U.S. home builders were less optimistic about the national and Florida housing markets in March, according to a monthly sentiment index released Monday by the National Association of Home Builders.

The NAHB/Wells Fargo housing market index fell to 36 in March from a downwardly revised 39 in February (originally reported at 40). It was the first decline in the index since September, when the index hit a 15-year low of 30. A year ago, the index was at 54; two years ago it was at 70.

Economists surveyed by MarketWatch were looking for a decline to about 38.

The index shows that about one-third of builders have confidence that the housing market is healthy.

Over time, movements in the index have correlated well with the government’s housing starts data, which will be released on Tuesday for February. Housing starts are down 36% from the peak.

Economists expect that starts rebounded in February to about 1.46 million seasonally adjusted annualized units from a 10-year low of 1.41 million in January, when starts plunged more than 14% as the weather turned unfavorable in much of the country.

Building permits, meanwhile, are expected to be unchanged at 1.57 million annualized in February.

“Builders are uncertain about the consequences of tightening [Florida mortgage] lending standards for their home sales down the line, and some are already seeing effects of the subprime shakeout on current sales activity,” said David Seiders, chief economist for the industry trade group.

The fundamentals of the market are “still relatively strong,” Seiders said in a statement, citing favorable interest rates, solid job and wage growth, and improving housing affordability due in part to price cuts.

All three components of the NAHB index deteriorated in March. Current sales fell to 37 from 40, expected sales fell to 50 from 53, and buyers’ traffic fell to 28 from 29.

The index is constructed by asking builders to rate current and future sales as “good,” “fair,” or “poor.” And they are asked to rate the traffic of prospective buyers through their developments as “high,” “average,” or “low.” A reading of 50 would indicate builders think the market is average or fair. The index has been below 50 for 11 straight months.

Sentiment improved in two of the four regions in March. In the Midwest, the index rose to 28 from 27. In the West, the index rose to 36 from 35. However, sentiment fell to 40 from 44 in the South - where Florida mortgage loan applications remain slow in demand - and to 41 from 43 in the Northeast.

If you’re in the market for a newly built home, check out some of the incentives being offered by area builders.

Many builders are experiencing sales slowdowns and contract cancellations because of the Florida real estate market slump - and they’re hungry for your business.

Last week, Bradenton-based Taylor Woodrow Inc., which has three developments in South Florida - and one on the way in Pompano Beach - announced a new program to attract home buyers. Under its “Forfeited Deposit Transfer Program,” qualified Florida mortgage applicants can use contract deposits forfeited by other buyers and apply those funds toward the purchase of a new Taylor Woodrow home.

“We wanted to find a positive application for these forfeited deposits,” said Sheila Johnson, director of sales and marketing for Taylor Woodrow’s Southeast Homebuilding and Tower Division in Palm Beach Gardens. “Making these monies available to potential buyers is a meaningful incentive that significantly increases their buying power.”

When a buyer walks away from a real estate contract, the entire deposit is forfeited, Johnson said. That’s 10 percent of the purchase price plus 100 percent of the cost of any options the buyer ordered.

While Johnson wouldn’t disclose the percentage of the firm’s contracts that have been canceled by home buyers, she said the rate is higher than usual. “But we’re certainly not in panic mode,” she said.

Other developers are also seeing cancellation rates higher than normal. Horsham, Pa.-based Toll Brothers Inc., which is building several developments in the South Florida housing market, recently disclosed in a filing with the Securities and Exchange Commission that it sustained cancellation rates of 37 percent in its fiscal fourth quarter of 2006 and 30 percent in the first quarter of 2007. The company’s historic cancellation rate is 7 percent, it reported.

To avoid a buildup of excess inventory after cancellations, builders are offering sales incentives, some of which can be substantial.

Sunrise-based G.L. Homes is applying forfeited deposits to the purchase of other homes, according to Marcie DePlaza, division president. Although a new buyer still has to come up with a deposit, the purchase price of the new home is reduced by an amount equal to the forfeited deposit. The program is only available for “quick delivery homes,” the company’s name for homes that a Florida home mortgage loan borrower can move into within 30 days.

