Condo Contract Cancelations Still On the Rise
WCI Communities said 17 percent of its condo buyers have walked away rather than close on new units this year.
The latest indication of trouble in the Florida condo market shows a rate that’s higher than the 8-10 percent rate WCI predicted at the beginning of the year.
With a record number of condo towers under construction and the Florida housing market slumping, market watchers are keeping a close eye on how many buyers actually close on units they contracted to purchase.
More cancellations mean more condos on the market, and more downward pressure on Florida home prices.
Also a builder of single-family homes, WCI is one of the few publicly-traded high-rise developers in Florida, so its reports are a rare view into an industry dominated by privately-held firms.
The vast majority of the Bonita Springs developer’s projects are in Florida, from Miami Beach to Perdido Key.
WCI, which reports second-quarter earnings August 16, told investors Monday it expected the number of buyers backing out of contracts to decrease to about 12 percent through the end of the year.
The company said One Bal Harbour, a high-rise in the affluent Miami-Dade County beachfront town, would account for the majority of cash flow the rest of the year.
Jerry Starkey, WCI’s chief executive, said the company has available cash and credit to withstand what he called “continued weakness” in the housing market.
WCI also said the company is not in default of any credit agreements.
Still, the builder said it’s renegotiating terms with Florida mortgage lenders to “provide broader latitude to operate during the protracted downturn.”
WCI has struggled to find its footing since the housing downturn commenced.
Last year it reported revenue of $2.05 billion but a profit of just $9 million. By comparison, in 2005 WCI earned $186.2 million on $2.6 billion in revenue.
Its stock price has tumbled from $24 a year ago to $6.64 Monday.
Company officials spurned an offer from billionaire investor Carl Icahn to buy the company, which included a plan to replace management.
After announcing in February the company was up for sale, company leaders said two weeks ago it couldn’t find a buyer.
Some observers predict things will get worse before they get better, even with Florida mortgage rates still near historic lows.
“Buildings yet to close from now through mid-2009 will see higher walkaways because they were contracted later in the boom cycle when prices were at the highest point,” said Deerfield Beach real estate analyst Jack McCabe.
SOURCE: Miami Herald
