Editor’s note: Though experts are divided over what the next 90 days may bring for the housing market as a whole, they all agree on one point: Each region of the nation has its own unique set of circumstances, and how those factors shape the attitudes of home buyers and sellers over the next several weeks will also help to decide how local home sales and prices will fare through the rest of this year and beyond. This four-part series looks at regional trends that are emerging as the peak spring home-buying season gets under way. (See Part 1 and Part 2.)
With mortgage rates rising and home sales slowing across most parts of the country, sellers and buyers in a market where economists say that prices should rise about 10 percent this year would seemingly be ready to shout for joy and thank the real estate gods for their good fortune.
But that’s not the case in Florida and a handful of other areas in the Southeast, where millions of homeowners have enjoyed a long string of annual price gains that have topped 15 percent, 20 percent, or even sometimes more than 25 percent.
“Prices have doubled in some Florida markets over the past four or five years, so the 10 percent increase we’re forecasting for the state this year might seem kind of small compared to recent trends,” says Lawrence Yun, an economist and managing director for the National Association of Realtors.
Yun stops short of saying that homeowners in the Sunshine State and other parts of the Southeast may have become spoiled by their years of even heftier price gains.
But, he admits, the mere suggestion that the pace of price inflation may slow “might be a little hard to swallow” by homeowners in the region who have grown accustomed to even sharper annual increases.
Though no one predicts that housing markets in the Southeast will soon come crashing to the ground, it’s clear that the region’s long run-up in both sales and prices is starting to ease.
Statewide sales in February tumbled 24 percent from a year earlier, the Florida Association of Realtors says, with declines of more than 40 percent in such market stalwarts as Naples and the Sarasota-Bradenton area.
Perhaps more worrisome, there are growing signs that many of the same speculators who have helped to fuel Florida’s long price-run-up are now getting jittery about the prospects for future gains.
Cendant Corp., the New York-based parent of such household names as Century 21 and Coldwell Banker, recently reported that its company-owned offices across Florida saw a remarkable 30 percent increase in cancelled sales: It placed most of the blame on speculators who backed out of deals, apparently because they think that prices may be topping out.
If speculators continue bailing, Florida’s condo market could be the first to feel the pain. The number of condos for sale in the Miami area is already double what it was a year ago, according to the state’s realty group. The foreclosure rate is also twice the national level, says California-based research firm RealtyTrac.
Despite such dire statistics, many developers just keep on building. Roughly 25,000 condominiums are under construction in the Miami-Dade area today, an amount that exceeds the total number of condo sales in the area that have been completed in the last nine years combined.
“It’s a scary situation,” sums up Jack F. McCabe, a Miami-based consultant to several big Southeast builders. “We are going to see severe downward pricing pressures on condos in the next few years.”
The market’s recent softness is also being felt by developers of single-family homes.
Florida-based building giant Lennar Corp. said in March that its first-quarter profits soared 34 percent from a year earlier, but it also warned Wall Street analysts that its future income could be hurt because it is offering more incentives to lure buyers.
Builder concessions are also popping up in other parts of the East.
In Virginia, Brookfield Homes Corp. recently launched a “FastMove” special on about 60 homes that are already finished or about to be completed: Discounts on some of its more expensive houses approach $100,000.
And in Washington, D.C., developer MDC Holdings Inc. is offering thousands of dollars in free upgrades to some potential buyers in an effort to offset a sharp 60 percent drop in local sales. “We’re certainly not in a ‘panic mode,’ but we’re doing what we can to sell more houses,” an MDC sales rep says.
Price cuts and other concessions are also spreading among new housing tracts in the key building markets of Atlanta and Dallas, though NAR economist Yun and other analysts agree that sales in the two cities should advance about 5 percent this year as both areas reap the benefits of a job-creation rate that’s more than twice the national average.
Though some buyers and sellers in the Southeast may be losing sleep over the market’s softening, builders who’ve been active in the region for decades are taking it all in stride.
“We’ve been around for 52 years,” Lennar Corp. CFO Bruce Gross said at a recent home builder’s conference. “So, we know that housing has a downside scenario.”
Tomorrow: A closer look at housing markets in California and the West.
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