“The incentives for these homes make them very desirable for prospective buyers,” DePlaza said.

Some local industry observers are impressed with the forfeited deposit programs. “They’re a creative way to generate buzz on existing inventory that builders need to move,” said David Levin, a Delray Beach-based housing analyst.

Levin also said builders are anxious to avoid contract cancellations and to hold onto existing home buyers. He has advice for anyone under contract to buy a home who is thinking twice. “If you’re in danger of losing your deposit, go back and talk to your home builder,” he said. “They may be more receptive to working out a deal with you than you would imagine.”

SOURCE: The Sun-Sentinel

A billionaire plans to launch a $22-a-share offer for a struggling Florida home builder, Bonita Springs-based WCI Communities Inc.

Carl Icahn, a major investor in WCI who holds nearly a 15 percent stake, said Tuesday that he and his affiliates would buy “any and all” stock at the offer price. His offering price was 16 percent more than Monday’s closing price.

It’s a deal valued at more than $950 million.

Icahn, known for pressuring management to improve financial performance in the companies he has invested in, wants to run his own slate of officers for the home builder’s board. His list of candidates includes himself. He believes his offer was “in the best interest of all shareholders.”

“We believe that the board and the CEO of WCI have not enabled the company to maximize the potential of its unique set of assets. … We expect our slate … to ensure these unique assets are properly marshaled through the current residential housing industry downturn,” he said.

Officials representing the Florida home builder weren’t commenting on his offer Tuesday. But it had other shareholders — big and small, and all concerned about the future of the Southwest Florida housing market — talking.

“I would not be the slightest bit interested in his takeover bid,” said Phil Wood, a shareholder, as well as the president of Naples-based John R. Wood Realtors Inc. “I’d rather leave everything with the present board and let them keep running the company.”

Wood purchased shares in the home builder about two months ago, basing his investment on expectations for a turnaround in the Florida housing market. He describes himself as a “very small” shareholder.

The closing of Icahn’s offer comes with conditions, including elimination of a so-called “poison pill,” which the company recently adopted in an attempt to ward off a hostile takeover.

“We do not expect management to waive the poison pill,” Bank of America analyst Daniel Oppenheim wrote in a note to investors. “We think that this will increase the pressure on the board to develop a strategic plan prior to the annual meeting, which should occur before mid-June.”

Last month, WCI, a real estate developer of prime waterfront and country club communities, reported a rare quarterly loss, blaming sluggishness in the Florida market.

As Florida mortgage demand declined statewide, the company lost as much as $64.6 million, or $1.52 a share, in the fourth quarter. That in comparison to profits of $54.6 million, or $1.20 a share, a year ago.

WCI’s losses in the last quarter were greater than analysts expected, and with many experts now believing Florida mortgage loan activity may remain slow in 2007 and beyond, they’re wondering what comes next.

And a $950 million offer is nothing to sneeze at.

“We think this offer reflects the value of WCI’s aged coastal Florida land and the likelihood of a high percentage of closings on tower units under contract,” Oppenheim.

In a tough Florida market, WCI has seen fewer home sales, more contract cancellations and rising defaults. The company builds traditional single-family home and multi-family home developments, as well as condominium towers.

Oppenheim doesn’t expect to see competing bids because of the “challenging conditions in Florida” and the “lack of stability in the business.”

Recently released statistics from the Florida Association of Realtors show home sales remain slow. In January, existing single-family home sales in the state declined 27 percent, while existing condominium sales fell by 30 percent, compared to the same month a year ago.

The good news is that the inventory up for sale is beginning to improve in many markets. But will Florida home mortgage conditions improve enough for the company to turn around sooner, rather than later?

Follow the link below to continue reading in the Naples Daily News …

At first, the rain kept people away.

But with sunny weather in the forecast and one week left, Hernando home builders hope to remind potential Florida mortgage loan borrowers that the local housing market hasn’t gone completely flat.

With 40 homes from 19 builders on display, the Hernando Builders Association is aiming to woo buyers with low mortgage interest rates during this year’s Parade of Homes.

