Brevard County Housing Market Problems Not Over
The housing market in Brevard County is doing better than many other markets in Florida, and doing worse than others, said Franck Kaiser, chief executive officer of the Home Builders & Contractors Association of Brevard.
Kaiser, who spoke to Florida Today, said home builders generally have dropped prices for new homes, including taking losses on some homes to clear out their inventory.
He said it could be later this year before new home construction and Florida mortgage demand in Brevard County starts to pick up.
Because of the housing slowdown, small home builders like in Brevard County like Bruce Pearcehave been forced to shape their focus on home repair and remodeling jobs.
Pearce, owner of Talbott Construction Design Inc. in West Melbourne, said he may get out of home building if business does not pick up because it’s hard to compete with large corporate home builders in a slow market.
At the conference, the most pessimistic of the panelists was Mark Kiesel, executive vice president of Pimco Funds, a bond-management firm based in Newport Beach, Calif.
In a report issued this month titled “Still Renting,” Kiesel said he remains convinced that he made the right decision sell his house in early-2006, after owning a home for eight years.
In his report and during the panel discussion, Kiesel expressed concern that an extended downturn in the housing market likely will lead to slow job creation, softer corporate profits, tighter Florida mortgage lender standards, and weaker consumer and business confidence.
“We’ve been sailing downwind on this boat for the last 10 years, and now we’re sailing into the wind,” Kiesel said during panel discussion.
A sign of continued trouble, according to Kiesel, is that the inventory of homes for sale isn’t going down that much at a time when home builders are offering buyers incentives to make a deal.
Kiesel doesn’t see a quick turnaround for the industry.
“This thing is going to drag out longer that many people think” — a year or more, Kiesel said.
Freddie Mac’s Amy Crews Cutts, however, said she expects to see signs of an upturn much sooner.
Freddie Mac, formally known as the Federal Home Loan Mortgage Corp., is projecting a gain in home sales and home starts for the current second quarter that ends June 30, she said.
Freddie Mac - a stockholder-owned corporation established by Congress in 1970 to create a more continuous flow of funds to mortgage lenders in support of home ownership and rental housing - purchases mortgages from lenders and packages them into securities that are sold to investors.
Kiesel predicted that the Federal Reserve by the end of this year will lower interest rates by 0.75-1.00 percent.
While that would result in a reduction of the prime rate, affecting many consumer and business loans, the Fed’s move would not necessarily reduce Florida mortgage rates by that amount.
There currently is turmoil in the subprime segment of the industry, and banking trade groups are pushing for reforms, something Congress is considering.
“We know it’s going to be bad,” Cutts said, referring to problems in the subprime [bad credit Florida mortgage] market. “How bad, nobody knows.”
Among the problems, she said, is that many borrowers lied or misrepresented their financial positions to home loan lenders, and there has been an increase in lending fraud in the industry.
“The sophistication of the fraud is mind-boggling, and it is very professional,” Cutts said.
SOURCE: Florida Today
