Florida Condo Market Slipping… Again

More than 400 building professionals from around the country attended this week’s National Association of Home Builders conference on multi-family homes entitled “Welcome to the Next Step.”

But according to the Palm Beach Post, the next step for multi-family housing in the Florida housing market is really a step back.

“We will see closings start to decline again,” said David Seiders, chief economist for the association, addressing the crowd about the sluggishness and instability in the over-built Florida condo market.

“Sales, prices and inventory will all continue to decline this year,” Seiders said, delivering a more dour forecast than he has in previous months and years. “This is not a recovery.”

“The impact of the [Florida mortgage] market mess has not shown up in the housing numbers yet,” Seiders said.

Median prices were rising 18 percent a year for several years, Seiders said. “We’ve got some more negatives ahead of us.”

There will be a large decline in multi-family home starts this year, he said - a 20 percent drop compared with 2006. But home builders everywhere acknowledge they over-built during the boom, and that a decline in starts is not necessarily a bad thing.

The really bad word - Seiders called it “the big theme” - is supply, he said.

The important issue is not how many houses are in the backlog of unsold inventory. It’s how many vacant houses, which have risen to unprecedented levels.

“We’ve got 1.4 million excess vacant units on the market now,” Seiders said. “That’s a lot.”

It’s the legacy of the bad credit Florida mortgage-driven investor binge of 2003, many believe, which left the condo inventory at record levels.

Vacant for-sale condos are going straight up in numbers.

“That’s the major point. Wow! The ‘overhang’ (unsold units) is very heavy, and that’s not considering units under construction, which are still at near-record numbers,” Seiders said.

During the boom, condo starts represented 48 percent of all multi-family home starts. There’s been what Seiders called “a sharp decline” to 42 percent this year, which will slide to 31 percent in 2008.

The bright light at the end of the dark tunnel Seiders acknowledged he had pictured is rental apartment starts.

“Despite everything I’ve said, multi-family rental market starts are rising.”

The wobbly South Florida housing market won’t cause a recession, he added, but if it does, the government is waiting in the wings.

In answer to a question from the audience, Seiders said price has nothing to do with current Florida housing market conditions.

“Short-term, it’s supply versus demand. It doesn’t have anything to do with price,” he said. “The home-buying public knows it and they’re waiting.”

Condo prices appreciated grossly relative to affordability. That lack of affordability brought down the market despite continued low rates of Florida mortgages.

“Pricing has a lot further to adjust. The places that have to adjust the most are the ones that rose the most (such as South Florida),” he said.

SOURCE: Palm Beach Post