HOUSING – DAILY BUSINESS REVIEW – TORRE MACKLE GROUP FEATURED
The road to recovery for South Florida’s housing market will be longer — and bumpier — than that of the rest of the nation.
Positive signs are emerging in the housing industry elsewhere, but local builders say the region is lagging the rest of the country. Too many homes are sitting unsold, and the future of thousands of distressed properties must be determined by lenders, borrowers and the courts before the local market shows any signs of a turnaround.
Gains in national building permits, an indicator of future construction, have not yet emerged in South Florida.
Residential building permits issued throughout the nation increased by 2.7 percent, from 564,000 in July to 579,000 in August, Census Bureau said Thursday. August’s figures were 32.4 percent below the 857,000 permits issued in August 2008.
The Census Bureau will release August building permit data for Miami-Dade, Broward and Palm Beach counties on Sept. 25. But based on July’s figures, South Florida is moving in a different direction.
Miami-Dade County issued permits for 42 residential buildings in July, a substantial drop from July 2008 when 104 building permits were issued. The July figures were down slightly from the 51 permits issued in June.
Residential permitting in Broward County slipped nearly 50 percent in July, to 46 from 87 in July 2008. In June, 47 permits were issued.
Palm Beach County’s July permitting figures were slightly down from the same month last year. Permits were issued for 103 buildings in July, a drop from 117 buildings in July 2008. In June, 134 buildings were given permits in Palm Beach.
Interview with Venny Torre
“It is clear that our situation in South Florida is very different from the national situation,” said builder Venny Torre, principal of TorreMackle Group of Coral Gables. With new home construction virtually dead in the region, TorreMackle is focusing on completing distressed residential projects.
“Getting out of the problems we have will take longer here,” Torre said. “South Florida was so overbuilt. Until we sell more existing homes and sort out the troubled assets, we will be behind the national average.”
The industry — whether nationally or locally — has a long way to go, said attorney Steve Silverman, a shareholder in Kluger Kaplan Silverman Katzen & Levine in Miami.
Despite the national gains announced Thursday, permitting is still down significantly from a year ago and will have to maintain or improve on the current level for there to be a long-term impact.
“I would certainly not call these numbers a turnaround,” Silverman said. “If we see a steady month-to-month increase in housing starts and building permits, that might tell us something on a national level.”
National housing starts increased 1.5 percent, from 589,000 starts in July to 598,000 in August, according to the Census Bureau. The August figure is 29.6 percent below the August 2008 rate of 849,000.
That follows quarterly gains in Broward and Palm Beach counties. New-home starts in Broward jumped from 17 in the first quarter of 2009 to 78 in the second quarter, according to Metrostudy, a national real-estate research firm. Palm Beach home starts rose from 139 to 213 in the same period.
But Miami-Dade County housing starts dropped precipitously in the same period, from 43 in the first three months of the year to seven in the second quarter.
South Florida is in step with the rest of the nation in one regard: Single-family homes dominate residential construction — what little there is.
About 80 percent of the national housing starts in August were for single-family homes. Only 64 percent of the projects completed last month were for single-family homes.
If local building permit figures are any indication, future construction in South Florida will be centered on single-family homes. All but seven permits issued in the tri-county area in July were for single-family projects.
Single-family homes in the region are likely being built by individual property owners with the resources to take advantage of lower-than-normal construction costs, Torre said. Major homebuilding companies are not currently getting involved.
“Speculative construction is not happening,” Torre said. “What is left are people who want to build themselves a home. But you can still buy an [existing] home way cheaper than the cost of building a new home.”
The oversupply problem in South Florida might dampen new-home construction until late 2010, said Ashley Bosch, president of the Builder’s Association of South Florida. Bosch is also managing director of Miami-based Blok Development Group.
Many more homes are expected to end up in the hands of lenders as the cost of adjustable-rate mortgages soars in the next few months, Bosch said. Home buyers who obtained adjustable-rate mortgages between 2004 and 2006 are starting to see the higher rates kick in.
“What we’re expecting now is quite a few people defaulting and a greater influx of foreclosures,” he said. “When you have that much product on the plate, it is difficult to get starts and permits going. It is not a good business decision to be starting new homes right now.”
Another key sign of the industry’s potential rebound is rising confidence among homebuilders throughout the country.
The housing market index of the National Association of Home Builders, a Washington-based trade organization, rose to its highest level since May 2008, the group said Wednesday. The index increased this month to 19 from 18 in August. A reading below 50 means most builders think conditions are poor, but sentiment is well above January’s record-low reading of 8.
The stock of Miami-based home-builder Lennar jumped of about 6 percent after the confidence numbers were announced. Lennar’s stock (NYSE: LEN) closed at $16.60 per share on Thursday.
Lennar chief executive Stuart Miller declined to comment on the latest housing figures or the company’s stock gains.
Despite the national confidence figures, most South Florida homebuilders have little to cheer about, Torre said.
“There is still a pretty low feeling people have in terms of what is out there for new construction,” he said. “It is really hard for anyone to start new projects. Even if builders are awarded a new project, the lack of funds available for financing are making them unsure if they will actually get started.”
The builders’ trade group is pushing Congress to extend a federal tax credit that covers 10 percent of a home price for first-time buyers up to $8,000. The program is scheduled to expire in November.