What's next for housing?

By ROBERT BARBA, NADIA GERGIS and KATE GRUSICH

The housing market is slowing. Sales of existing homes are slowing and fewer homes are being built. The $100,000 question: How will the local housing market play out?

We asked nine Realtors, builders and analysts who work or have professional ties to the housing industry in Martin, St. Lucie and Indian River counties. They agreed that the days of double-digit percentage increases in monthly prices are over. Most said the market is shifting.

Here's what they see for the next six months to one year.

REALTORS

Mark Seeberg, president, Realtors Association of Indian River County and partner at The Professionals Realty
Six months: Prices will stay where they are now, pretty much but I definitely see it improving in the future. I think by then prices will have been regulated.
One year: Barring any major obstacles we'll see an improvement in prices. We're not going to se the bottom fall out, like everyone's been saying. The cysle will have run it's course by then and I see an improvement in the market.

Jerry Mabus, president, Realtors Association of St. Lucie County
Six months: I think the residential real estate market is going to stay level or drop a little bit lower in the next six months. However, if Burnham Institute announces it is coming to Port St. Lucie, it becomes a different game. While that wouldn't open for another year and a half, my understanding is that related industry will move in immediately. That will have a direct impact on the housing market. If not, we can expect to be down about 6 percent from last year estimated by David Lereah, chief economist of the National Association of Realtors.
One year: We have also seen some Realtors leaving the business, we have had between 50 and 75 Realtors leave the association this year. This is not a bad market, though. Two things make a bad market, high interest rates and high unemployment. The interest rates are still at a decent level and we have low unemployment in the area.

Dale Armor, president, Realtors Association of Martin County
Six months: Right now, there is a lot of inventory in the marketplace and there has definitely been a correction in the pricing. A lot of sellers have reduced their prices so I think its a favorable buyer market. With that in mind, there are still a lot of people moving here and the area is still very desirable. I think our numbers are going to be fine. What I would like to see for us in the next six months is a steady market with good choices for consumers.
One year: I'd like to see a nominal, maybe 10 percent increase, over where we were in October. Steady growth would be great. Same with the appreciation of the homes. If annual appreciation of the homes outweighs inflation than Martin can keep going along."

ECONOMISTS
Brad Hunter, director, Metrostudy South Florida division
Six months: In a nutshell, still slow but better. It (housing market) will be a tad stronger than it is now, barring that there are no hurricanes this year. We'll be more than halfway through the process of filling empty homes.
One year: Demand will be stronger but we still will not have absorbed all of the empty supply. There will still be homes built between now and then, so we'll have to absorb those units too.

Pamela Peterson-Drake, associate dean, Florida Atlantic University
Six months: You should see a slow absorption of the houses that are currently unsold. I think some of the speculators have learned their lesson and realized that flipping does not always pay. And I think the builders are already realizing that the market just has too many unsold houses and that they need to slow down. We've seen some price appreciation continuing even though we've had a glut of houses. This is still a very good market in terms of growth, so I don't think you'll see all of them pull away.
One year: I think there will be a national pullback. It may actually level off for awhile but people shouldn't get discouraged because it's a national thing."

Bill Fruth, economist and president, Policom Corp.
One year: The housing situation will be one of the most severe recessions South Florida has seen in the last 20 years. The combination of overbuilding, the changing climate of financing and interest rates and speculators' excessive ownership in the inventory create a perfect storm.
The last housing recession began in 1988 and lasted until 1992. Based on what we saw then, we will likely see at least a third of the jobs in construction cut. In addition, we will see significant slow down in sales and an overall decrease in values. We can expect to see as much as 20 percent less in value in May 2007 than what they values were May 2005. There will be devaluation of property in St. Lucie County because there was such a race to go there and people paid more than they should have.
One year: It will take about two years for the inventory to absorbed. Taxes and insurance will also contribute to the inventory as second-home owners decide they can't afford to carry it and are not eligible to homestead their home. In addition, we are seeing something we have not seen before: out migration. For places like Tennessee and North Carolina, Florida is their marketplace.

St. Lucie County's economy will weather the downturn in construction better than Martin County will because they have done a good job at recruiting industry. What occurred in the last two years should not have happened and the market is adjusting itself and it will take one or two years of pain to get what the market will truly support.

BUILDERS
Jeff Logsdon, president, KB Home Treasure Coast
Six months: We believe we'll continue to see a stabilizing of prices. The fundamentals for housing demand remain intact and the economic outlook remains healthy.
One year: In this market, investors played an important a role in the housing demand over the past few years, which acerbated the downturn as they have exited the market. That will correct itself over time and we will begin to see supply and demand more in balance and the inventory back to normal levels.

Don Santos, president, Santos Construction, and past president of Treasure Coast Builders Association
Six months: In a word, the new home market is slow. I think we are at the lowest point right about now and I don't think 2007 is going to be much better. Our impression is that it will take about a year for the high inventory to be absorbed. We should start rebounding in late 2007 and into 2008.
One year: With the slowdown, everybody is thinking about how to reposition in the market and delaying projects where they can. In some cases, that might mean lowering home prices. If the supply is a function of affordability, the quickest way to fix it is to lower prices. It is a great time to buy a house.
We have delayed our project to late 2007 because we hope to come into a market that is stronger than it is presently. As builders, we have suffered threw these cycles before, but this will be the longest in recorded history. The affect on the economy could be enormous and we will likely see unemployment spike up significantly, because there is not going to be the volume that there was in the last few years. We are now seeing subcontractors laying off people. The slowdown will cause a ripple effect for mortgage and real estate brokers. I think the waves are starting to touch our shores.

Dennis Buford, owner, Buford Construction in Stuart and past president of Treasure Coast Builders Association
Six months: I'm a custom homebuilder so I've seen less downturn than most of the others. I think production builders are seeing a greater percentage of their work disappear. This is a downturning construction market. Housing starts across the nation are down. I can put my magical cap on and be optimistic and say 'things will be better in six months,' but I'm not sure if that will be the case.
One year: I study the home sales in Martin County and there are still a lot of sales there. I think we're definitely in a glut. But, last year we were seeing property values go up 20 to 30 percent a year. We basically saw a 100 percent increase in value in a short timeframe. Those properties now for sale at last year's levels are having to reduce their price, but it's still a pretty good bargain for land investment."