Tip for an economic recovery: Boring predictability

Interesting column in the Washington Post about how over-giddy experimentation on the part of President Franklin Roosevelt during the Great Depression prolonged the economic downturn. One interesting anecdote about how the president arbitrarily tried to set a price for gold:

What horrified markets even more was that FDR managed the operation personally, day by day, over a breakfast tray. No one ever knew what the increase would be. One Friday in November 1933, for example, Roosevelt told Treasury Secretary Henry Morgenthau that he thought the gold price ought to be raised 21 cents. Why that amount, Morgenthau asked. "Because it's three times seven," FDR replied.

Let that be a lesson to today's politicos who seem to vying for membership in the economic-cure-of-the-month club.

Tampa less lashed by home price declines than other Sun Belt cities

It's hard to be buoyant about a 19.8 percent decline in home values the past year, but if Tampa has been bruised by the housing downturn, other Sun Belt markets have been mauled.

Tampa's annual home value decline was 19.8 percent as of October, according to the S&P Case Shiller home price index. That placed us 8th worst on the 20-city index.

Most depreciated was Phoenix, where home values crashed 32.7 percent. Las Vegas continued to suffer disproportionately with a 31.7 percent housing plunge. Miami remains Florida's basket case, registering a 29-percent decline.

Let's place Tampa's decline in perspective. The 20-city average home price decline was 18 percent. So we're a bit worse than average. Markets previously immune to the downturn - think Seattle and Portland - are now feeling the pinch.

According to Case-Shiller, our home values have returned to September 2004 levels and stand 30.5 percent below the peak reached in July 2006.

In other words, our overall home depreciation since the climax of the housing boom has yet to match the decline registered in one year by the likes of Phoenix and Las Vegas.

That may be small comfort - we're comparing ourselves to cities built atop deserts after all - but things could be worse.

With big squeeze, homeowners tastes could change

I dunno. The Washington Post is pushing the line that we'll start skimping on our homes now that the market has crashed. Out will be grand entranceways, huge lots and McMansion gingerbread. In will be energy efficiency, tight lots and multi-family dwellings.

The story posits a parallel between the Victorian era, when people erected 30-room mansions, and those homes' subsequent decline into the multi-family/rental market.

Like I said: I dunno.

For the next couple years, the middle class, provided they have jobs, can grab 2,800- to 3,500-square-foot houses for relative pennies in the Tampa suburbs. They're not mansions, but five bedrooms and 3 baths isn't a hole in the ground covered by a couple twigs.

As we've reported in the past, the region has no shortgage of vacant building lots. At last count the four-county Tampa metro area had something on order of 32,000 developed home sites sitting idle.

The Post's story may ring truer in the Washington suburbs, but I don't see a major land shortgage in the Sun Belt, if you exclude much of California.

The Gilded Age ain't over.

 

Did builders skimp on materials during the boom?

We know all about how homes were built during the boom using shaky financing and half-trained sub-contractors. But now they're telling us all is not right with the actual guts of the homes. From a story in southwest Florida:

Chinese drywall installed in houses in Lee County and elsewhere may be causing a wave of air conditioning failures and health problems.

The story seems lightly sourced, as if the reporter got a hot tip that didn't really pan out. I received the same tip a couple months ago - that Chinese drywall was crumbling prematurely in some newer Tampa area houses - but couldn't get anyone to confirm it.

The complaint is at least plausible. I had my roof re-tiled after the hurricanes of 2004 and within weeks noticed rusty red streaks running across a small section of the roof.

The apologetic roofer confirmed that we'd gotten a bad batch of tile adulterated with Chinese grit containing too much iron. He replaced the bad tiles free of charge under warranty from Owens-Corning.

Anyone who's bought assemble-at-home furniture or toys imported from China has probably had the same quality control complaints I've had: Missing hardware, ineptly drilled guide holes, damaged finishes, non-working parts.

Is it too big a leap to imagine those deficiencies extending to imported building materials? Let's hope the Far Eastern concrete was up to snuff...for the sake of our highway overpasses and skyscrapers.

Deja vu: Tampa monthly home sales rise as prices freefall

The national news is highlighting a home sales "plummet" in November, but we're doing okay here in the Tampa Bay area.

Measured year to year, Tampa area home sales rose a modest 3 percent in November. The Florida Association of Realtors recorded 1,701 single-family sales last month compared to 1,644 a year earlier.

The stimulus came in the form of lower housing prices. The median sales price last month was $149,800, the first time prices have broken into the "140s" since April 2004. Cut-rate foreclosure properties accounted for much of that.

The heavy-foreclosures-equals-brisk-sales formula was even more pronounced in Cape Coral-Ft. Myers. The annual price plunge there was an extraordinary 53 percent. Fort Myers homes sold for a median price of $106,100.

We're talking a return to 1999-2000 prices. With so many distressed property sales, Fort Myers has probably over-corrected on the down side. If there's a positive side, it's that sales soared 64 percent year to year.

Statewide, sales inched up 4 percent in November, reflecting a 27 percent plunge in prices. Nationally, home sales fell 8.6 percent to an annual rate of 4.49 million in November. National prices retreated 13 percent, the biggest year-to-year drop since 1968.

Here's a chart breaking down homes sales in Florida metro areas. Note how northern Florida towns like Gainsville are suffering disproportionately these days: Download Novhomesales.pdf 

Whom to believe about home sales? Realtors or First American?

