Real Estate Blog

A long climb ahead for Florida home prices

September 24th, 2009 12:16 PM by Sherry Lee

A long climb ahead for Florida home prices By Robert Trigaux, Times Columnist In Print: Thursday, September 24, 2009 What does Florida's housing market have in common with Mount Everest? When you fall off the world's tallest mountain, it takes longer to get back to the top. So it is with Florida's housing market. It peaked at 2006's high-altitude prices, dropped more than 46 percent, and now will require decades to rebound. So says one expert. Moody's economy.com senior director of housing economics Celia Chen says Florida homes won't regain their price peaks until after 2030. Yes, that's 10 years after national housing prices should recover. Chen laid out her sobering arguments this summer in an economy.com analysis called A Long Crawl Back for Regional House Prices. Florida's housing market starts with three strikes: One: Florida entered the housing downturn a year later than the nation, so it already lags the recovery and won't hit bottom until 2011. Two: Florida's foreclosure process is lengthy and may prolong a housing downturn. Three: Florida had one of the biggest runups in home prices and one of the biggest declines. Such a big swing adds to recovery time. With apologies for baseball metaphors, I'll add a fourth and maybe a fifth strike. Double-digit unemployment rates of 10.7 percent for Florida and 11.3 for Tampa Bay mean any rebound in jobs will be slow and hamper demand for housing. Also, from 2007 to 2008, Florida sustained a 3.9 percent decline in median household income. That's the biggest income drop in the nation and will dampen buyers' ability to purchase homes. So, in a state proud of its go-go growth and rising population, that's one ugly housing scenario. Except Chen tells me this week that things are not as bleak as they appear. Yes, Chen says, the weak housing market will dampen Florida's economy. But the lengthy time it will take to regain peak housing prices reflects how overvalued the state's housing markets became during the peak of the boom rather than any severe weakness in the state's economic outlook. "Long term, Florida is expected to outpace the nation in terms of employment growth," Chen says. "Even by 2011, population and employment growth will exceed the national average." And dig this. Chen says housing price appreciation in Florida will even slightly outpace the national average during the 2011-2016 rebound. But there's plenty to repair. "A tremendous amount of equity has been lost by Florida homeowners, and this will continue to constrain consumer spending in the state," Chen says. Some states, notably those in the upper Midwest, Mississippi and South Carolina, will regain their housing price peaks by 2014. These states experienced more modest gains in home prices during the housing bubble. It does not mean they have more economic horsepower ahead. The bottom line? Florida will "recover nicely" from the housing downturn. But long-term growth will be constrained by the fallout. Says Chen: "Our current outlook is for weaker growth than we had expected prior to the housing crash." I'd call that a silver lining, despite a forecast of such a long-term recovery. So grab your mountain gear. Let's start climbing the big hill again as soon as possible. Robert Trigaux can be reached at trigaux@sptimes.com.
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Posted by Sherry Lee on September 24th, 2009 12:16 PM

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