Economist: Florida Housing Slump Will Linger

Nationally known economist Mark Zandi told home builders and industry professionals meeting Wednesday in Orlando that the beleaguered U.S. housing industry could bleed for another year or more.

And the Florida housing market, he said, will be one of the states with the worst hemorrhaging.

“There’s no sign at all of stabilization,” said Zandi, a featured speaker at an industry forum related to the Southeast Building Conference, which opens today at the Orange County Convention Center.

Zandi, chief economist of Moody’s Economy.com consulting company, said the good news he had for the residential-construction and home-sales business is that “the worst of the decline is over,” roughly two years into a correction caused by overbuilding and resale-inventory buildup.

More needs to be done, though, he said, including deeper price cuts for both existing and new homes, and further cuts in housing starts.

The National Association of Realtors on Wednesday predicted that home builders “will limit construction well into 2008,” which should help restore some balance to total home inventory.

The trade group predicted that housing starts, including multifamily, will fall from 1.8 million last year to 1.43 million this year before barely edging up to 1.44 million in 2008.

But major threats remain, Zandi said, including the rising delinquency and Florida mortgage defaults rates for residential-mortgage debt, doubts about the ability of consumers to continue spending and fears that foreign investors will stop buying U.S. treasuries.

“This is all happening in a good job-market environment,” Zandi said, noting that, despite the housing sector’s weakness, “fundamentally, this economy is in good shape.”

Businesses are profitable in general, he said, with strong cash flows and healthy balance sheets.

“The economy will bend, but it will not break,” Zandi predicted.

Jack Haynes, executive vice president of the national builder division for Countrywide Home Loans, said that while the bad credit Florida mortgage meltdown remains “tricky and dangerous,” lenders and builders are taking steps to tighten standards and work their way through the morass.

If government “over-regulation” does not hamper the recovery, Haynes said, home builders will lead the economy out of the downturn.

Florida Gov. Charlie Crist also spoke during the forum, urging builders and housing-industry professionals to help him and state lawmakers keep up the pressure to reduce property taxes and property-insurance rates.

“We need to ensure that Florida is affordable,” Crist said.

If builders help the state “continue to press down on [insurance] rates and taxes,” Crist said, “you’ll be busier than ever.”

SOURCE: The Orlando Sentinel