During that quarter, only 904 building permits were issued locally, or 63 percent fewer than the 2,414 issued during the same period of 2005, reflecting a major drop-off in the demand for Florida mortgages.

If any consolation could be taken from these numbers, it was the “hotness” rating that Hanley Wood gave the Volusia-Flagler area. Measuring the number of permits issued per 1,000 of population, the firm said the area’s rate of 9.6 per 1,000 was “hotter” than the national rate of 6.1 permits per 1,000.

It also was above the 8.4 average rate elsewhere in the South. But last year’s “hot” felt decidedly lukewarm or cool to many in the industry, as Florida mortgage demand and real estate activity overall remained slow.

“We still have a lot of inventory to clear out,” said Sue Darden, executive director of the Volusia Home Builders Association. “I hear inklings that the [Florida housing market] is starting to turn around, but we all know it’s never going back to what we had in 2005. The recovery is going to be slower than what we’re accustomed to.”

Stan Janzen, president-elect of the builders group, said he’s encouraged by a recent pick-up in the number of people making inquiries about new homes in Flagler and Volusia County.

“There seems to be a rebound in traffic, both from the tourists and from the locals. But it’s going to take a while before the market improves,” he said.

At the University of Florida, the Bergstrom Center for Real Estate Studies surveyed more than 300 real estate professionals throughout the state in the month of January and found a large increase in optimism since last fall.

The quarterly survey, scheduled for release later this week, suggests that “maybe we have bottomed out, and things are not heading in any worse direction, at least for the single-family market,” said Wayne Archer, center director. “For condos, though, it’s more volatile.”

However, Mark Vitner, a Wachovia Bank economist, said he expects for local construction to continue shrinking throughout 2007, even as Florida mortgage loan rates remain relatively low.

“Prices are no longer rising, so buyers don’t feel pressured to make a decision right away,” Vitner said. “They feel they can wait 6-9 months, and prices will be the same, if not lower.”

Mark Soskin, a University of Central Florida economist who has done ample consulting work for local home builders, said that younger builders don’t realize how precarious their industry is right now because they haven’t experienced a full-fledged recession.

“People need to be aware this thing could get a heck of a lot worse,” Soskin said.