Southwest Florida Sales Up, Prices Down

Sales of new homes surged in April by the biggest amount in 14 years in the U.S., although the median price of a new house also dropped by the largest amount on record.

What does this mean for the Southwest Florida housing market?

Murky to some, the report from the U.S. Department of Commerce on Thursday provided more evidence to Southwest Florida home builders that the worst of the housing downturn is over.

Powered by low Florida mortgage costs, the strength in sales nationally was led by a 27.8 percent surge in the Sunshine State and throughout the South.

“We’ve hit bottom. This is it,” said Lee Wetherington, president of high-end home builder Lee Wetherington Cos. “From here on out, it’s going to be more positive.”

The government said that from March to April, sales of new single-family homes jumped 16.2 percent to a seasonally adjusted annual rate of 981,000 units. That was far better than the tiny 0.2 percent gain economists had been expecting.

But the median price of a new home sold last month fell to $229,100, a record 11.1 percent decline from the previous month.

The big price decline indicated that home builders are slashing their asking price in an effort to move a huge overhang of unsold homes.

Wetherington said that the national report reflects what he is seeing in prices and sales in this region. His Lakewood Ranch company’s sales have risen by about 20 percent this year. But Wetherington Cos. cut its prices by 20-25 percent overall since the market softened.

“Traffic is up significantly and we’re seeing really, really qualified buyers,” Wetherington said.

Pat Neal, president of Lakewood Ranch-based Neal Communities, has seen similar changes in the market.

“Our May results are better than May of 2004, 2005 and 2006,” Neal said referring to when Florida mortgage loan demand started to peter out.

“We’ve sold 14 homes this month with an average price in the high $500,000s.”

The average price for one of Neal’s homes is down about $125,000 since the market softened early last year, partly because of a drop in prices and partly because Neal has mixed in lower-priced homes to his offerings.

“We have seen a strong pop in sales of homes priced between $500,000 and $1.2 million, but we don’t see it in homes priced below $300,000, whose buyers are much more credit dependent,” Neal said.

“Because underwriting standards are much more difficult now, many of the lower priced homes may well find their way back onto the market through foreclosure,” he said.

As bad credit Florida mortgage products cause distress, more properties may make their way back into the for sale listings.

As home sellers cut prices, the sales jump nationally was the biggest increase since a 16.4 percent surge in new home sales in April 1993.

But analysts cautioned against reading too much into the gain, especially in light of other surveys showing that home builder confidence has sunk in recent months over worries that troubles in the home mortgage market will further crimp demand in coming months.

The drop in median prices in April compared with March was a record one-month decline.

If the April sales price was compared with the sales price a year ago, the decline was 10.9 percent, the biggest year-over-year drop since 1970.

The positive news on sales was not much comfort to luxury home builder Toll Brothers Inc., which reported a 79 percent drop in second-quarter profits.

Shares of Toll Brothers, which trades on the New York Stock Exchange, were selling for $30.07 at the close of regular trading, up 30 cents, though they sank slightly in after-market trading.

Other home builders also gave up their gains. The Philadelphia Housing Sector Index, which tracks housing stocks, was down after an early rise.

“What you’re seeing is the blue-light special,” said Pat McPherron, an economist with Moody’s Economy.com. “The only way this market is going to move is by price-cutting.”

McPherron pointed to the large inventory of unsold homes and rising mortgage foreclosures as problems for the market.

SOURCE: Sarasota Herald-Tribune