New home starts are up, but demand is down in Naples-Fort Myers

— New home construction is picking up in Southwest Florida while demand is down.

A report by Metrostudy, a national housing research firm, shows the pace of move-ins has slowed, while the inventory of homes is growing.

Finished vacant inventory rose from 703 units in the second quarter to 728 in the third quarter of this year in the Naples and Fort Myers markets, according to the study.

“The increase was completely attributable to townhome inventory,” said Brad Hunter, who directs Metrostudy’s market research operations in Southwest Florida.

In the third quarter, new home starts rose in Lee and Collier counties. Most builders have cut back production so much that their inventories have been shrinking and they’ve sold off much of their excess inventory, Hunter said.

“While some builders are sitting on inventory, others have depleted their inventory to the extent that they felt a need to start new homes,” he said.

Builders are competing head-to-head with foreclosures and other distressed sales so they need to have homes that are ready to deliver, Hunter said.

The local builders have reduced their hard costs so they can stay competitive.

“Most of them are able to make money,” Hunter said. “Part of what they’ve done is changed their product offerings. “They are building smaller homes now than they had been during the boom. They are putting in fewer upgrades.”

In Lee and Collier counties, move-ins dropped from 342 in the second quarter to 267 in the third quarter, according to Metrostudy.

In Collier, builders started 89 single-family homes in subdivisions in the third quarter. That compared to 54 in the second quarter.

At the market’s peak back in 2006, 681 detached homes were started.

While the absorption of single-family homes in Collier improved in the third quarter, it was “abysmal” for townhomes, dropping to 23 from 45 in the second quarter.

In Lee, single-family home starts rose to 194 in the third quarter, up from 91 in the previous quarter. Meanwhile, townhome starts fell from 22 in the second quarter to 11 in the third.

Townhomes are particularly hard to sell because single-family homes have become so affordable.

“The housing downturn has resulted in a vicious cycle: The drop in housing starts caused layoffs that had a ripple effect across all industries, and then job losses resulted in a drop in demand for new homes,” Hunter said.

Non-agricultural jobs have been shrinking for more than two years in the two counties. The current loss rate is 24,000 a year, Hunter said.

He uses the four “f’s” to explain why the demand for new housing has slowed: fear, financing, falling home prices and finding a buyer for an existing home.

Many builders have gone out of business or shut down divisions in Naples and Fort Myers. The silver lining to that is there’s less competition for the builders that remain, Hunter said.

“I don’t think we are completely out of the woods,” he said. “I think the majority of the fallout for the builders is behind us.”

Nationally, sales of new homes dropped unexpectedly last month. That’s blamed in part on the fast-approaching deadline to take advantage of a temporary first-time homebuyer tax credit.

The Commerce Department said Wednesday that sales fell 3.6 percent to a seasonally adjusted annual rate of 402,000 from a downwardly revised 417,000 in August. It was the first decline since March.

Sales in September were off 7.8 percent from a year ago.

Time lags for closings could make buyers nervous they won’t be able to complete the deal before the Nov. 30 deadline to take advantage of a tax credit of up to $8,000 for first-time buyers.

The report “demonstrates the power of the first-time homebuyers tax credit,” said Bernard Markstein, senior economist with the National Association of Home Builders, which has lobbied Congress to extend and expand the tax incentive.

“We just haven’t gotten the economy back to the point where we can step back and say the housing market doesn’t need any more support.”

The Associated Press contributed to this story.

Connect with Laura Layden at www.naplesnews.com/staff/laura layden.

© 2009 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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