Florida Growth Not So Slow After All

Florida Growth Not So Slow After All
Dec 24, 2010 – 8:19 AM

Laura Parker

AOL News, Laura Parker Contributor

A year ago, the news in Florida couldn't have been more dire. On top of the housing bust and an unemployment rate topping 12 percent came the news that Florida's great economic engine -- growth -- had ground to a halt. For the first time since the end of World War II, Florida lost population -- some 50,000 people, estimates showed.

"We've got rooftops to spare. We just don't have the bodies to put in them," said Sean Snaith, an economist at the University of Central Florida in Orlando, at the time.

It turns out that Florida's future may not be so bleak. It remained one of the fastest-growing states in the past decade, in spite of the recession, new census data show. The Sunshine State added 2.8 million people, enough to win two new seats in Congress and assure that Florida remains on track to overtake New York as the third most populous state in the 2020 census.

"To me, that's saying the long-term trends have not really changed all that much," said Stan Smith, director of the University of Florida's Bureau of Economic and Business Research in Gainesville. "Even though there have been substantial ups and downs, people have often over-interpreted what's been happening in the last year or two and view deviations as the beginning of a new trend. I don't think you can conclude that."

Smith and other Florida demographers await the population counts for city and counties that the U.S. Census Bureau will begin releasing in February, to determine whether his premise is true. But the new state-by-state numbers help put the larger picture in perspective.

Even with the recession, the state's growth rate can only be described as robust. Florida grew at a rate of 17.6 percent in the past decade, compared with the national average of 9.7 percent. As with the rest of the country, most of the growth occurred in the first half of the decade.



It was Smith's bureau that came up with the estimated population loss last year.

Now that the new state census has been released, he said the loss may have been merely a smaller increase in population. He said his population estimates for the mid-decade may have been "on the high side," influenced by the building boom.

"Consequently, when the housing bust hit, it made it look as if the population declined for that one year in 2009," he said.

Smith said he expects slow growth next year, then a gradual return to what he calls "more normal levels" of growth.

"Ohio and New York and New Jersey are still going to be cold in the winter," Smith said.

Smith warns that Florida may not grow at its previous pace. "But it will get to 2 million or 2.5 per decade, which is still a big number," he said.

Until the housing bust brought Florida's economy crashing down, the state had grown explosively for three decades. In the 1970s, '80s and '90s, Florida added between 3 million and 3.2 million residents every 10 years, Smith said.

"We called it 'Economic Development for Dummies,'" said Snaith. "Sit back, if people come, your economy grows."

In the first few years of the 2000s, houses were being built so fast that they made Florida's legendary swamp lot developers of yesteryear look downright somnolent by comparison. In Fort Myers, a city of 60,531 residents in southwest Florida, 14,000 new homes were built on speculation.

When it all ended in 2008, Fort Myers became the state's ground zero in the home foreclosure crisis. Some 12 percent of homeowners found themselves in foreclosure, one of the highest rates in the country -- and high enough to draw a visit from President Barack Obama in February 2009 as he campaigned for passage of his stimulus plan.

Across the state on the Atlantic coast, Flagler County went from being the fastest-growing county to having an unemployment rate of 16 percent, Snaith said.

The August 2009 announcement that the state had likely lost population seemed inconceivable.

"People were stunned," said Aubrey Jewett, a political scientist at the University of Central Florida. "We had a variation on the saying, nothing is certain except for death, taxes and population growth in Florida. Then we discovered only two of the three were sure things."

Some economists, like Snaith, are less confident that Florida will resume growth at its old pace. The decline of housing values nationally makes it difficult, if not impossible, for some who once considered a move to Florida to afford it.

"We're not Michigan by any stretch of the imagination," Snaith said. "The near term is going to be a slow climb out of a pretty deep hole. People will again move back to Florida. But I don't think we'll see a 3 percent growth rate."

To be sure, Florida is still mired in recession. The statewide unemployment rate hovers stubbornly around 12 percent. Christmas shopping looked good, but even Santa Claus had trouble finding a job at the mall this season.

