More Florida Mortgage, Housing Market Problems Forecast For 2007
With home prices still falling and Florida mortgage foreclosures rising, home builders won’t see better days until the end of the year, industry economists said Thursday.
“We’re definitely looking for further price erosion,” David Seiders, chief economist for the National Association of Home Builders, said at the trade group’s Spring Construction Forecast Conference.
The key problem is the glut of unsold housing inventory languishing on the market and rental properties also choking the market.
“Both are running very high,” he said. “We’re heavily oversupplied.”
Still, with the U.S. population and labor market expanding, the 2-year-old housing recession will ease in roughly six months, Seiders predicted.
“We’re fairly near the bottom now,” he said. “Things will stabilize and start to move up in the latter part of this year.”
From the housing cycle’s peak in 2005 to its bottom, which likely will come this summer, prices of new homes will have declined about 10 percent.
By next spring, home builders should be enjoying a recovery, but for now, “the housing market correction is in full swing,” said Mark Zandi, chief economist of Moody’s Economy.com.
In 2005, housing starts totaled more than 2.07 million, the builders association says. But in 2006, the market declined sharply, with builders starting only 1.82 million homes, a drop of more than 12 percent.
This year, builders will probably start just 1.45 million homes, down 20 percent from last year - and a 10-year low. Seiders believes that an expansion will resume in 2008, when 1.53 million homes will be built.
Although the housing recession stretches from coast to coast, conditions can vary greatly. For example, the construction plunge is far more severe in the South Florida housing market than in most other areas, because the boom there was greater in 2003 and 2004.
In the Miami-Fort Lauderdale region, housing starts this year will decline nearly 35 percent from the previous year, to just 20,200, according to association data released Thursday.
South Florida home building will recover eventually, but “there is a big overhang, so it’s going to take a while,” said Patrick Lawler, chief economist for the Office of Federal Housing Enterprise Oversight.
With the hot economy, many Baby Boomers hurried to apply for Florida home loans and buy condos before prices rose.
“You start to see prices rising, so you think, ‘I better do this quick,’ but that clearly bred some speculation,” he said. With the accelerated demand, many times a home builder too got carried away and flooded the market.
Still, many Florida mortgage broker and lender groups urged homeowners to draw equity out of their homes by refinancing, often with pricey subprime (bad credit) mortgages.
Now the job market there is weakening as those mortgages are resetting to higher rates, touching off a wave of foreclosures as a Florida refinance remains hard for many to come by.
Thomas Lawler, an economist with Lawler Economic & Housing Consulting LLC in Vienna, Va., said there is one big difference between Ohio and South Florida today: how far prices can still fall.
Because of heavy speculation in homes and condos, South Florida “has a bigger potential for a material drop in home prices,” he said. “There’s still potential for 15-20 percent drops.”
Patrick Lawler said some markets, especially in the South and Texas, have held fairly steady during the housing market downturn.
Compared with California or South Florida, “Atlanta didn’t see the big, booming prices on the one hand, and on the other, it did not experience the economic weakness of Ohio and Michigan,” Lawler said. “So you see much more stability there.”
Texas has held up fairly well because of the oil industry boom. Housing starts are expected to decline only 14 percent in Austin and 10.5 percent in Dallas this year.
SOURCE: Palm Beach Post
