Thanks to Florida Mortgage Crises, No Housing Market Turnaround in Sight
According to the Sun-Sentinel, home builder Ara Hovnanian was asked Thursday to rate the housing market on a scale of 1 to 10.
“Am I allowed to use negative numbers?” he said, drawing laughs from the crowd of about 400 at a real estate conference.
That about sums up the state of the Florida mortgage market.
The CEO of Hovnanian Cos. and other builders and analysts agreed that home sales continue to sag, and they fear that recent trouble in the high-risk Florida mortgage business could extend the housing slump into next year.
Regions such as the South Florida housing market, which soared during the recent housing boom are now feeling the worst of the downturn.
“We’re in for a fairly ugly correction,” said Ron Terwilliger, head of Atlanta-based Trammell Crow Residential.
“Some markets will really be in the doldrums for quite a while,” said David Seiders, chief economist for the National Association of Home Builders, who says he still doesn’t think housing will pull the state or nation’s overall economy into a recession.
Two months ago, Seiders predicted the housing market would begin to recover toward the end of 2007. But since then, many so-called subprime [bad credit Florida mortgage] lenders have faced financial problems when borrowers with weak credit defaulted on home loans they secured in the boom years.
The number of late Florida mortgage payments skyrocketed in Broward and Palm Beach County, though actual foreclosures are increasing more slowly.
Because of the subprime mortgage crunch, traditional lenders are tightening their standards. That’s leading to fewer qualified buyers and keeping the South Florida housing market depressed.
“The subprime world has really changed the market in for-sale housing,” said Hovnanian, adding that his New Jersey-based company’s two softest areas in Florida are Fort Myers and West Palm Beach.
“I’m a bull long term on housing. But the short term is not so rosy.”
Builders and other real estate businesses nationally and regionally have cut jobs in recent months as the demand for housing wanes in the wake of Florida mortgage lenders‘ well-documented problems.
What’s more, a new government report released this week showed that South Florida wages are flat or declining, in part because of the real estate slide.
The average weekly salary in Broward County grew just under 1 percent to $754 a week for the third quarter of 2006, compared with a year ago. Palm Beach County’s weekly wage fell 1.6 percent to $756.
While the single-family home and the condo market sectors both remain sluggish, the rental market is thriving, developers say.
Home prices are still too high for some consumers, who are choosing to rent instead of taking the plunge and applying for a Florida home loan.
Demand for rental units is driving up those prices. Fort Lauderdale and Miami are now among the nation’s top markets for rent increases at the end of 2006, said Ron Witten, with Witten Advisors.
“I think it’s a confusing time to buy,” said Bill Donges, CEO of Lane Co., an Atlanta-based apartment and condo developer.
“It’s hard to tell if prices are at the bottom. With all the uncertainty, a lot of people think it might be better to rent for awhile.”
SOURCE: Fort Lauderdale Sun-Sentinel