Though Sunday, the annual event will give home-seekers the chance to check out model homes ranging from $100,000 to $500,000 throughout the county. It began March 3. So far, local home builders aren’t complaining about the slower-than-usual flow of people coming through the models, which are scattered from Spring Hill Drive to Ridge Manor.

With the recent housing market slump in the back of their minds, they instead continue to remind buyers that they won’t find a better time to buy than now. Especially here in Hernando County, where money tends to go a little further than in other Tampa Bay housing markets.

“What we’re trying to stress to people: the low and affordable interest rates,” said Emilia Raia, executive officer with the builders association. “There is good inventory out there, and builders have the time to work with customers and really give them what they want.”

Raia said that the county is still growing. After all, it is part of the Nature Coast and provides residents a beautiful place to live.

But when considering the record year of 2005, when 4,271 single-family home building permits were issued by the county, not many builders expect that 2007 will top that.

“What you’ve got to realize is that 2005 was an anomaly,” said Dudley Hampton Jr., first vice president of the builders association. “And it’s one of those years that comes along once or twice in a lifetime as far as real estate and home-building goes.”

Despite a slow first quarter, Hampton said he thinks 2007 will shape up to be on par with the normal rate of building.

During January and February of this year, the County Planning Department issued 227 permits for single-family residences. In 2006, 2,787 were issued. Before that in 2004, more than 2,700 permits were issued, coming close to 1987’s previous 3,000 record.

This year, the potential home buyers/Florida mortgage applicants that Ed Velasquez has seen come through the two Lexington Homes models in the Villages of Avalon subdivision seem to just want to know what’s out there.

When complete, the new subdivision off Anderson Snow Road will have a total of 812 homes constructed by several builders, ranging from upper $100,000 price ranges to $1-million.

“I’d say that 95 percent of the people I’ve talked already own a home,” Velasquez said. “And while they’re looking to sell first, they’re trying to make plans to figure out what they want.”

People are also using the Parade of Homes as an opportunity to see what they can get for their money, he said.

Combined with those low interest rates, Hampton said, homeowners will get some relief from skyrocketing insurance rates this year - even though he thinks lawmakers can do more. That should eventually push them into buying, he said.

“I think we’ll settle back into that normal pace of building,” he said. “We’ll just have to wait and see.”

Given the current cost of a Florida mortgage and the tepid demand for homes among would-be buyers, the Sunshine State hasn’t been so sunny for Bonita Springs-based home builder WCI Communities Inc.

For the first time in several years, the company reported a quarterly loss Tuesday, blaming mostly a slowdown in the Florida real estate market.

The company lost $64.6 million, or $1.52 a share, in the fourth quarter. That compared to profits of $54.6 million, or $1.20 a share, a year ago.

In a tough Florida market marred by high home prices, property taxes and insurance premiums, WCI has seen far fewer home sales and more contract cancellations and defaults.

In the quarter, WCI recorded real estate inventory impairment losses of $91.4 million, related in part to discounts and buyer incentives it has offered to try to spur sales.

In the fourth quarter, WCI reported its incentives averaged 20 percent on new sales, twice the amount offered in other quarters. Write-offs for the quarter totaled $118.3 million - a figure that includes the costs of land options for projects WCI no longer plans to develop.

“2006 was a tough year,” said Jerry Starkey, WCI’s CEO. “I think it was characterized essentially by an eroding in consumer confidence, sliding demand and rising cancellations … The fourth quarter offered no relief…”

Usually, the fourth quarter is WCI’s strongest of the year. But with the demand for Florida home mortgage loans sliding, WCI saw a huge spike in cancellations for its traditional single-family and multi-family homes.

About 22 percent of contract purchasers scheduled to close in the quarter defaulted, compared to about 1 percent a year ago. Gross orders totaled a healthy 257 units, but that was almost totally offset by 249 cancellations.

For the year, the cancellation rate in WCI’s traditional home-building division was about 40 percent. The home builder didn’t see near as many cancellations for its condominium tower residences in 2006. But in the fourth quarter, there were 27 defaults and five new orders.

“No towers were introduced to the market in 2006, and so we didn’t have the benefit of new orders coming from new towers,” Starkey said.

