New Housing Starts Are Key To Market's Health

Sales of existing homes may be strong and price declines less steep, but those indicators don't necessarily point to the end of South Florida's housing slump, a leading analyst said.

Instead, listen for the sound of hammers on wood, housing consultant Lewis Goodkin told more than 100 people at a Fort Lauderdale real estate seminar sponsored by the Gunster law firm.

'The real sign that we have bottomed out is when we start seeing new-home building,' he said. 'This is the lowest level I've ever seen in many markets.'

Broward County is on pace for 311 housing starts this year, the lowest rate recorded in more than a decade, according to the Metrostudy research firm in West Palm Beach.

Home construction is more prevalent in Palm Beach County, in part because of the availability of land. The county is on pace for 758 housing starts this year, but that's off 27 percent from Metrostudy's forecast at the beginning of 2009.

During the housing boom of 2000 to 2005, annual housing starts in the two counties peaked at well above 10,000.

'Today's levels are so low, it's almost zero,' said Brad Hunter, Metrostudy's regional director.

Builders have been retrenching in recent years, selling off land and writing down the values of their portfolios. Some now are searching for bargains on lots, trying to position themselves for a rebound, but new homes still can't compete against foreclosures and other resales, Goodkin said.

Recent regional and national reports suggest the housing slump may be easing, but Goodkin isn't optimistic.

He said borrowers who owe more than their homes are worth have little incentive to stay"

Mortgage Rates, Affordability, Home Sales; All Favorable for August 2009

Is The South Florida Real Estate Market Stabilizing?

The end of the meltdown may be in sight, but don't call it luck. The last 24 months have been a rough ride for the housing market. Thankfully, federal regulation and fiscal policy have been effective in stemming the great recession. And now many experts are citing encouraging signs that point to stability. Take existing home sales, for example, which have increased for the fifth consecutive month, an all-important indicator of stability. In today's battered market, rising sales translate to a more balanced supply and demand picture.

By all indications, the market still represents opportunity. The $8,000 first-time buyer tax credit is set to expire at the end of November, but remains a powerful incentive. While first-time buyers are active, more repeat buyers are also taking advantage of favorable mortgage rates and better prices. These two broad groups of buyers are absorbing excess inventory. Mortgage rates, which now sit around 5%, are slightly above the record low of 4.86%. Thus they are still very favorable and represent an historic opportunity for qualified potential buyers. The housing affordability index also remains very strong, as prices are adjusted to levels not seen since the mid-2000s.

The overall U.S. economic scene looks a bit brighter, as GDP figures came in better than expected for the second quarter. The economy declined at a pace of just 1% over the past quarter, a great improvement from the first quarter's decline of 6.4%. Economists declare this a potentially strong signal that the longest recession since World War II is finally beginning to wind down. Looking forward, GDP is expected to return to positive territory in the third quarter and increase further in the fourth quarter.

An increasing trend is American consumers' movement toward real savings. Last month alone, the U.S. savings rate hit 4.6%, a marked change from the negative to 0% savings rate over the past decade. Economists consider a savings rate of 5% beneficial for the long-term viability of the economy and housing market. With increased savings, lower consumer spending could result in a slower recovery, but might lay the foundation for sustainable growth in the future. With limited prospects of new job growth, unemployment will continue to remain in focus as the best indicator of broader recovery.