At Last, Optimism

The worst of the housing downturn is behind us and 2012 should usher in an era of modest growth and price appreciation. At least, that’s what builders statewide and locally seem to think.

In a survey conducted in late Nov-ember, the Florida Home Builders Association (FHBA) found that 57 percent of respondents saw “some signs of improvement” in the housing industry — up from 24 percent a year ago. About 32 percent said there had been “no improvement” — down from 46 percent a year ago.

In a separate survey of First Coast builders, Florida Homebuyer Jacksonville and the Northeast Florida Builders Association (NEFBA) found that 56 percent of respondents believe that 2012 will be “about the same” as 2011 while 44 percent believe that 2012 will be “slightly better” than last year.

If that isn’t exactly a ringing endorsement, it should be noted that, while no one predicted the market would get “substantially better,” no one predicted it would get substantially worse, either. And that has to count as optimism after several years of frightening declines.

“There’s pent up demand,” said one builder. “Interest rates are the lowest they’ve been in 40 years. Affordability is the highest it’s been in 10 years. And Americans are get-
ting impatient for a recovery.”

So perhaps it’s not surprising that no builder in the local survey predict-ed that his or her company would build fewer homes in 2012 than in 2011. About a quarter each predicted increases of up to 5 percent, 6-10 percent and 11-20 percent. An impressive 15 percent expected their output to increase by 20 percent or more.

Are the dark days of declining values behind us? Eight in 10 local builders say they expect new-home prices to remain about the same this year while 20 percent believe prices will increase, albeit modestly. Notably, no one predicted further price erosion.

“We may see prices start to inch up this year,” said one builder. “But homes are still great bargains compared to se-veral years ago.”

Looking father into the future, the results of the local and the statewide polls mirrored one another. More pronounced improvement is expected in 2013 and 2014, according to both polls, although First Coast builders said it would be “at least five years” before the market could be described as “robust.”

What’s the biggest obstacle to an improving market? It’s the difficulty buyers face obtaining mortgage loans, according to respondents in both polls.
Statewide, 36 agreed that tight consumer financing is the No. 1 factor preventing the market from bouncing back strongly. Locally, 30 percent agree.

But there was a hopeful statistic as well. In the statewide poll, about 30 percent blame low buyer confidence as the major factor tamping down sales — down from 45 percent last year. 

Clearly, builders are sensing that buyers are feeling better about the economy and about their own financial situations — a crucial component for any significant recovery to take hold.

Locally, about 20 percent of respondents cite competition from foreclosures and 15 percent cite impact fees as their biggest challenges. “Increased impact fees and other regulations will force prices up very rapidly once supply and demand are equalized,” said one builder.

Several respondents mentioned low appraisals — but that problem is most likely related to issues around financing. “There should be a standard that new homes carry a premium over existing homes,” said one builder, echoing several others who advocated appraisal reform.

Does this somewhat less-gloomy outlook have any basis in fact, or is it simply wishful thinking? In fact, housing starts are up and inventory is down — two signs pointing toward an improving market, according to Metrostudy, a national housing data and consulting firm. 

In the Jacksonville MSA, 850 single-family units were started in the third quarter of 2011, the most recent quarter for which statistics were available at presstime. That’s an increase of 14.6 percent compared to the same time frame in 2010. Single-family closings in the third quarter totaled 790 units, 14.3 lower than the same time frame in 2010. 

“The increases in starts should keep move-in paces strong for the next few quarters, and should push annual clos-
ing rates upward,” says Anthony Crocco, director of Metrostudy’s Jacksonville division.

Total single-family inventory equaled 1,864 units, which equates to about 8.2 months of supply, at the end of the third quarter. That’s down 12.6 percent compared to 2010. 

“The Jacksonville area economy is slowly improving, arm’s-length resale transactions are growing slightly and for-sale housing inventory is down,” adds Crocco. “Even with distressed re-
sales, Jacksonville’s lack of new and re-sale inventory and competitive pricing should provide an upward bounce in new home activity going into 2012.”

More good news came in November from Builder magazine, which named Jacksonville the fourth healthiest housing market in the country based on pro-
jected price appreciation, population growth, income growth and an improving employment picture.

Finally, for the first time since the downturn began, Jacksonville has been listed in the National Association of Home Builders/First American Improving Market Index (IMI).

The IMI identifies housing markets showing measurable improvement from their respective troughs in housing permits, employment and home prices for at least six consecutive months.

In addition to Jacksonville, 35 new markets were added to the IMI in January, bringing the total nationwide from 40 to 76.

Builder, in conjunction with Hanley Wood Market Intelligence, predicted that Jacksonville would see 4,363 building permits pulled in 2012 vs. 2,284 in 2011. That’s a 30 percent increase.

“Seeing a Florida market so high on our list of healthy markets may be a sur-
prise to some,” the magazine wrote. “But the city’s strong employment base has helped it come back before many of the services-dependent housing markets to the south. A strong military presence has always anchored the economy while a growing financial services sector has added employment in recent years.”

Employment is expected to rise 3.2 percent in 2012 while median income is projected to rise 3.3 percent, according to Builder’s researchers, who also predict that home prices will rise by a healthy 5 percent in 2012.

So the “buy now” message is taking on a bit more urgency — and credibility — than it has in the past several years.

“Homes are priced below replacement cost right now,” said one builder. “Prices will never be better.” 

Added another: “You need to take advantage of low prices and rates before they’re gone — and if you don’t believe it, wait another six months and see what happens.”

Q&A

Name: Barbara Moore

Company: Lennar Homes

Title: Division President

Involvement: President, Northeast Florida Builders Association

Education: Florida State University, Bachelor’s Degree in Business Management; Master’s Degree in Urban Regional Planning

Personal/Family: Two children, four grandchildren

Interests/Hobbies: Building more homes; traveling