Orlando New Home Market Gets Worse

Nov 1 - Orlando Sentinel Reports:

Home builders continued cutting back in the Orlando area this summer, as new-home starts plunged 47 percent in the third quarter compared with the same period a year ago.

MetroStudy, a Texas-based real-estate-research company, also said in its latest survey that the July-to-September home construction in Metropolitan Orlando was down 20 percent from the previous quarter.But the number of home buyers closing on their purchases, and moving into their new houses, in the four-county metro area slipped only 5 percent from the second to third quarters.

Economists and industry experts said the sharp drop in housing starts is painful in the near term but helpful in the long run because it means the inventory of unsold homes can be absorbed faster. It also means a rebound in the region's housing market might begin sooner, and perhaps be even stronger, than after previous downturns, they said."They are anxious to work their way through the inventory.

Now is not the time to be building," said Terry Eckert, a longtime Orlando-area home builder. Builders are smart enough to know the cyclical nature of the market, Eckert said, and most builders are not starting work on any homes unless it involves a confirmed sale with lender-approved buyer.

Eckert, a former president of the Home Builders Association of Metro Orlando, worked for years for major-production builders -- the companies that fill subdivisions rather than erecting custom homes on single sites. He recently became director of construction for Habitat for Humanity-Orlando, the charity that builds for families who ordinarily could not qualify for a regular home loan. In contrast to the area's conventional builders, Eckert's nonprofit group is on pace to build a record 17 single-family homes in the region by the end of its fiscal year next June 30.

But only the major commercial builders have the scale and financing to build homes in the volume required to meet overall demand, and the MetroStudy report released Wednesday showed that housing starts in the Orlando area during the third quarter fell 46.9 percent year-over-year to 4,851 units.Anthony Crocco, director of MetroStudy's Central and Northeast Florida divisions, said the sharp decline in Metro Orlando -- which comprises Orange, Seminole, Osceola and Lake counties -- is a reflection of "the slow sales paces and high cancellation rates of late summer and early fall." His survey of subdivisions showed that the number of homes sold and occupied in the third quarter totaled 3,850, down 29.8 percent from the same period in 2006 but off only 5 percent from this year's second quarter.

Orlando economist Hank Fishkind told builders, developers and Realtors last week that this housing downturn does appear to be different in Central Florida when compared with past housing slumps, in that home builders have slammed on the brakes harder than ever.That should help clear out the inventory of unsold homes and set the stage for a more robust rebound in sales of both new and used homes, perhaps in 2009, Fishkind said during his quarterly forecast for Stirling Sotheby's International Realty Global Gallery.

MetroStudy's report did, in fact, show a drop in the area's new-home inventory. Total inventory -- homes under construction, finished-but-vacant units and model homes -- totaled 10,412 at the end of the quarter, down 36.3 percent from a year earlier.But at the recent slow sales pace, that still amounted to a 6.6-month supply. And the critical finished-but-vacant category fell just 9.9 percent from a year ago, to 5,264 homes -- still, a sign that the large stockpile of homes is finally starting to get whittled down.