Florida Housing Market to Decline Through 2007

The Florida housing market - and across the Southeast - continues to bottom out and will likely stay weak through 2007, a report issued by RBC Centura economist Amy Goldbloom showed.

The Raleigh, N.C.-based bank said it expects housing markets across the Southeast to gradually recover, though Florida and Virginia may lag behind other areas because those markets were hit the hardest by the housing correction.

Rick Perez, regional president of personal and business banking in Florida, blamed speculation for exacerbating the rise in prices, and says that homes in Orlando and South Florida were the first to zoom up in price, and may be the first to come down.

The report also pointed out that key economic impacts are intact, and that job markets across the Southeast picked up beginning in 2004, with Florida and Virginia leading in gains. The current pace of job growth is half a percentage point below 2006, but is still capable of supporting a tight labor market and rising wages.

“You’ve got pretty good income growth,” Perez says.

RBC says affordability is also showing “modest improvement,” although Florida and Virginia “are correcting off much higher levels and have significantly more downside potential compared with the rest of the region.

Florida leads the nation in the drop of new home starts. During the first quarter of 2007, the state’s annual rate of decline was 53.7 percent, double the national rate of decline.

The main reason for this fall? A lack of Florida mortgage loan demand. Once buyers pick up the pace again, builders will do the same.