The WSJ points out that Florida’s decrease in building permits, construction material sales, and credit quality on residential construction loan portfolios make it the center of the housing “shakeout”:
“Speculators who have held back on selling now bear heavy costs. According to the U.S. Commerce Department, the number of vacant homes for sale in Florida doubled last year to 4.3% of the state’s total housing stock. That’s the highest vacancy rate in the country. As more speculators throw in the towel, Florida housing prices may have much farther to fall”
Interestingly, although the article makes reference to Miami, the Magic City is set apart from Florida as a whole. Recent reports have touted Miami as a stabilizing factor in Florida’s overall market while others have singled it out as over-priced. WSJ is looking at some critical indicators of a downward tumble, but two of the three, the decline in permits and construction material sales, are less an indication of a downward market slide and more of a reflection of the leveling off of construction activity; a necessary and expected halt in residential unit production. Credit deterioration, insurance rate and property tax increases, however, paint an ugly picture for Florida in general.
A recent comment posted here by a reader named Brad describes the current situation as a reflection of “the current stalemate between buyers and sellers and sellers’ unwillingness to lower prices.” The ongoing increase in residential unit inventory will likely result in the capitulation of the latter and a property value hiccup, but not a longterm one. Miami’s market still holds significant value potential and rests its laurels on a historic level of construction activity, a substantial rise in tax revenues, a unique and expanding economic position, and a thriving tourism sector.