The Housing Bubble

The News Press reports from Florida. “Real estate inventory in Southwest Florida remains high. So does the grass at some residential listings. Upkeep of unoccupied new and old construction is fading. Once pristine properties are now unkempt, deprived of necessary attention because of absentee or inattentive owners. ‘It’s becoming an eyesore to the already complicated market,’ said John McWilliams, broker in Fort Myers.”

“‘It’s the kiss of death because there are so many homes for sale,’ said Judy Ramage, broker associate in Cape Coral. Slow sales and home foreclosures have resulted in residences that sit vacant for months, maybe a year.”

“Though Realtors said unsightly properties are common in outlying parts, such as Lehigh Acres, many areas have been affected. On a recent weekday morning, three of five homes for sale along Kismet Parkway in Cape Coral…had overgrown lawns. All of the properties had signs on the front lawn to display brokerage or builder names, and four homes were new construction.”

“According to the National Association of Homebuilders, as many as 1.4 million new housing units are sitting vacant, an all-time high.”

“Some builders and brokers, whose contact information is given on signage, are not tending the crop. Weeds taller than the roadside mailbox sprouted on the overgrown lawn at a new home on Northeast 24th Avenue in Cape Coral. Telephone calls to the real estate company’s number on the sign out front resulted in a message stating the number was no longer in service.”

“Homeowners in dire financial straits skimp on upkeep of the dwelling’s interior and amenities, notably the swimming pool. ‘If they’re getting foreclosed on, they tend to let the property go down the tube,’ McWilliams said. ‘If they’re in the final stages, they cut off the AC. There’s a risk issue.’”

“Real estate experts said these listings, especially older homes, show poorly and will not move as quickly as those that are maintained. ‘It hurts the homeowner,’ McWilliams said. ‘It gives the buyer the impression that they’re in trouble. The buyer wants to buy at or below the market value.’”

The St Petersburg Times. “Almost everyone’s heard about the pain the crumbling housing market has inflicted on building trades, real estate agents and mortgage lenders. But the tremors have cascaded from the inner circle to more distant, but related, industries.”

“Think furniture stores, appliance dealers, pickup sellers, even the CSX trains that lug lumber to Tampa to build homes.”

“‘It’s weighing down the economy and it’s shaved growth off. There’s no doubt about that,’ said Sean Snaith, a University of Central Florida economist.”

“Jeff Bloom’s family has run Ethan Allen furniture stores in and around Tampa since 1967. Since late last year, customers just aren’t coming through the doors at his design centers in Tampa, Citrus Park and Brandon. ‘We have to wait and see when housing’s coming back before we can justify building,’ said. ‘This is as rough as we’ve seen it in many, many years.’”

“Home Depot named Florida as a sore spot. Sears cited a dip in demand for appliances. Wal-Mart delayed construction of a supercenter in Dade City, citing lack of ‘maturation’ in a housing market turned south.”

“When St. Petersburg builder Construction Compliance Inc. filed for bankruptcy this year, one of the first things seized was its pickups. Tom Castriota, owner of Castriota Chevrolet in Hudson, has noted the same phenomenon in Pasco County: a glut of pickups for sale on U.S. 19 from idled plumbers and other tradesmen.”

“Even the car company with the hottest hand, Toyota, isn’t moving as many Tundra pickups as it would like. ‘What I’ve heard industry-wise is that Florida and California are taking the hit,’ Castriota said.”

The Herald Tribune. “The downturn in residential real estate and home building has caused a sharp rise in Southwest Florida unemployment.”

“‘Clearly there has been a deterioration in the labor market since last year,’ said David Denslow, research economist for the University of Florida’s Bureau of Economic and Business Research. ‘It is due to the housing downturn.’”

“Paul Kasriel, chief economist for Northern Trust in Chicago, believes Florida’s all-important tourism and boatmaking industries will also be hit because people across the country can no longer tap into rising equity in their homes.”

“Now that the housing sector is in recession, there is no question it will spill over to other sectors. Construction workers won’t make as many trips to Wal-Mart, and Wal-Mart won’t order as many goods. Eventually it works its way through the entire economy,’ he said.”

“‘We’re seeing a general slowing in financial services and retailing,’ said Mark Vitner, an economist with Wachovia Bank. ‘Fewer people are moving to Florida.’”

The Palm Beach Post. “Jobless rates spiked in June in Palm Beach County and the Treasure Coast, hitting their highest point in two years.”

“One culprit: Layoffs in the housing sector. In one example of that trend, DiVosta Building Corp. has laid off 430 workers in Palm Beach Gardens since December.”

“The state’s construction industry shed 18,000 jobs over the past year, state officials said, marking the first time since 1992 that the state has experienced four consecutive months of year-over-year declines in construction jobs.”