Daniel Oppenheim, an analyst with Banc of America Securities in New York, said that this is an indication of the “continued deterioration in demand in Florida” and expects home prices to continue to fall because of the weakness in the Florida market.

Florida accounts for about 85 percent of WCI’s business and traffic in the state was down by about 50 percent, Starkey said. While traffic is up for home builders this month in Florida, compared to last month, it’s still down from a year ago.

The slump in Florida is far-reaching, with other builders in the Southwest Florida housing market struggling with slower sales and cancellations.

On Tuesday, Hovnanian Enterprises Inc., one of the nation’s largest home builders, said it expects to report a first-quarter loss, primarily because of charges related to its operations in Lee County, where it targets first-time home buyers.

WCI officials remain optimistic about the Florida real estate market.

“When America wakes up from this slump and this fear of buying homes I think we will see Florida return to one of the top home building markets in the entire United States, as it has been historically,” Starkey said.

The Motley Fool opines that you don’t need to rent An Inconvenient Truth to see that Florida is sinking. With the cost of a Florida mortgage higher than most people can bear, the state could be facing a housing crisis of epic proportions.

It’s more than that, though. You see it in residents whose homeowners insurance rates have soared after a streak of bad hurricanes. You also see it in their incredulous gazes as simple residential moves trigger a surge in their property tax bills. And so on.

The state government has a plan to bail out its distressed citizenry, but the misunderstood measure faces an uphill battle in winning over skeptics. The idea - eliminating all property taxes on primary homes by increasing the state’s sales tax rate by 250 basis points - is a bold endeavor, one that supposedly pits homeowners against renters.

No one seems to be saying the obvious - this is ultimately a move to help the state’s battered developers - but the Fool will go ahead and say it. That’s all it really is when you think about it.

Like a lot of Florida’s eccentricities, its home builders have come in all flavors. You have conventional real estate developers like Lennar or high-rise specialist WCI Communities. You also have some companies that took quirky paths on the road to becoming real estate barons.

St. Joe was a paper and pulp company until it began to cash in on its ample and valuable land in the panhandle. As the largest private landowner in the state, it soon began changing the business of Florida real estate. Levitt came into its own by transforming orange groves into developments.

The Florida housing market slump has impacted its players. St. Joe has now backed out of the actual home building market, handing over the grunt work to Southeastern developers like Beazer Homes. Levitt accepted a big buyout offer last month that values it at half of where it was two years ago.

WCI has been portrayed as the poster child of coastal condo cancellations. Lennar has had to quadruple the amount of buyer incentives it provides to woo anyone interested in buying.

Downfalls can be found in hot markets all around the country. The problem is exacerbated in the Sunshine State not just because of high Florida home mortgage payments, but due to the spiraling tabs of home insurance and property tax statements.

The real estate insurance market in Florida has become a problem, especially in the coastal, storm-ravaged hotbeds. Higher home insurance rates mean Floridians have less disposable income, and also make property ownership appear less attractive, especially to investors who now have higher holding costs before flipping properties for profit.
It doesn’t get any better on the property tax front.

Florida caps property tax increases for current homeowners - it isn’t until a home is sold that new, higher tax rates kick in. The spike can startle homeowners who bought their homes and budgeted their payments based on the seller’s property tax bills.

In short, someone who buys a new home for the same price at which they sold their old home would likely get slapped with thousands in new taxes.

Florida has made some moves to ease the blow. Voters have agreed to double the homestead exemption for senior citizens in the fall. The government is now proposing that the tax break go to all primary homeowners, along with making the property tax caps portable for new homes.

Many of these suggestions would be moot if property taxes are swapped out for a consumption tax. The debate will likely get fierce. Tourism officials will resent out-of-towners bankrolling free rides for locals, although most states tax hotel stays at higher levels than their state tax rates.

Renters will also shout even louder, though it’s naive to think that they are immune to their landlords’ rising ownership costs. If tax moves encourage the development and purchase of rental property, wider supply should help lower monthly rents.

The proposal to abolish property taxes would only present a partial break to non-primary homeowners like landlords, but renters should see some form of relief, or at the very least avoid the rent hikes that are coming down the pike if the problems are left unchecked.