Playing with statistics can be like traipsing across a minefield: One wrong step and you're singing falsetto.

I had that feeling when I pulled a Tampa Bay area report by national housing consultant First American CoreLogic and compared its home sales statistics with those of the Florida Association of Realtors.

Realtors said October home sales rose 11 percent, from 1,814 in 2007 to 2,021 in 2008. First American said sales fell 12 percent, from 2,497 in October 2007 to 2,200 in October 2008.

What to make of this? I'm not too concerned about the October 2008 figures. Realtors' and First American's numbers are in the general ballpark. Even their median sales price corresponded pretty well. Realtors reported $152,300 while First American reported $155,000.

But that October 2007 number is suspicious. How could Realtors report 27 percent fewer sales than First American? If I had to guess, I'd say Realtors were more accurate.

Think about it. As a trade group for the home selling industry, the Realtor association has the greater incentive to fudge sales on the upside. But it didn't.

One possibility is that Realtors, by not counting by-owner and non-Mulitple Listing Service sales, missed a boatload of transactions in October 2007. But 683 sales - the difference in the two counts -seems too high.

Here's a chart from First American: Download corelogicchart.bmp

Florida housing construction to recede further in 2009

Florida single family home construction will fall another 11 percent in 2009. According to Jennifer Coskren, senior economist at McGraw-Hill Construction Analytics, in-state home building will amount to about $8-billion next year. Lest that sound good, single-family home construction totaled $39-billion in 2005.

But the percentage declines will be worse in office and retail construction, both of which suffer belatedly when a rotten housing market slows population growth. Office construction will plunge 26 percent and retail construction 24 percent in 2009.

Both office and retail are coming off peaks in 2007-08, and the decline next year would bring then down to about 2003 levels.

Coskren predicted public works projects, particularly roads and bridges, would help keep construction workers employed. The incoming Obama administration is promising hundreds of billions of new spending in that arena. Other bright spots are hospital and power plant construction.

When will housing recover? Coskren is looking for a tepid turnaround in 2010. Commercial construction's comeback would follow in 2011.   

Hope it wasn't our mall that broke the bank

Okay, so it's probably a coincidence. But a few weeks after the new Wiregrass Mall opened north of Tampa, its developer, Forest City Enterprises, says "no mas" to new projects.

Wiregrass is an open-air mall off State Road 56 in Wesley Chapel built around a decent facsimile of an urban Main Street. It's the only new mall to open locally in the past few years.

Here's the Wall Street Journal's take on Forest City's new-found aversion to cement:

Real-estate developer Forest City Enterprises Inc. said it will halt new projects and focus on reducing debt and managing its existing real-estate portfolio.

Chief Executive Charles Ratner said Forest City will transition from a "development company with an operating portfolio to an operating company with a development capacity."

"Forest City has heavy debt and heavy development, both of which are a problem these days," says Rich Moore, analyst at RBC Capital Markets. The company has $2 billion of debt maturities over the next two years, according to company filings. Real-estate debt markets have seized during the past year, creating headaches for property owners needing to refinance mortgages and replace construction loans.

Forest City said it will continue some developments it has already started, including the $4 billion Atlantic Yards project in Brooklyn, N.Y. Plans for the 22-acre site include offices, apartments and a basketball arena.

Cleveland-based Forest City is one of the largest builders of real-estate projects in the U.S., ranging from planned housing communities to urban mixed-use developments.

Sorry Charlie: Guv can't take credit for dip in Tampa Bay foreclosures

Tampa Bay area property owners were hit with 10 percent fewer foreclosure filings in November compared to a month earlier. Some media outlets are crediting Gov. Charlie Crist's foreclosure "moratorium."

Sorry but that doesn't fly. Crist didn't cut a deal with bankers until the last few days of November. What's more, the agreement to halt foreclosures for 45 days was a modest giveaway: Filings tend to slow as Thanksgiving, Christmas and New Years shut down court houses.

The firm RealtyTrac reported 6,783 foreclosure filings in the Tampa Bay area in November. October's number was 7,553. Filings were down in Pinellas, Pasco and Hillsborough counties, but up in Hernando County.

Here's a county-by-county breakdown: Download realtytracnov08.xls

RealtyTrac said November's national foreclosure activity was the lowest since June, but cautioned that more homeowners are falling behind on monthly mortgage payments.

Based on our lackluster home sales and high inventory of properties for sale, it's way too early to say foreclosures have peaked. A one-month decline does not a reassuring trend make.

The builders' buffet table groaneth not this Yuletide

It wasn't exactly cold gruel from the communal pot and bread laced with sawdust, but the spread was a tad thin Wednesday evening at the Tampa Bay Builders Association's holiday banquet.

Swedish meatballs, chicken fingers, a cheese platter, phylo dough spinach pastries: You can't accuse builders of living high on the hog while the rest of us wolf down value meals at Wendy's. You could have filled most of that builders' buffet from the Sam's Club freezer case. Not that there's anything wrong with that.

It's good to know the banquet wasn't BYOB: The line rarely let up at the open bar.

Tampa area new home sales are off about 75 percent from the 2005-2006 peak. That pretty much explains the tightness with the food budget. Come to think of it, considering the health of the media market, Swedish meatballs and slabs of Monterey jack would taste pretty good right now.