Florida Housing Market: The Epicenter of Real Estate Woes

If the housing market shakeout has an epicenter, it probably lies in Florida. For companies with business tied closely to the state, that’s a problem.
During the boom, home prices in Miami and the Tampa housing market ran up faster than almost anywhere in the country.

Goldman Sachs economists have noted that speculative buyers in houses and, especially, condos fed a building boom that pushed Florida’s housing stock up far more quickly than the state’s population grew.

Now, Goldman says, investors better watch the Sunshine State’s woes carefully as Florida mortgage problems continue to widen.

Speculators who have held back on selling now bear heavy costs. According to the U.S. Commerce Department, the number of vacant homes for sale in Florida doubled last year to 4.3 percent of the state’s total housing stock. That’s the highest vacancy rate in the country.

As more speculators throw in the towel, Florida home prices may have a lot farther to fall. Then there are home builders, hard hit everywhere for sure, but getting hit hardest in Florida.

Building permits for new-home construction — an important leading indicator of activity — were 51 percent below their year-ago level in the first quarter, according to the Commerce Department.

That was twice the nationwide rate of decline for permits. Banks with exposure to Florida real estate have also been getting hurt, even far away from the state.

In April, earnings at Webster Financial, a Connecticut-based savings and loan, warns that the bad credit quality of its Florida residential-construction loan portfolios had deteriorated.

Florida home loan problems have worsened to the point in which it’s no longer limited to just one state. If these conditions aren’t depressed, what we may have on our hands is an economic crisis.

SOURCE: Providence Journal