It’s no secret that the U.S. housing downturn has depressed once-thriving real estate markets around the nation. Specifically, however, suburbs of major cities have suffered the most abrupt market correction.

Home construction in these distant towns has slowed, while prices and sales have fallen more than those of close-in suburban neighbors since a five-year U.S. housing boom ended in the summer of 2005.

For example: Average home prices in Loudoun County, Virginia, 35 miles outside of Washington, D.C., fell roughly 11 percent in 2006, according to the Northern Virginia Association of Realtors. By contrast, Virginia’s Arlington County, which hugs the nation’s capital, saw a price decline of only about 2 percent.

“It’s been hard for sellers to comprehend, and I’m usually the bearer of bad news,” said Mike Wagner, a real estate broker who works in Loudoun. “The news is: Your home is worth $100,000 less than it was a year and a half ago.”

And it’s not just prices that have suffered.

The average Loudoun County home sold in December spent 101 days on the market, according to the Realtor group. In Arlington, the average was 72 days. As previously reported, unsold inventory is a problem across the state and country.

Wagner and other local real estate agents say the area’s soft market is a hangover, in part, from a building spree and a buying binge among investors priced out of other areas. The same applies to those within the Florida mortgage market - and elsewhere, evidently.

Take California, where suburban housing markets have softened more than those close to urban centers.

Home prices in Los Angeles rose a relatively modest 5.8 percent in December from a year earlier, while sales were down 14.5 percent, the California Association of Realtors said.

Now, real estate agents in those areas are trying to sell a glut of new homes, along with the inventory of previously owned houses.

“There is intense competition in the inland areas of the state between the existing stock and new homes,” said Appleton. “The absorption of this new product is going to take some time.”

In some of Florida’s distant suburbs, strong price appreciation rates had builders imagining a continued demand for homes, said Brad Hunter, director of South Florida real estate research firm Metrostudy.

“I think it was easy for builders to think that there were real users in these fringe areas far from jobs and entertainment,” he said. “In fact, we found that purchases in those areas over the last three years or so … were speculators and not users.”

Earlier today, home builder Morrison Homes reported closing on sales of 582 new homes in 14 Orlando housing market communities last year.

Morrison Homes’ Orlando division expects to complete sales in four communities this year and says it will open another seven. Developments expected to close out this year are Ashton Park in Ocoee, Warwick at Vista Lakes in east Orlando, Greystone in Sanford and The Landings at Parkstone in Winter Springs.

It’s all a sign that Florida mortgage loan demand is returning to the region.

The home builder also plans to build homes in 17 communities in 2007, in part expanding “aggressively” into Volusia County, says Katie Millikan, marketing manager, in a prepared statement.

One Volusia County development is scheduled to open early this summer, while presales recently began in two others, she says.

With a once-robust South Florida housing market in a yearlong decline, hundreds of local housing-industry professionals will attend the 63rd International Builders Show, held Wednesday through Saturday at the Orange County Convention Center in Orlando.

The largest trade show in the world attracts home builders, architects, contractors, designers, manufacturers and other professionals involved in every aspect of residential and commercial real estate construction.

Last year’s show drew a record 105,000 industry representatives from 95 countries, according to the National Association of Home Builders.

The group anticipates that even with Florida mortgage decline down and contract cancellations rising, at least that many people will attend the event this year.

“It’s an opportunity to see what manufacturers are offering to put in a house to improve livability,” said Joshua Fowler, executive vice president of the Palm Beach County Gold Coast Builders Association.

“Important trends for local builders,” Fowler said, “include senior housing and green building. But most of the show is dealing with new things to put in a house and better ways to build.”

The Big Show, the theme for his year’s event, is certainly the place to be to see the latest trends in technology and home building.

The show is not open to the public, and features nearly 300 educational seminars and hands-on workshops on everything from “Understanding Housing Markets and Consumers” to “Designing for the Active Adult.”

A new educational track this year, “Changing Markets,” will offer tips on how to navigate the housing market decline, plus forecasts for the home-building and remodeling industries and a seminar on construction cost cutting.

These and other seminars should be well attended, given the shaky condition of the new-home market.

