Builder: Fort Myers Housing Market Worst in U.S.

While all home builders have taken hits from the housing slump, Hovnanian is facing what one of its top executives on Monday called America’s “worst” housing market: Fort Myers, Florida.

In the recent past, we’ve heard the Miami housing market receive that distinction. Now it’s a Southwest Florida city being designated.

Hovnanian bought the largest home builder in that city on the coast of the Gulf of Mexico in south Florida in August 2005, just as sales dried up.

That has left the sixth-largest U.S. home builder with no choice but to slash housing prices by as much as $100,000 to keep sales moving.

“It is by far the worst housing market that we’re in and I wouldn’t be surprised if it’s not the worst housing market in the country,” J. Larry Sorsby, executive CP and CFO of Hovnanian, said.

Sorsby said the recent turmoil in the U.S. was amplified in the Florida housing market, as buyers late to the U.S. boom looked to the warm clime for investment properties.

As of December, some 16.1 percent of the Florida mortgages in the Fort Myers and nearby Cape Coral area were classed as “subprime,” or made to less-creditworthy buyers.

That estimate is according to First American LoanPerformance, and it paints a grim picture for the future of the Florida mortgage market there as rates on those loans rise.

“A lot of people rushed, like the Gold Rush, to buy a house in Florida on speculation rather than on an absolute intent to live there,” Sorsby said.

“We’ve reduced a number of home prices $100,000 or more across the Fort Myers housing market.”

The $100,000 price reductions came on single-family homes originally priced at $325,000 to $400,000, according to company officials.

Earlier this year, Red Bank, New Jersey-based Hovnanian took a $90 million pretax charge related to problems at its Fort Myers operation.

The company wrote down the value of some land parcels in the area it had bought for $80,000 to $85,000 to about $20,000, Sorsby said.

“Our focus right now is kind of completing the homes that we have in backlog,” Sorsby said. “We’ve not been able to sell very many to new customers, and even if we could, we don’t make a decent margin at it.”

He predicted it would be some time before the Fort Myers housing market improves, but said Hovnanian had no plan to pull out.

“We have no intention at this point of leaving Fort Myers,” Sorsby said. “We think it’s a good market longer term.”

The pain in Florida is not limited to Fort Myers, or even to Southwest Florida mortgage seekers throughout the region.

“The job market itself is also somewhat dependent on housing, particularly in parts of the country where housing has been very important to growth,” said Mark Zandi of Moody’s Economy.com. “Florida is a good example.”

“You go to the east coast of Florida, from just north of Palm Beach … all the way over to Orlando, that area’s been almost recession-like conditions … just because the market has gone south and taken the jobs.”

SOURCE: Reuters