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Forecast says housing backlog gone after 2010

Forecast says housing backlog gone after 2010

Charlotte Sun-Herald Newspaper. Reprinted with permission.

January 8, 2008

By BOB FLISS CHARLOTTE BUSINESS EDITOR

Compared with the rest of Southwest Florida, Charlotte County’s residential real estate market is in fair shape, according to an economic forecast released Monday.
No predictable event is likely to produce a repeat of Charlotte’s post-Hurricane Charley “boom” year of 2005, when about 13,000 single-family houses changed ownership, nearly all existing structures.
But the forecast by Orlando economist Hank Fishkind states that 2007 should be the bottom of the market in Charlotte County, with only about 3,600 sales of new and existing houses.
For 2008, Fishkind predicts about 4,300 sales, rising to about 4,900 in 2009, and 6,000 in 2010. This would still be slightly less than the volume of new homes sold during the last pre-Hurricane Charley years of 2002 and 2003, but it’s as close to a full recovery as the local market is likely to get.
Although the slow residential market is causing significant job losses, Fishkind said that the overall economy is in much better shape than the last major housing bust, which occurred in 1990-91.
“Then you had a severe recession with very high interest rates … I don’t believe we will have a recession, and if we do, interest rates are much lower than in 1990-91,” Fishkind said.
Important as construction is to the Florida economy, there’s enough momentum from other sectors to prevent a recession, Fishkind said. Also, look for the Federal Reserve to continue cutting interest rates, which should provide relief to borrowers caught with adjustable-rate mortgages, while possibly encouraging some potential real estate buyers.
Although selling a house in the current market has become a challenge, prices have come down only moderately. Fishkind said he didn’t see any major loss in property values.
“Home prices aren’t like the prices of barbecue grills at Wal-Mart. If there’s an excess of barbecue grills at the end of the season, you just cut the prices until you clear the market,€ Fishkind said.
Houses, on the other hand, usually represent the largest share of the owners’ assets €” hence, there’s an understandable reluctance to cut prices.
“In Florida, prices tend to shoot up like a rocket and come down like a feather,€ Fishkind said. He forecasts that the average sale price of a Charlotte County house will stay around at its current level of $218,000 through 2010.
In Sarasota County, this figure should hold around $340,000. In Lee County, the price should hover around $310,000, while in rural DeSoto County, the going price should be stuck around $113,000.
All of these markets have inventories to work off €” but volatile prices should be much of a concern through 2010, Fishkind concluded.
Another bit of good news is that Charlotte is still gaining population and jobs, Fishkind noted in a Monday conference call arranged by the sponsor of his forecast, Attorneys’ Title Insurance Fund Inc., also of Orlando. This is the second year Fishkind has done the report, which is based on actual sales data for all 67 Florida counties, processed with a series of macroeconomic equations.
Hurricane Charley led to a loss of about 3,000 residents during 2005, Fishkind reported. Since then, Charlotte has returned to a fairly steady pattern of growth: about 6,000 new residents in 2006, about the same forecast for 2007. Looking forward, Charlotte should gain a little less than 5,000 residents in 2008 and in 2009, rising to about 5,500 in 2010.
Future demand for housing closely tracks population growth. The number of new households will be roughly half the number of new residents. And each household needs a place to live.
And that’s where Charlotte seems to be on a much steadier course than some neighboring communities €” notably Fort Myers and Cape Coral in Lee County. Fishkind describes Lee County as probably the most “distressed€ housing market in the state, because construction has outstripped demand, leaving an inventory that will take several years to work off.
For 2007, Fishkind predicts about 2,800 new households in Charlotte County, against an inventory of about 7,000 houses. These numbers are going to move closer together in 2008, closer still in 2009, and balance out in 2010, when Fishkind predicts 3,500 new households against 2,500 existing houses on the market, and about 1,500 housing starts.
Lee County has a much larger backlog to work off. Population growth appears to have peaked in 2006 with about 36,000 new residents. But that figure dropped in 2007 to about 19,000, representing about 8,500 new households.
At least these new Lee County residents have an inventory of about 25,000 houses to choose from. And this inventory will take years to work off. Fishkind predicts that by 2010, Lee County’s housing starts and housing inventory will still be nearly twice the number of new households.
But perhaps the most overbuilt market in Florida may be condominiums in Miami. The oversupply situation there is comparable to the boom and bust of the 1970s, Fishkind said.

Jim Mulligan (941) 456-3034
Andy Leonard (941) 662-0033

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