South Florida Housing Market: New Construction Slows Rapidly

Construction of new homes fell to the lowest level in more than a decade in July as home builders continued to struggle with the steepest housing slump since 1991.

The Commerce Department reported that construction of new homes dropped 6.1 percent last month to a seasonally adjusted annual rate of 1.38 million units.

That was down a staggering 20.9 percent from the pace of activity a year ago and represented the slowest pace since January 1997.

The South Florida housing market, which had enjoyed a prolonged boom until 2006, has been struggling this year with a deepening slump as builders are slashing prices and throwing in various incentives in an effort to unload record levels of unsold homes.

The problems have been worsened by rising home foreclosures.

This is especially true in the bad credit Florida mortgage sector, a development that is dumping even more homes onto a glutted market.

Home builders in South Florida have been hit particularly hard. Lennar Corp. of Miami and Fort Lauderdale-based Levitt Corp. have seen rising contract cancellations as demand for new homes wanes.

Last week, Levitt announced a $58.1 million loss for the quarter ended June 30, compared with a $737,000 loss for the same period a year ago.

In the past year, one of the area’s top home builders has laid off at least 70 employees, about 10 percent of its work force.

The nation’s biggest luxury home builder delivered an ominous perspective on the South Florida housing market.

Robert Toll, chairman of Toll Brothers, last week described South Florida’s new-home market as a “flunk minus.”

Toll has several projects in Palm Beach County.

In other economic news, the U.S. Labor Department reported that the number of newly laid off workers filing for unemployment benefits rose by 6,000 last week to 322,000. The increase was unexpected. Analysts had been looking for a decline of around 1,000.

The July drop in housing construction followed a 2.1 percent rise in June, which had been driven by a big increase in apartment building.

• Applications for building permits, considered a good barometer of future activity, fell by 2.8 percent in July.
• Housing construction fell in all parts of the country except the Midwest which posted a 2.6 percent increase in July.
• Construction starts were down 11 percent in the South, 3.7 percent in the West and 1.3 percent in the Northeast.

The current Florida mortgage and housing skid is the worst since a downturn that occurred during an economic recession in 1990-91.

Overall economic growth has slowed, but so far there has been no recession as other sectors have offset the weakness in housing.

However, economists say that the threat of a recession would rise if consumer and business confidence were eroded by the current troubles in financial markets.

Follow this link to continue reading the Sun-Sentinel’s take on slowing national and South Florida housing starts …