MIAMI — July 24, 2006 — Three dozen South Florida home builders and real estate agents mingled last week at Buster’s Bar & Grill in downtown Delray Beach. Standing only feet apart, they shouted pleasantries over the deafening din of Elton John’s Rocket Man and Steve Miller’s Fly Like An Eagle.
The music might have been more appropriate during the past few years when the housing market was soaring. Now it’s falling, leaving industry observers to count the casualties.
With demand softening in South Florida and across the nation, builders and real estate firms are laying off workers, shuttering offices and selling to moneyed buyers. Expect few changes in the coming months as the housing sector copes with a significant slowdown after five years of blistering sales.
“Construction, mortgages, title insurance. We’re seeing cuts across the board,” said Mark Zandi, chief economist for Moody’s Economy.com of West Chester, Pa. “It’s going to be a long process. It’ll take two or three years to work through.”
And expect the ill effects to touch many other industries dependent on a vibrant housing market, such as home remodelers and interior decorators.
Miami-based real estate consultant Lewis Goodkin predicts the region’s housing landscape will be even weaker in the second half of 2006, with sluggish sales carrying over into 2007.
“We’ve got the real potential to get into a mild recession,” he said. “We’re in a picture where we’ll see home building moderate substantially over the next 18 to 24 months, and then we’ll see a significant pickup that will be much more in line with true demand, not based on speculative buying.”
Until things improve, Florida real estate companies are pulling back, hoping to buttress their bottom lines.
With cancellations up and orders down, builders have resorted to offering cars, cruises and other perks to stimulate sales. They’re also cutting staff.
GL Homes of Sunrise announced in June that it laid off 68 employees. WCI Communities Inc. of Bonita Springs, a big player in South Florida, also has sliced jobs but declined to provide a number. Jacksonville-based Montecito Property Co., one of the nation’s largest condominium converters, told The Florida Times-Union last week it has slashed 100 positions since March. Montecito declined an interview with the South Florida Sun-Sentinel.
The trend follows what’s happening in Las Vegas, Phoenix and other formerly hot markets as builders trim fat to stay competitive.
“In a slower business market, it made sense to cut back,” said Steve Zenger, a WCI spokesman. “This is really meant to control costs when times are slower.”
The layoffs extend to Deerfield Beach-based Expert Realty, a discount real estate brokerage. The firm confirmed earlier this month that it fired 25 of its 150 agents.
With mortgage applications declining this year, Washington Mutual and Countrywide Home Loans closed offices in Lake Worth and Sunrise, respectively. Washington Mutual, the nation’s largest savings and loan, laid off 1,400 people in Florida and Washington.
Real estate industries nationwide once were adding 35,000 to 40,000 jobs a month, but growth in those sectors has flattened, Economy.com’s Zandi said. He expects job declines during the next six months, especially because surveys indicate builders are showing less confidence than they did a year ago.
The slowdown is causing some small independent real estate agencies to latch on to larger competitors.
Last week, for example, Boca Raton-based Lang Realty announced the acquisition of DCI International Realty Inc. of Boca Raton. In March, Lang bought Carriage Trade Properties, also of Boca.
Although most agents work as independent contractors, small firms still face hefty expenses such as advertising and rent, Lang President Scott Agran said.
“A lot of these agencies are forced to spend more money advertising listings, but the market is just not there right now,” Agran said.
The thriving market from 2000 to 2005 was an open invitation for wannabe agents to get into the business. With buyers rushing to give sellers more than their asking prices, houses sold in days or weeks, leading to quick windfalls for scores of agents.
Membership in the National Association of Realtors has swelled by 70 percent since the beginning of the decade.
“We grew by 100,000 new members a year for three years,” said Tom Stevens, president of the Washington, D.C., trade group. “We’re going to see that slowing.”
Despite the current conditions, experts say they’re still bullish on Florida’s long-term housing prospects.
Anthony Trella, a Deerfield Beach-based consultant to home builders nationwide, said the state will continue to attract baby boomers and other new residents.
“I don’t see demand going away,” Trella said. “A thousand people a day are moving to Florida. Where are they all going to live? They can’t keep living with their brother-in-law.”
Copyright © 2006 South Florida Sun-Sentinel, Paul Owers. Distributed by McClatchy-Tribune Business News.
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