Still, there are some promising signs. Enrollment in public schools is expected to increase for the third year in a row. State officials anticipate next fall's enrollment to be the largest in six years. Likewise, electric hookups, another measuring stick, are on the rise statewide.

In Fort Myers, if the economy isn't exactly hot, it's certainly less grim.

International Buyers Snap up 90,000 Florida Condos and Homes in 2010

International Buyers Snap up 90,000 Florida Condos and Homes in 2010

MIT prof: Housing demand about to take off

William C. Wheaton, professor of economics at Massachusetts Institute of Technology, argues that the housing market is due for improvement, calling home construction, “a sleeping giant that is about to wake up.”

Wheaton believes because there has been so little construction that demand exceeds the level of building and it will soon absorb excess inventory.

“Housing construction will not only rise, but it will stay high for a while, which didn’t happen in previous recoveries,” Wheaton predicts.

Source: Fortune, Nin-Hai Tseng (09/17/2010)

© Copyright 2010 INFORMATION, INC. Bethesda, MD (301) 215-4688

Where is the shadow inventory?

We've been saying this for some time now - in our area, there is little inventory to speak of. Add to that the fact that we started the downturn at least a year and a half before much of the rest of the country, and it takes the wind out of the 'shadow inventory' case made by many who incorrectly associate it with northern Palm Beach County...

WASHINGTON – Sept. 20, 2010 – For the last year, the real estate industry has been talking about shadow inventory and the coming flood of distressed properties. Where are they?

Here’s what’s happening, according to a recent paper by Alan Mallach, a senior fellow the Brookings Institution:

• Some delinquencies have been resolved through loan modifications or people working out the problems on their own.

• Banks are getting better at managing short sales.

• Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market.

The likeliest outcome, Mallach predicts, is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices – but it will probably lead to low or no appreciation in home prices for a while.

Source: The Wall Street Journal, Nick Timiaros (09/16/2010)

© Copyright 2010 INFORMATION, INC. Bethesda, MD (301) 215-4688

Florida population grows again

GAINESVILLE, Fla. – After declining for the first time since the end of World War II, Florida’s population grew once again last year, a hopeful yet tentative sign that the worst of the recession may have passed, according to the latest preliminary population estimates from the University of Florida (UF).

Stan Smith, director of UF’s Bureau of Economic and Business Research, estimates that Florida added a modest 21,000 residents between 2009 and 2010, but that follows a population decline greater than 56,000 between 2008 and 2009.

“Even though the state turned it around, it still represents the smallest population increase since the 1940s and does not make up for last year’s loss,” Smith said. “Florida’s population growth continues to be very, very slow by historical standards.”

Florida grew by more than 125,000 residents in every year from 1950 to 2008. It’s estimated that Florida added 21,285 residents during the past year, with its total population increasing from 18,750,483 on April 1, 2009, to 18,771,768 on April 1, 2010, Smith says. The previous year it lost an estimated 56,736 residents.

“Two years ago, the economy was deteriorating rapidly, while over the past year there have been some signs that it is leveling off or even improving slightly,” he says. “I think that’s the reason we’re seeing a small increase in population. Although technically the recession has ended, the economy continues to be in bad shape, particularly in terms of its ability to create jobs. There have been some jobs added in the last few months, but unemployment is still very high and job growth is very weak.”

Slightly more counties lost rather than added population, but the split was fairly even. In percentage terms, both increases and decreases in counties’ populations were generally very small, with no dramatic changes.

“At the state level, foreign immigration continues to be relatively strong, and the state also continues to have substantially more births than deaths, which are really the drivers of Florida’s growth in the last year,” Smith says.

The largest population gains were in some of the biggest counties. Miami-Dade led by adding an estimated 8,253 residents, followed by Hillsborough, 6,353, and Broward, 5,834. “Because they’re the largest counties, they have fairly sizeable numbers of births,” Smith says. “They also receive a substantial number of foreign immigrants.”

