Even as Housing Prices Cool, Families Continue to Flee Florida

A tried-and-true formula of plentiful jobs, abundant sunshine and low taxes suddenly isn’t enough to support the growth of families with children in Florida, as real-estate speculators and empty nesters are snapping up property, shrinking the supply of affordable homes for newcomers who traditionally pumped up school enrollment. Overall, the number of students in the state’s public schools is expected to grow by just 30,000 this year to 2.67 million, well below recent annual increases of about 65,000, and some counties are seeing declines. School officials say the reason is that Florida’s overheated housing market, even with some cooling in recent weeks, is pricing young families out of the state. The median existing-home price in August was $248,400 — up 90% since 2001. Ranking fourth in population among the states, Florida remains one of the fastest-growing places in the country, adding an average of 1,000 new residents a day to its total of 18.3 million. Some Florida officials say that the slowdown is temporary and that enrollment will accelerate later this decade because of rising births and immigration. Also, the weakened housing market, including a 34% decline last month in sales of existing single-family homes in Florida compared with a year earlier, could bring some relief to families suffering from sticker shock. Florida is home to four of the 10 most-overvalued housing markets in the U.S., according to economic consulting firm Global Insight Inc. of Waltham, Mass., and National City Corp, a Cleveland bank. (www.realestatejournal.com)
RealEstateJournal.com (9/28/06); Chad Terhune and Rafael Gerena-Morales, The Wall Street Journal Online

[Return to top]

U.S.: The Fed Could Go Into Hibernation This Winter

A 19% decline in crude oil prices from their mid-July peak of $77 per barrel and a 35% plunge in wholesale gasoline prices since early August are easing inflation pressures and suggest that the Federal Reserve might be content to sit on the sidelines, neither increasing nor cutting interest rates, for a very long time. There was nothing to dispute that notion after its Sept. 20 meeting, when the Fed decided to leave its target rate on hold, at 5.25%, for the second time in a row. On balance, the trends in inflation and economic growth appear to be closely tracking the favorable expectations the Fed laid out in its June forecast. Based on the Fed’s statement, policymakers still think the risks associated with attaining its desired paths for growth and inflation are slanted slightly toward the risk of more inflation. However, they also believe price pressures “seem likely to moderate over time,” with lower energy prices helping toward that end. Despite worries about the impact of weakening housing activity, consumers continued to show life in the third quarter and household buying for both goods and services, adjusted for inflation, is set to make a larger contribution to economic growth in the final quarter than it did last quarter. (www.businessweek.com)
Business Week (10/1/06); James C. Cooper

[Return to top]

Small Home Builders Find Success During Slumping Market

Compared to large home building companies that have been dealt a blow by the recent housing slump, small local builders that can better adjust to the shifting market are now thriving, according to builders and trade groups. “I keep a close eye on the market, but really a lot of builders my size haven’t seen a slowdown,” said Donny Mack, who runs Beaver Builders, a Sanger, Texas-based residential construction firm with just three full-time employees. Beaver Builders constructed a dozen single-family homes in the $150,000 to $400,000 price range last year, Mack said, and expects to double that by the end of this year. “We have a few first-time buyers, but also a lot of empty-nesters looking for a smaller place,” he said. Mack said that many smaller firms can also turn to remodeling during slower business periods. (www.inc.com)
Inc.com (9/27/06); Angus Loten

[Return to top]

At Home in Steady Market

While new-home starts have fallen in five of the past six months nationally, the Charlotte, N.C. housing market is gaining strength, with values rising and builders on track to break another production record. The Charlotte region is the 13th largest housing market in the country and has added 100,000 residents in the last two years. Steady job expansion has fueled much of the growth, supplemented by a steady stream of retirees. Mark Baldwin, president of the Charlotte Home Builders Association, says that the area continues to benefit from the half-back trend, in which Northerners move to Florida for retirement, don’t like the heat, high cost of living and hurricanes, and move halfway back to the North, relocating in Charlotte and the mid-Atlantic states. A record 18,000 new homes were closed in Charlotte last year, a 17% increase over 2004. The market has also avoided the euphoria that is now taking a negative toll on boom locations. While homes in the hottest urban markets such as Las Vegas or Northern Virginia had been rising in value some 20% or even 40% annually, Charlotte real estate moved up at about 6% and, at best, 8% a year. New-home closings in Charlotte were up 22% in this year’s second quarter compared with the same period in 2005, and new residential permits were up 26%. The median new-home price was up 14%, much higher than usual, but the median price of a resale was up just 1% in the second quarter, which could be a sign of some slowing ahead. “Typically, when a market softens, it first shows in resale home prices,” says local real estate agent Chuck Graham. Also, he says, builders have 7.5 months of unsold inventory, with 2.5 months of projects completed and unsold. While those are healthy inventory levels, the inventory in the region has been closer to five months, and builders will pull back production if they see the inventory rise much more. (www.charlotte.bizjournals.com)
Charlotte Business Journal (10/2/06); Laura Williams-Tracy

[Return to top]

‘Conversion, Reversion’

After they were converted from rentals to condominiums, condominiums are now turning back to apartments in Naples, Fla. and around the state — a phenomenon that South Florida real estate guru Jack McCabe has coined “the great conversion reversion.” “The apartment conversion reversions began here in South Florida and worked their way through Florida,” he says. “We are seeing reversions around the country as well, from Miami to Seattle, and all points in between.” In the past two years, condo converters swallowed up more than 4,200 apartments in Collier County and thousands more in Lee County, following a national trend driven by low interest rates, skyrocketing construction costs and the scarcity of land in prime locations. After conducting a survey in May, McCabe found that 1,322 units had been sold at nine complexes that were converting in Collier County, out of 2,385 available units, leaving more than 40% unsold. Converters across the state are finding creative ways to drive sales, including covering the buyer’s first year of mortgage payments and even throwing in two-year leases on luxury cars. At the 300-unit Reserve at Naples, sales continue but there are 120 units left to sell, and sales are averaging about 10 a month. Sales are expected to pick up, but in the meantime, the community has rolled out a rent-to-own program in which renters can receive up to six months of rent back to use toward closing costs or to reduce the purchase price. (www.naplesnews.com)
Naplesnews.com (10/1/06); Laura Layden

[Return to top]

Is the Living Room Dead?

The advent of the glamorous kitchen and the wired-for-everything family room, coupled with the decline of formal entertaining, has stripped the living room of its function. It now serves primarily as the well-groomed buffer between the front door and the actual living quarters, or as a place to display costly or sentimental objects, but rarely does it attract actual inhabitants. “The living room is on the chopping block for the average home,” says Gopal Ahluwalia, vice president of research for NAHB. “It is becoming smaller, like an average room, and has a different purpose: a library, a parlor, a music room, although it will remain in big houses where there’s room for everything.” Last year, more than one-third of new single-family homes were without a living room, he says, and 40% of those responding to a survey say they were willing to buy a home without one. An NAHB study of the home of the future found that designers and architects predict the demise of the living room, with the square footage being allocated to the family room, kitchen and bathrooms, Ahluwalia says. (www.newsday.com)
Newsday (9/28/06); Carol Polsky

[Return to top]