New home sales fell last year by the largest amount in 16 years, according the Department of Commerce. Meanwhile, major home builders like Lennar Corp., D.R. Horton and Pulte Homes have been revising their 2007 sales forecasts downward as new-home buyers have slowed their pace.

Across Florida, home sales did increase for the second straight month in December, raising hopes that the worst of the housing downturn is ending.

Department of Commerce studies reported that December sales rose 5 percent, following a 7 percent rise in November.

Those two increases, however, were not enough to salvage the entire 2006, with total home sales of 1.1 million units, down 17 percent from 2005. That marked the biggest sales decline since an 18 percent plunge in the housing downturn of 1990.

The housing slowdown is occurring after a boom in which sales of both new and existing homes set records for five straight years. The lowest Florida mortgage loan rates in more than four decades powered a surge in sales that was bolstered by investors making purchases in hopes of turning around and reselling the properties for quick profits.

Analysts attributed the big declines in 2006 to a cooling - or return to normalcy - of that speculative boom. Moreover, the housing slowdown trimmed 1.2 percentage points off overall economic growth in the July-September quarter.

Analysts are looking for an equally severe hit in the final three months of 2006, which haven’t been revised, with housing expected to be a continuing drag in the first half of this year.

Despite the slowdown, home building is still going on, of course. But how much of it will take place - and what will builders’ profit margins look like - if Florida home mortgage rates rise in 2007 and demand remains flat?

West Calhoun, the new president of the Home Builders Association of West Florida, is a Pensacola native who started out in the construction trade working summers for local contractors. He took the time to answer questions about the housing market and his plans for his year-long term with the Pensacola News-Journal. Here’s the interview:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Q: What are the biggest challenges facing home builders in 2007, and what are they doing as a group to address them?

A: There are many, including property insurance, growth management, affordable housing, workers’ compensation, construction education and environmental permitting, just to name a few. Each of these issues are complex but equally important for the overall success of the housing market.

For instance, builders must have property casualty insurance coverage in order to build homes - Florida mortgage lenders require coverage for construction loans. This coverage must be available and affordable in order to do business.

As for growth management, local and state governments regulate residential development and home building through a myriad of rules and regulations designed to protect current residents, the environment, and the health and safety of new home buyers.

Q: Will 2007’s home building numbers approach those of pre-Ivan? And are you envisioning 2007 as a “comeback” year?

A: I am optimistic about the future. I cannot say whether or not this will be a comeback year, but I do believe that homes have been selling in our market if they are priced right.

Lately there have been a lot of calls and usually sales follow calls, so I am hopeful that people will take advantage of the market right now, because it’s still a good time to buy a home.

Q: Is the supply of labor sufficient to meet home builder needs during 2007?

A: Finding skilled labor is always tough in some cases, but I would say that builders are finding that the subcontractor labor force is able and willing to work.

To help meet Florida’s need for a more qualified workforce, the Home Builders Association of West Florida is pleased that Navarre High School has started a Future Builders of America program that is educating high-school students with important skills and industry knowledge.

Q: Do you see the use of incentives as more or less important in stimulating home sales going forward?

A: Incentives are good, but sometimes people will wait take a wait-and-see approach before buying. They will shop one builder to see what incentives and then go to another builder, and so on.

At the end of the day, the buyer is afraid to buy because they don’t want the feeling that they missed out on a better deal. It is human nature to get the best deal possible on their Florida mortgage loan and on the house itself.

I would encourage anyone to make an educated decision. However, it could cause paralysis by analysis, if you will, in the market.

Q: What effect have the crises involving insurance and property taxes had on new home sales?

A: Taxes and insurance definitely affect home sales by increasing the monthly Florida home mortgage payment. Hopefully the folks up in Tallahassee have made some positive changes recently that will lower insurance costs.

Q: What are your goals as 2007 president of the association?

A: I am proud of the work the HBA has done to keep our members informed, and frankly, keep them in business. We are proud of our governmental affairs program that continues to work to provide safe, affordable housing and the opportunity for home ownership for people in our community.

Regulatory fees are hard costs that are passed along to the buyer. The unintended consequence is that, because of the cumulative affect of each regulation, the price increases, thus reducing the affordability of homes.