The county with the biggest percentage increase was Lafayette, which grew by 5.2 percent, but that change was largely attributed to the addition of state prison inmates. There was no pattern to which counties lost population, which were spread throughout the state and include both large urban counties and small rural counties.

The largest population decline was in Seminole County, which lost 3,659 residents, followed by Pinellas, 3,119, and Volusia, 2,055. In percentage terms, the county with the biggest decline was Glades, followed by Jackson and Holmes.

With a quick economic turnaround unlikely at either the state or national level, Smith expects Florida’s population to continue to grow slowly during the next year or two. But within the next 10 to 20 years, the state’s annual population growth could be as high as 250,000.

“From 2003 to 2006, Florida’s population grew by more than 400,000 per year, and in the previous three decades increases averaged about 300,000 per year, although there were certainly ups and downs from year to year,” he says.

Last year’s population decline, a result of the economic slump, was the first since 1946, when military personnel left the state at the end of World War II.

“If the economy recovers sooner than people expect, we would expect faster growth,” Smith says. “If it recovers less rapidly or even slips back into recession, we would expect that growth will continue to be very slow and possibly even be negative again.”

Between 2000 and 2010, the counties that grew the most in absolute numbers were Miami-Dade, Orange and Hillsborough. Flagler had the highest growth rate, 90.4 percent, followed by Sumter, 82.6 percent, Osceola, 59.8 percent, St. Johns, 50.6 percent, and Wakulla, 41.7 percent.

The population figures are interim estimates that will be replaced by numbers from the 2010 census when they become available early next year.

© 2010 Florida Realtors®

The best moves for home buyers and sellers

By Beth Braverman August 25, 2010: 8:55 AM ET


(Money Magazine) -- Plenty of forces, from overly cautious lenders to inaccurate appraisals, are wrecking real estate deals right now. But one of the biggest roadblocks to getting a house sold these days is the disconnect between buyers and sellers.

In general, sellers have gotten more realistic in pricing their homes than they were right after the housing bubble burst, but agents say that many still don't grasp how much they must concede to close a deal. And buyers are still spraying lowball offers around in hopes that sellers will be desperate enough to bite.

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Take such unreasonable expectations, multiply by two, and what do you get? "A standoff," says Glenn Kelman, CEO of real estate brokerage Redfin.

With the busy summer home-sale season drawing to a close, there's little time to waste. Whether you're trying to unload your place or land a new one, follow these dos and don'ts to negotiate the best deal -- fast.
If you're buying

Don't say: "I'll pay 85% of your asking price and not a penny more."

Instead: Look for homes that are fairly priced and make a reasonable offer. "Coming in about 10% below list is a good starting place for negotiations now," says Denver real estate broker Jeff Fogler. Yes, you have the upper hand in most markets, but the average homebuyer is paying only 2.7% below list price (see the chart). Set your expectations accordingly. You can always ask if the seller is willing to bridge a price gap in other ways -- for example, by picking up your closing costs (which can run $7,500 on a $300,000 house).

Don't say: "I haven't put my own place on the market yet."

Instead: List your current home before you start shopping seriously for the next one. Because it takes almost three months to move a house these days, sellers are loath to write home-sales contingencies into purchase contracts. You'll have far more leverage if you've gotten rid of your house before you start negotiating: Sellers know there's less chance of the deal falling apart. (Prequalifying for a mortgage helps too.) What's more, you'll know exactly how much money you can put into your new digs.

Don't say: "This is my dream house."

Instead: Stop imagining the great parties you'll throw there and gird yourself to walk away if the seller won't make reasonable concessions. Your ability to abandon negotiations is your most powerful bargaining chip. Given that plenty of other homes are on the market now, finding another place to love shouldn't be too hard. You might let the seller know that. Nicely.
If you're selling

Don't say: "You're offering how much? Forget you!"

Instead: When bidders lob low-balls at you, thank them for their interest -- and ask that they come back with earnest offers. "If you become offended, enraged, or unreasonable, you've blown any chance at negotiation," says Warwick, R.I., real estate agent Ron Phipps. These days many buyers are just testing you to see how big a discount they can get. Point the bidder to comparable recent sales that support your list price. (Received several super-low offers? Check the comps to make sure your price isn't too high.)

