Nov 15, 2007 11:27 am US/Eastern
South Florida Developers Scale Back
MIAMI (CBS4) ―
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Housing Construction In South Florida
CBS
A new study shows developers in South Florida's real estate market are slowing down with projects in what economists are calling a housing depression.
New-home construction is at a ten-year low.
In all of this, however, there could be promising news for some sellers, but not very good news for people who work in the construction industry.
To explain what's happening, for example, picture a glass filled with water representing the current real estate market. It's filled to the maximum, in our case, filled with properties. Filling it up with more water, or projects will only cause an overflow.
But if developers pull back, slow down, then there might be some impetus by consumers to start buying those empty units that have come down in price, absorbing - like a towel - some of the overflow. In other words, the inventory on the market could start to be bought.
Just beyond the 55th Street Station in Miami, off Biscayne Boulevard, there is a building site for a project called Kubik, 315 ultra-hip condos overlooking Biscayne Bay. It was a project so attractive, the developer sold half the building.
That was three and a half years ago. Now, on the empty lot is a building crane, beginning to show signs of rust.
A neighborhood lawsuit brought the project to a halt.
"Oddly enough we were thinking of not moving forward with Kubik anyway because of the market," said developer Paul Murphy. "You know, sales came to a dead halt."
Murphy pulled the plug on his project and handed back deposits to investors.
This move is not unlike other developers who have slowed or even stopped building.
Banks have been taking on record loses from foreclosures, and have begun putting the squeeze on developers.
"The financing is tough to get," said Murphy. "You have to have qualified buyers and the banks are requiring people to put significantly more money down on their units."
According to Metrostudy, a group that tracks the housing industry, the financing crunch has had an effect on the South Florida market.
In Miami-Dade, more people are moving into new homes than developers are building.
In Broward, things appear more stable though the numbers are the lowest in 10 years.
According to Murphy, it could last two to three years. Until then, less construction hopefully would balance out the market, and developers would learn if another building cycle is possible.
In the meantime, it may be good news for some sellers, it's not so great if you are in the construction industry. Less new starts means less work, and less work means less jobs.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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