New-home construction slowed, but closings picked up during the fourth quarter of 2009 in the Orlando metropolitan statistical area (MSA) according to Metrostudy’s quarterly survey.
“Homes under construction and finished home inventories declined in the fourth quarter, as significantly more homes were occupied than were started,” said Anthony Crocco, director of Metrostudy’s North and Central Florida divisions.
The Orlando MSA –Orlando, Lake, Osceola and Seminole–housing market was dominated by resale activity from foreclosures and short sales in the fourth quarter. Short sales are sales of homes for which the lender accepts less than the existing mortgage. These distressed sales are a reflection of the weak state of local economies, which continue to lose jobs although at a slower rate than previously, Crocco said.
Florida’s non-agricultural employment declined by 235,000 jobs, or 3.1 percent, during the 12 months ending in December 2009. At 11.6 percent, Florida recorded the highest unemployment rate for the state since the Bureau of Labor Statistics began keeping records in 1976. In the Orlando MSA, 35,000 jobs were lost in the 12 months ending in December 2009, a 3.7 percent rate of job loss. Unemployment continued to grow in the MSA, reaching 11.9 percent at the end of the fourth quarter.
According to Metrostudy’s most recent survey of the Orlando MSA market, there were 885 housing starts in the fourth quarter of 2009, a decline of 1 percent compared to last year’s fourth-quarter rate of 894 units. When compared to the previous quarter, starts of new homes declined 20 percent. The fourth quarter is slow historically for new starts due to the holiday season, and was even slower in 2009, because builders started excess homes in the second and third quarters to try and close units by the original November tax incentive deadline, Crocco said. The annual starts rate of 3,618 units decreased 31.8 percent during 2009.
“Distressed sales accounted for two-thirds of all existing-home sales in the fourth quarter, and the rate of distressed sales is not declining. As a result, there is price pressure on housing that affects homebuilders,” said Crocco.
Starts of new homes priced below $200,000 have increased more than 30 percent since 2008, while starts in all other price segments have decreased. Housing starts base-priced from $200,000 to $350,000 decreased 50 percent in 2009, while starts of homes priced above $350,000 declined by two-thirds.
Move-ins increased 20 percent from the third-quarter rate. The original November deadline for the homebuyer tax incentive helped trigger the spike in closings. Crocco said similar spikes may occur in the first and second quarters as the new June 30 tax incentive deadline approaches.
Metrostudy’s closings figures represent move-ins evidenced by actual signs of occupancy. Crocco noted that move-in statistics are a true barometer of demand, as opposed to deed recordings or contract sales, both of which can be artificially inflated by speculative purchases.
While closings were greater than in previous quarter, they declined year-over-year. Single-family quarterly closings totaled 1,505 units, which is 18.5 percent less than the 1,846 closings that occurred in the fourth quarter of 2008. The annual closings rate of 5,378 was 36.7 percent less than the annual rate of 8,501 units at the end of 2008.
Single-family inventory, which is composed of units under construction, finished vacant units and model homes, declined 32.4 percent from December 2008, to 3,666 units in December 2009, an 8.2-month supply.
Finished vacant inventory, a fundamental indicator of the health of housing markets, decreased from 3,308 units in the fourth quarter of 2008, to 2,097 units in 2009. Under-construction inventory declined by 336 units, to 1,237 units. Lot inventory has begun and should continue to decline in real and relative terms.
“With the expanded and extended tax incentive for homebuyers, quarterly construction activity should increase in the first and second quarters of 2010, and starts are likely to be greater than they were in the anemic first and second quarters of 2009. The question remains as to how the market will react later this year when the incentives have expired,” Crocco said. “It is likely that the economy of Central Florida will recover a bit sooner than much of Florida, but a quick rebound is unlikely.”