Don't say: "I didn't know the deck was rotting."

Instead: Pay a few hundred dollars to get your house inspected before you put it on the market. Then arrange to make any necessary repairs yourself. (In most states the law requires you to disclose to potential buyers any defects of which you're aware.) "Taking care of any inspection issues upfront helps sellers limit the points that buyers can negotiate on," says Pat Lashinsky, CEO of the national brokerage ZipRealty.

Don't say: "It might take us a while to move out."

Instead: Make sure to tell buyers -- especially those who might have children starting school this month -- that you're willing to scram pronto, if possible. That will help you stand out from any short sales in your area, which may have lower list prices but can take months to close. "If the buyers have a strict time limit, they're going to pay more money to get into a house quickly," says Ellen Klein, a realtor in Rockaway, N.J. More money plus more speed: That's what it's all about. To top of page

Hedge Fund Heavyweight Paulson Makes New Housing Bet

Ok, let the talking head dopes on MSNBC yap all they want about how bad it is - then ask yourself, "What are the people with real loot doing?"



Hedge fund manager John Paulson is underscoring his bullish bet on America in a big way.

The billionaire investor, who famously made more than $4 billion betting against the US subprime housing market at its peak in 2007, will be throwing his hat into the race to acquire residential land—and dirt cheap.



TimSloan | AFP | Getty Images

John Alfred Paulson, president of Paulson & Co., Inc.


--------------------------------------------------------------------------------

Paulson, who manages the $31 billion Paulson & Co. fund, has made a "stalking horse" bid of $42.4 million to acquire the assets of Engle Homes, which includes land and lots in Arizona targeted for more than 8,000 homes, and nine completed residences.

Engle-owned property in Colorado and Nevada is also part of Paulson's proposed deal. Engle is a subsidiary of Technical Olympic USA of Hollywood, Fla. [TOUSQ 0.0040 --- UNCH (0) ] .

The offer follows auctions earlier this year by TOUSA where Paulson also participated, according to Reuters and sources familiar with the matter.

Paulson runs the $31 billion hedge fund Paulson & Co.

With builders suffering due to continued sluggish sales of new homes, slow job growth, and the competition for market share, it really is survival of the fittest—talks of consolidation among the biggest players have been circulating in the industry and among investors.



According to Citigroup [C 3.75 --- UNCH (0) ] analyst Josh Levin, in a note issued to clients Wednesday, "We view consolidation as the proverbial elephant in the room. Management teams are not discussing the issue publicly, but we would be surprised if at least some of them were not talking about it privately.

Investors like Paulson see this as an opportunity to strike while the iron is hot. Buying land makes sense because they recognize the demand from builders who could benefit from increased supply and lower prices.

Inventory of homes for sale shrinks in South Florida

Inventory of homes for sale shrinks in South Florida

WEST PALM BEACH, Fla. – Aug. 17, 2010 – The number of homes and condominiums for sale across South Florida has steadily declined over the past two years, an encouraging sign for the region’s battered housing market.

Still, industry observers worry about a sizable “shadow inventory” of foreclosed homes that could complicate any real estate recovery.

Broward County had 19,869 properties on the market in July, down 35 percent from July 2008, according to a multiple listing service report compiled by the Keyes Co.

Palm Beach County’s inventory of homes and condos slid 31 percent to 23,947 during the same period.

The supply of new homes being built in the two counties also has decreased sharply in the past two years, said Brad Hunter of the Metrostudy research firm in Palm Beach Gardens.

In 2005, sellers rushed to list their homes, hoping to fetch record prices during the housing boom. But the frenzy led to a collapse and prices plummeted.

Thousands of foreclosures and short sales have clogged the market ever since, giving buyers plenty of choices and little reason to pay top dollar.

“You won’t get price appreciation until you get the inventory in balance,” said Mike Pappas, president of Keyes. “We’re making great strides.”

