Bert Caldwell : Florida housing is in a cold snap

A little of the air may be going out of the area’s real estate market, but the deflation here — at least in the number of homes sold — is nothing compared to the situation in Southwest Florida.

Once among the nation’s hottest markets, the area around Fort Myers has become a disaster. Moody’s Economy.com has rated the metropolitan area No. 2 on its list of housing markets facing the worst price collapses. Business 2.0, in its most recent issue, put the area among those potential buyers best avoid. Even local real estate experts there do not sugarcoat the dismal conditions.

With 12,600 homes and almost 8,000 condominiums on the market, one of that area’s leading brokers says, it will take almost two years to sell off the available inventory even if all construction on new housing units stops. That, obviously, is not going to happen. Contractors have invested millions clearing land, building roads and burying utilities. One way or another they must generate cash flow, and if foregoing profits will keep them in the game until the market turns, so be it.

Yet existing homes on the market are listed at a median price — $324,900 — 23 percent higher than the median selling price. Condos are listed at prices 35 percent above the median sales price. The condos, by the way, sell for more than the average home in Spokane County.Median prices are down 9 percent compared with a year ago, but that does not accurately reflect decreases across the market. In some communities, it’s more like 20 percent. Sales are down an astonishing 36 percent. There are 15 homes on the market for every buyer. First-hand experience suggests lots of patience.

A year ago, the gloomy broker was among the optimists. He expected the market to hold its own as refugees from the Northeast and Midwest sought suntans along the area’s admittedly beautiful coast. The water vistas are awesome.

Buyers were absorbing all the new units coming on the market. Unfortunately, many of those buyers were speculators. When the market peaked, the smart ones got out. Now, falling prices have trapped owners with adjustable-rate or interest-only mortgages.

The result: Florida led all states in foreclosures during the third quarter of 2006, with more than 40,000. Washington’s total was one-tenth that number.

The high inventory of unsold homes is not the only headwind sellers and builders are fighting.

Just the 1 percent increase in mortgage rates in the last year has added $125 to monthly mortgage payments on a $200,000 loan. Thanks to Katrina, Rita and Wilma, which swept through Fort Myers last year, premiums for hurricane insurance have tripled or quadrupled since 2000. Yet, despite sagging new-home construction, Lee County last month decided to triple road impact fees to help offset the costs of increasing traffic congestion. (Those must be outbound vehicles.) The burden on a single-family home will be almost $9,000, and that’s just one of six impact fees, albeit the largest, added to the price tag on new residences. How’s that for an incentive for someone looking at a new home?

Liquidity has been foiled still further by Florida’s Save Our Home Amendment, which limits annual increases in property tax assessments to 3 percent until a home is sold.

It’s been a while now, but many in Spokane can recall times like those afflicting Fort Myers. In the mid-1980s, prices were horrible, and a housing start was almost cause for celebration. Hard to believe from the perspective of more recent years and the hyperactivity that has begun to subside. Still, inventory reflects just more than a three-month supply of homes for sale based on September statistics for Spokane County. Prices continue to advance, although one has to wonder how long that can continue as the sales pace slows.

We have an economy far less dependent on snowbirds and tourists. Imported equity has certainly been a factor. But speculation, while present, has never become a market driver. Housing is more of a stretch than it used to be, but it can still be had.

Maybe things will get better in the Fort Myers area as the snowbirds return and pick up on the bargains Realtors say are available. In the meantime, the market reminds us it does frost in Florida.