Builders: Florida Housing Market to Get Worse

The National Association of Home Builders called its multi-family housing conference “Welcome to the Next Step.”

But the next step for multi-family housing is really a step back.

“We will see closings start to decline again,” said David Seiders, chief economist for the group, addressing more than 400 professionals from around the country last week about sluggishness and instability in the over-built condo market.

“Sales, home prices and inventory will all continue to decline this year. This is not a recovery,” he emphasized.

It gets worse.

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

Prices were rising 18 percent a year for several years.

“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 as builders everywhere acknowledge they overbuilt during the boom, a decline in starts is not a bad thing.

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

The important issue is not how many homes are in the backlog of unsold inventory, but 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. That’s the legacy of the finance-driven investor binge of ‘03. Condo inventory is at record levels.”

Vacant for-sale condos are “going straight up” in numbers, he said.

“‘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.”

During the boom, condo starts made up 48 percent of multi-family housing starts. There’s been what he 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 tunnel Seiders acknowledged he had pictured is rental apartment starts.

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

The wobbly housing market and shaky Florida home mortgage demand won’t cause a recession, he added, but if it does, the Fed is waiting in the wings, he said.

Condo prices appreciated grossly relative to affordability, he said. That lack of affordability brought down the housing market, he added.

“Pricing has a lot further to adjust. The places that have to adjust the most are the ones that rose the most,” he said.

Such as the South Florida housing market.

Get ready for it.

SOURCE: Miami Herald