Declines in homes for sale already have helped stabilize prices recently.

The median price in Broward rose 7 percent during April, May and June to $209,800 from a year ago, the Florida Realtors said Wednesday. Palm Beach County’s median increased at the beginning of the year but dipped 2 percent in the second quarter to $235,500.

Pappas said his firm is handling fewer transactions involving foreclosed homes, and he thinks that’s an indication the foreclosure market has peaked.

But some analysts disagree, pointing to a recent surge in homes repossessed by lenders that is pushing inventory levels higher in recent months.

Banks are on pace to take back nearly 50,000 properties in Palm Beach, Broward and Miami-Dade counties this year, according to CondoVultures.com, a real estate consulting firm. Many lenders are careful to hold off listing those properties for sale all at once to prevent widespread price declines.

Sean Snaith, an economist at the University of Central Florida, expects more foreclosures to result from homeowners losing their jobs. And he said the sagging labor market likely will discourage potential homebuyers.

“You have to have a healthy labor market as a foundation for a healthy housing market,” Snaith said.

Another concern is the expiration of the federal homebuyer tax credits.

Buyers who signed contracts by April 30 and close by the end of September are eligible for the $8,000 and $6,500 tax rebates. But people who put homes under contract after April 30 don’t qualify.

While pending sales still are robust, demand for homes is expected to wane in the second half of the year. Fewer sales would keep the supply of homes elevated and ultimately hurt pricing, said Chris Lafakis, an economist covering Florida for Moody’s Economy.com in West Chester, Pa.

“Our forecast is that ... demand won’t be strong enough to work off the excess inventory fast enough to stave off future price declines,” Lafakis said. “But by this time next year, the worst of the declines will be over.”

Copyright © 2010 Sun Sentinel, Fort Lauderdale, Fla., Paul Owers. Distributed by McClatchy-Tribune Information Services.

Asians Find Attractive Buys in Britain and the U.S.

By ALEX FREW McMILLAN
HONG KONG — Darryl Dong recently took his wife, Eva, to New York for a bit of shopping. He had heard there were some great sales. But Mr. Dong, a financier based in Hong Kong, was not looking for designer clothes.

Instead, he picked up a two-bedroom, two-bathroom condominium on Sutton Place, an exclusive street between midtown Manhattan and the Upper East Side, for $2 million. He paid one-third less than the $3 million asking price, the price that a similar unit in the building had sold for in 2007.

Mr. Dong is part of a stream of buyers based in Asia who have become increasingly active in Western real estate, particularly in Britain and the United States, snapping up properties at what they consider to be bargain-basement prices.

“Now is a truly opportune time to buy London, New York, L.A. — all these markets are totally thrashed,” Mr. Dong said. “It’s not cheap per se, but for executives in Hong Kong looking for a second home, you can’t do any better than that. These are all prime markets that you would move in and out of in business circles anyway.”

Asian buyers have accounted for 49 percent of the investment purchases in London over the last 12 months, according to research from the Knight Frank real estate agency. Asian investors spent £761 million, or $1.2 billion, on property in the British capital, with investors coming from Hong Kong, mainland China, Singapore, Malaysia and other parts of Asia.

“While the market has returned to life after it pretty much shut down in 2008, current international investment demand is almost totally concentrated on London and is primarily coming from Asia,” said Liam Bailey, the head of residential research at Knight Frank.

Buyers say the weak pound, and the sense that London real estate is a secure investment, are the main attractions. And even though prices in the city have risen 22 percent in the 14 months that ended in May, prices in central London still were 32 percent off their peak in March 2008, in Hong Kong dollar terms.

Asian buyers favor central locations and properties near the Underground, Knight Frank says. For example, the extension of the Jubilee Line south of the River Thames is drawing Asians to Southbank and Canary Wharf.

Knight Frank says the Pan Peninsula development in Canary Wharf sold 110 units in Hong Kong and Singapore, at prices from £250,000 to £4 million, at an average of £800 per square foot. And developers like Barratt Homes, which is giving Asian buyers first opportunity to buy the 700 apartments in its £150 million Renaissance development near Greenwich, recently said Hong Kong and Singapore residents buy one quarter of all the homes it builds in London.

