Experts: Worst of Housing Market Slump May Pass in 2007
There’s hope for the battered housing market yet.
That’s the sentiment expressed by Frank Nothaft, chief economist for Freddie Mac, during the opening of the International Builders Show in Orlando.
“In the second half of the year, I see improving conditions in home sales and housing starts continuing into 2008. But ‘improving conditions’ doesn’t mean a jump back to the wonderful days of 2004 and 2005. Far from it,” he said.
Still, any optimism is welcome relief for the more than 100,000 home builders, architects and contractors attending the giant trade show.
“This is good news,” said Joshua Fowler, executive vice president of the Gold Coast Builders Association, which represents more than 1,000 builders in Palm Beach County and northern Broward County. “We were concerned that this could be a long-term recession.”
During the past year, builders in Florida and across the nation slashed earnings forecasts and laid off workers as short-term investors left the real estate market and the five-year housing boom crumbled.
Nothaft and David Berson, chief economist for Fannie Mae, say they expect gradual improvement after following a few more months of softness as home sellers lower prices to entice buyers.
A third economist, David Seiders, representing the National Association of Home Builders, was more optimistic, saying the housing downturn hit bottom late in 2006 and is poised for a recovery in the second quarter.
During the boom years of 2000-2005, the South Florida housing market was one of the worst regions in the United States U.S. for affordability, speculative buying and excessive building, he said.
“It’s going to take this market longer to really recover than other markets around the country,” Larson said. “I would expect this year will be weak, with not much appreciation and more likely price declines.”
Even with Florida mortgage rates low, South Florida may not rebound until the spring selling season of 2008, he said. By then, buyers will have had a chance to cut into the excess inventory of unsold homes.
With homeowners insurance rates and property taxes remaining as obstacles for the housing market in Florida, even with state legislators lawmakers last month passing legislation that they say will cut insurance rates, a fast turnaround in the market may be wishful thinking.
U.S. mortgage lenders tightening bad credit home loan requirements for borrowers also could extend the region’s housing slump throughout 2007, Larson said.
“People need to realize it’s going to be a long, drawn-out process. Don’t expect miracles. And if you’re a buyer, do expect to be bargained with,” Larson said.
But some local housing professionals say they already are starting to see heightened mortgage loan demand and improved buyer conditions.
Scott Agran, owner of Lang Realty in Boca Raton and Palm Beach Gardens, said business has picked up noticeably during the past few months.
For most of 2006, his real estate agents were thrilled to show a property, let alone sell one. But as prices have leveled off, demand for mortgage loans is picking up and buyers are returning to the housing market.
“I’m not telling you the market is going to be fast and furious. I’m saying the next 18 months will be flat, but with consistent business. We’re seeing a return to a more normalized market not a hot market, but not ice cold, either,” Agran said.
SOURCE: South Florida Sun-Sentinel