The Naples News. “Jim Lowndes likens it to driving off a cliff. After establishing Liberty Aluminum in 1993 and growing it to 105 employees by the end of 2006, he had to lay off 60 workers in early 2007. He’s been able to hire back 10 of them, but business is still down 60 percent from where it was a year ago.”

“‘We don’t see any improvement in the residential screen enclosure market for at least another year,’ Lowndes said. ‘Business is down 90 percent for some people.’”

“It’s something Sand Springs Development President Dennis Cantwell sees every day.”

“‘Everybody I talk to is laying off somebody in (residential) construction and I think it’s resulting in a trickle-down effect,’ said Cantwell. ‘It’s not only construction; people no longer have the grass cut or pool cleaned, and they don’t need day care because they’re staying home with the kids now. It’s going to blow through the whole system. Some people aren’t even going out for dinner anymore.’”

“Lee County’s unemployment rate grew to 4.2 percent in June as the construction jobs dropped and school district contract workers officially went off the rolls for summer. That rate is sharply up from the 3.1 percent jobless rate in June 2006.”

“Construction companies, particularly those who specialize in homes, continue to trim jobs, said Barbara Hartman, spokeswoman for the Career and Service Center in Fort Myers. The sector that includes construction lost about 800 jobs from a year ago, when home construction was more active.”

“David Atyeo of Fort Myers, lost his job at a local construction supply company this month because business has been slow. ‘I’ve tried to get work in construction, but those jobs just aren’t there right now,’ Atyeo said. ‘It’s been a couple of years since it has been this hard to get work in construction.’”

“‘We’ve begun to see construction employment begin to finally drop … at fairly substantial rates,’ said Frank Williams, a legislative economic analyst.”

“Brace yourselves. Sometime in the next two months, more road projects may be axed from the county’s road building budget.”

“Earlier this year, Pasco cut projects in 22 locations countywide, worth $950-million, from its five-year roadbuilding budget for 2008 through 2012.”

“The first round of cuts was based on planners’ calculations that assumed 5,000 building permits for 2007. Even when they made that forecast back in April, county officials knew they were being a tad optimistic.”

“‘If they don’t go right, they’re going to have to come back and readjust the budget,’ county Commissioner Ted Schrader said at the time.”

“County planners now believe they’re on track for just over half of that projection: 2,600.”

“‘We have enough money to get us through ‘08 and probably ‘09,’ said Michele Baker, Pasco’s chief assistant county administrator.. But the budget is for five years, so common sense tells planners to prepare themselves.”

“Only 1,118 single-family permits were issued between January and June this year, compared to 3,488 in the same period last year, according to Pasco’s central permitting division and the U.S. Census Bureau. June saw 189 permits issued, compared to 473 last year.”

“While supply appears to be stabilizing, real estate broker Natalie Feldman said price stabilization hasn’t yet but should catch up.”

“That’s not quite the same note of enthusiasm that was in a July 17 memo Baker wrote when she prepared for negotiations on the Wiregrass Ranch development. ‘The revenue estimates for (the next four years) will likely have to be revised downward and additional projects will have to be delayed,’ she said.”

“In Round One, the axed projects included some that were near and dear to planners’ hearts. As far as Round Two goes, there’s no hint yet of what might get cut. ‘I don’t know,’ Baker said. ‘That’s the hard part.’”

The News Journal. “Integra Land Co. has set out to saturate the Volusia-Flagler market with as many Class A rental units as possible. Lake Mary-based Integra wants to put 288 units in Daytona Beach, 277 units in Orange City and 482 units in Palm Coast, at prices ranging from $800 to $1,300 a month.”

“But the big questions are whether or not the market can withstand all the new apartments, and just who are these guys?”

“David McDaniel said, ‘By the time we start leasing in 2008, I believe the moderation in leasing currently in the market place will be abated.’”

The Star Banner. “Jumping into the housing construction business these days is like diving into a swimming pool, with no water. The market just isn’t there. But North Carolina-based Beckwith Homes is donning swimming trunks and heading toward the diving board, anyway.”

“Beckwith is betting that small, nimble builders can still do well in the Marion County housing market, despite the wailing and gnashing of teeth by large developers that are sitting atop big inventories they can’t unload.”

“Big builders that traded on Wall Street had the added pressure of making investors happy, said Beckwith’s division president, Cheri Bass, who has worked in the housing business for more than 10 years.”

“‘I’m not trying to get the whole piece of the pie,’ Bass said. ‘Just a little sliver.’”

“The companies built as much as they could when the market demanded more homes, regardless whether they could sell them fast enough, said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. ‘They had quarterly numbers they had to hit,’ he said.”

“‘It’s in the doldrums now,’ Snaith said of the housing market. ‘But the reality is the housing market wasn’t a bubble. There was a real demand and a demand is still there.’”