In the United States, buyers from China and Hong Kong are the fourth-most-active international purchasers, according to a report issued in June by the National Association of Realtors, following buyers from Canada, Mexico and Britain. The Chinese make up 8 percent but, with the British share slipping to 9 percent in recent years, they soon may be the most prominent buyers from outside North America.

For the 12 months that ended in March 2010, foreigners represented 4.5 percent of the buyers, who purchased $907 billion in U.S. real estate during the period. The proportion actually could have been larger, but one-third of all potential international buyers were unable to complete their purchases because of financing problems. Ninety-two percent of all U.S. buyers get mortgages, while only 45 percent of foreign buyers do.

Danny Lim, another investor based in Hong Kong, also traveled to the United States this spring to vet property. During that trip he bought properties in Detroit; Las Vegas; Fort Lauderdale, Florida; and Miami, paying cash for homes to rent out and to hold for investment.

Mr. Lim, who was born in Indonesia but grew up in Australia, plans to target Phoenix and parts of California next. “We identified five areas that we thought had really good potential and also the ones that were the worst hit in the credit crisis,” Mr. Lim, 34, said.

His company, The Creations Group, has established a small fund that is open to friends and family, and that so far has invested around $1.5 million of its $2 million in cash. If the venture is a success, he anticipates opening a larger fund to the public.

Working with local brokers, he targets lower-end housing a few streets away from good neighborhoods. But by stipulating that the properties be single-family homes, in good condition and producing a minimum rental income, he hopes to ensure a good return.

Other purchasers stick to high-end property. The median price paid by international buyers for U.S. property is $219,400, according to the Realtors’ survey, 27 percent higher than the median $173,000 price for all sales, including American buyers.

Mr. Dong, 52, used the O’Neill Group, a company with operations in Hong Kong and the United States, to broker his purchase. He secured a 30 percent loan on his Manhattan purchase. But he says financing “wasn’t an issue,” just as he did not worry about getting the best price.

“My philosophy has always been as an investor, it’s nice to buy something at the bottom but don’t chase the bottom,” he said. The market “has gone down far enough that any time along now that you buy, it’s going to be a great deal.”

Mr. Dong is the global head of distressed-debt investments for PineBridge Investments, the former AIG asset management arm now controlled by Richard Li’s Pacific Century Group. He is putting his work experience to personal use. In addition to the Manhattan purchase, last year he bought a four-bedroom, four-bathroom home in Mill Valley, California, for $2.5 million. He rents this out but eventually expects to use it as a home.

Mr. Dong, a Vancouver native, said he targeted the Bay Area and New York for personal reasons but would be equally upbeat about buying in London.

“How often does a confluence of circumstances create a situation where you have got a housing crisis, a global financial crisis, and in Europe you have got a debt crisis? That will never happen all at one time in our lifetime,” he said. “It’s a once-in-a-lifetime opportunity to buy in those places.”

Foreign cash buyers boosting Florida real estate

August 5, 2010 - Florida's biggest fans appear to be wealthy families relocating from overseas - and paying for homes in cash.

A burgeoning sector for real estate agents in the state has been the international market, fueled by foreign buyers with lots of money and no qualms about dropping millions on a new home, reported AOL Real Estate.

International customers make up about 60 percent of broker Esther Percal's cash buyers, she told the news site. "A cash buyer may be someone who is borrowing from somewhere on their own, they may have the money in the bank, they may own the bank, but their purchase is not contingent on a finance deal." Some of her clients find the U.S. mortgage market to be too slow and constricting to bother seeking financing, she added.

Their purchases aren't just to obtain trophy homes either, said the report. Many buy American homes because they want to build credit in the U.S. for business purposes or wish to obtain a visa.

Though price may not be a concern for those buyers, the average consumer would be wise to shop around for a mortgage and moving services when buying a home.

