Housing Starts On The Rise
(Daily Business Review) Home-building in South Florida is keeping pace with the industry’s emerging recovery from the real estate recession. As local municipalities await next Friday’s Census Bureau report on residential building permits issued during July, the most recent regional figures are encouraging to industry observers. Residential construction in South Florida is now moving at a rate four times faster than in 2009, which is considered the bottom of the real estate downturn, according the latest quarterly report by Metrostudy, a national real estate research firm.
Nationally, builders slowed their pace of housing construction slightly in July, the Commerce Department said Thursday. But in a hopeful sign for future construction, applications for building permits rose to their highest level since August 2008. Single-family builders in South Florida are encouraged because they have found pockets where new homes can compete with the remaining inventory of foreclosed properties, according to Bernie Navarro, president of the Latin Builders Association and founder and president of Coral Gables-based private equity mortgage lender Benworth Capital Partners.
The sector is also getting a boost from cash buyers, which were previously focused on condominiums, Navarro said. Residences in cities like Doral and Coral Gables are coveted by such investors. Homebuilders “are trying to look for deals,” Navarro said. “A year-and-a-half ago, land was a bad word. Now people look for it.”
South Florida builders are keeping a “cautious” outlook on the market’s recovery, he said, until the November elections are completed.
In the second quarter, builders in the region started construction on about 43 percent more homes than in the previous quarter and nearly 64 percent more than the second quarter of 2011, according to Metrostudy. In what Metrostudy considers another positive sign for the local market, housing starts are exceeding move-ins. “We are convinced that this is a positive trend, in that builders were getting more pre-construction sales,” Metrostudy researchers said.
Builders of single-family homes in South Florida are seeing signs of encouragement.
In addition to Miami-Dade, Broward and Palm Beach counties, the Metrostudy report includes Martin, St. Lucie and Indian River counties. The region was led by Palm Beach County, which had 440 single-family homes under construction during the three-month span. That’s the highest level of new home construction in the county since the market bottomed out and was nearly 19 percent over the previous quarter and 43 percent year-over-year jump.
Miami-Dade County also posted a second-quarter surge in housing starts to 559 homes, nearly three times the activity from the second quarter of 2011. Broward County housing starts were flat at 249. The county did have a more than 50 percent gain in move-ins from the first to second quarter with 316.
Miami-Dade led in the Census Bureau’s most recent residential building permit figures, with 169 permits for projects valued at $34.21 million in June. That’s a significant increase from the 99 permits issued at a $27.31 million value in June 2011. In Broward, 55 permits were reported at a $15.96 million value in June, compared to 56 permits at a $9 million value in June 2011. Palm Beach reported 149 permits at a $52.62 million value in June, down from 165 permits at a $53.31 million in June 2011.
The Commerce Department said Wednesday construction of single family homes and apartments dipped 1.1 percent in July compared with June, to a seasonally adjusted annual rate of 746,000. In June, the pace had been the fastest since October 2008. The weakness in July came from a 6.5 percent drop in the building of single-family homes, which represent about 70 percent of the market. They fell to an annual rate of 502,000. By contrast, construction of apartments rose 12.4 percent to an annual rate of 244,000 units.
Even with the slight setback in July, housing remains on an upward trend, said Dan Greenhaus, chief global strategist at BTIG in New York. Greenhaus noted that national construction of single-family homes is up 17 percent from a year ago. Even with the gains made this year, the rate of construction and the level of permits remain only about half the 1.5 million annual rate considered healthy.
In June, single-family housing starts, which account for more than 70 percent of residential construction, rose for the fourth straight month to a two-year high. The housing boom drove construction to record levels in the middle of last decade, peaking in January 2006 at a rate of nearly 2.3 million. But the bubble burst in late 2006 and 2007, and construction ceased in most parts of the country. Starts plunged to just 478,000 homes in April 2009, the low point during the housing bust. Building increased in early 2010 as temporary government tax credits for home buyers lifted sales, the fizzled again when the support ended. Construction picked up again last fall, coinciding with growing optimism among builders, and it has been rising gradually since.
Homebuilder confidence grew this month to a five-year high, according to the National Association of Home Builders/Wells Fargo sentiment index. The index rose to 37 from 35 in July. And many builders reported seeing their best sales since February 2007. Homebuilders have enjoyed improved sales trends this year, aided by record low mortgage rates and a decline in the inventory of unsold homes.
Average U.S. rates on fixed mortgages ticked up for the third straight week, staying slightly above record lows. Cheap mortgages have helped fuel a modest housing recovery this year. Mortgage buyer Freddie Mac said Wednesday the rate on the 30-year loan increased to 3.62 percent, up from 3.59 percent last week. Three weeks ago, the rate fell to 3.49 percent, the lowest since long-term mortgages began in the 1950s. The average rate on the 15-year fixed mortgage, a popular refinancing option, rose to 2.88 percent. That’s up from 2.84 percent last week and record low of 2.80 percent three weeks ago.
Still, the nascent housing recovery has been subject to fits and starts. Sales of new homes fell 8.4 percent in June to a seasonally adjusted annual rate of 350,000 — the biggest decline since February 2011. That was down from a two-year high of 382,000 in May. Most economists say a healthy market has annual sales of new homes closer to 700,000.
(August 17, 2012)