South Florida Speculators Outbid Average Homebuyers

By Lisa Selin Davis Jul 30th 2010

You’d think that now would be the time

to pick up a bargain home in South Florida.

After all, there are more than 96,000 foreclosures

to choose from, and that’s just

from the first six months of 2010, according

to the Miami Herald: “Distressed properties

are still dominating the market, with

more than half of all homes and condos

sold last month at some stage in the foreclosure

process.”

Floridians with modest nest eggs who

were priced out of home ownership during

the boom should be able to get their hands

on a sweet little slice of subdivision now

that prices have plummeted. Right?

Not exactly. It turns out that investors

are opening their purse strings, too, beating

regular buyers to the punch.

“Cash-happy investors have been scooping

up these bargain basement deals at a

fast clip, often before middle-income buyers

can get financing,” according to the

Herald. The nest egg can’t compare to the

deep pockets of developers, speculators

and investors who can self-finance, especially

in the wary world of mortgage lending.

And foreclosed homes tend to sell for

25 less than their non-foreclosed counterparts,

hard for the cash-in-hand to resist.

While it’s bad news for middle class

Americans who thought they’d finally get a

piece of the real estate pie, it’s decent news

for the Florida economy. Median sales

prices in Miami-Dade county are still

down from a year ago — 4 percent lower —

but they’re 3.4 percent higher than they

were in May. Sales are up from a year ago,

and single-family home prices are slightly

higher.

The real mystery is what the investors

will do with the homes. Buyers tend to be

more patient, willing to wait decades to see

their home values appreciate, whereas

investors prefer to see a quick return on

investment.

Will the homes sit empty, waiting for a

new round of bank-approved buyers? Or

will those middle class buyers who missed

out on the first round be willing to pony up

a little more for a property they missed out

on initially?

We’ll have to tune in next quarter to see.

Builders See Returning Florida Market

Companies Grab Cheap Land, Construct Less Expensive Homes as They Vie With Banks' Foreclosed Properties for Buyers

By ROBBIE WHELAN - From Wall Street Journal 6/15/10

SANFORD, Fla.—In Central Florida, one of the nation's most-hobbled housing markets, home builders are welcoming what they see as a returning market by snatching up cheap land and beginning construction on smaller, less expensive subdivisions.

Home builders have been able to slash prices on new homes, partly because land is still cheap —some say as much as 40% to 60% off boom-era lot prices.

"We went through a period of two years where no one bought any land, and they were actually liquidating land," says Tim Stapleton, a division president for Arizona-based builder Taylor Morrison Inc. "Demand wasn't that high, and you were eating the lots. Now, you see builders going out obtaining new lots."

View Full Image

Robbie Whelan/The Wall Street Journal

Builders have shown a renewed interest in the Orlando market recently, buying hundreds of lots. Above, Taylor Morrison's Terracina project in Orlando. Taylor Morrison, one of the most active builders in Orlando, has bought 142 lots in the past eight months, its first acquisitions in this market since 2007. Last month, the company closed on 19 lots in a large lakefront development called the Island Club.

Mr. Stapleton said that the homes Taylor Morrison plans to build there, which will range from 2,300 to 3,200 square feet, will probably sell for about $400,000 apiece, whereas in 2007, they would have moved for $700,000 to $1 million.

Despite the renewed interest, Florida is a bifurcated housing market—a reminder of the housing crisis with a glut of foreclosed homes, while new developments serve as examples of how home builders are positioning themselves to compete against banks selling foreclosed homes, even in markets like Orlando.

Last year, Taylor Morrison sold 62 townhomes in Terracina, one of its new developments in Orlando, ranging from $160,000 to $230,000 and 116 more are set to begin construction soon.

Charles Wayne Consulting, Inc., an Orlando-based research company, reported a 70% year-over-year increase in construction starts for single-family homes in the four counties that make up the Orlando metro area in the first quarter of 2010.

That's surprising because economists consider Florida ground zero for the nation's housing and mortgage crisis. The state had the largest percentage of mortgages, 20.6%, that were classified as "seriously delinquent" during the first quarter of this year, according to the Mortgage Bankers Association.

Sales of newly built single-family homes aren't doing much better: Closings are down 19% in the Orlando market since last year. Florida also has the highest percentage of homes in the foreclosure process, nearly 14% of all homes with a mortgage.

Robbie Whelan/The Wall Street Journal

Linnette Girau, an interior designer, visited three bank-owned foreclosure properties before deciding to purchase a $144,000 newly built, three-bedroom house built by D.R. Horton in Beacon Park, a sprawling subdivision near Orlando's international airport.

Yet, in a number of Florida markets, sales of existing homes are picking up. Orlando saw a 36% bump in sales in April, with similarly high jumps in Jacksonville, Tampa and West Palm Beach, indicating that the state is working through its inventory of distressed and existing housing stock.

That comes as builders ramp up construction of new subdivisions and snap up raw land and lots in anticipation of the market's return. In February, Miami-based builder Lennar Corp. optioned nearly 5,500 Florida lots that once belonged to small Florida home builder Tousa Inc. Lennar is now selling starter homes on some of the lots for prices starting at $160,000.

Not long ago, the conventional wisdom held that there wouldn't be any new demand for housing in Florida for years and that buyers instead would purchase foreclosures, which they could buy at bargain prices. But real-estate agents say that buying a foreclosure from a bank has turned out to be complex, time consuming and more costly than most buyers had expected.

Linnette Girau, an interior designer, visited three bank-owned foreclosure properties before deciding to purchase a $144,000 newly built, three-bedroom house built by D.R. Horton Inc. in Beacon Park, a sprawling subdivision near Orlando's international airport.

"The person who left the house, I don't know if they were mad or something, but the house didn't smell good, and the ceiling lights and carpets were gone," said Ms. Girau, adding that she didn't have the money to put into a home for renovations.

She and her husband closed on the Horton house in April.

Centerline Homes, an independent Florida builder, has also been on a buying spree. In November, the company bought 499 lots in three Orlando developments, and has begun building at all three developments.

Prices for 50- and 75-foot wide lots, like the ones at Turtle Creek, a development in southeast Orlando that is being constructed by multiple builders, are in the $22,000 to $24,000 range, roughly 40% lower than boom-era prices.

Because land is so cheap, said Steve Fusilier, an Orlando Realtor who sells homes in new developments and has a close relationship with many of the builders here, builders are able to turn a tidy profit selling small homes—about 1,800 square feet—built at a cost of $150,000, and sold in the normal retail price range of $160,000 to $170,000.

"I remember 12 years ago, going to a builders' meeting where they had glasses of champagne because they'd sold five houses in a month and they made $10,000 in bottom line profit on each one. Then in 2003 to 2005, suddenly they were making $100,000 per home." Mr. Fusilier said.

Officials from Meritage Homes Corp., a top-10 public builder, has 13 actively selling communities here, and with 77 sales in the first quarter (an 18% increase from a year earlier), the builder's Orlando division posted its first quarterly profit in three years.

"If you're looking at it from a 40,000-foot view, you'd sort of question what we're doing, but if you look at it the way we have, it makes sense to try and build more homes," said Rick Harvey, Meritage's regional president for Florida and Texas. Meritage said its strategy is similar for Denver, Las Vegas, Arizona and parts of California: to buy land at rock-bottom prices and begin building.

The company has acquired nearly 700 lots in the past 15 months, and says that job numbers in the area are encouraging for a market recovery.

Medical City, a 600-acre biotech park and hospital complex near Orlando's international airport, is expected to bring more than 7,000 jobs to Orlando in the next few years. Nine different builders, including Hovnanian Enterprises Inc., Beazer Homes USA Inc. and D.R. Horton, have opened new-home communities.

Home buyers in Orlando aren't likely to be affected much by the massive oil spill in the Gulf of Mexico, about 350 miles away, which is already threatening to devastate the tourism and fishing industries and put downward pressure on property values for many Floridians who live and do business near the water.