Regional Spotlight: Florida Builders’ Decreased Pace Allows Inventory to Shrink

RISMEDIA, May 7, 2007-(MCT)-Central Florida's new-home inventory fell during the first quarter, as builders continued to cut back on construction amid slowing demand.

But the number of finished-but-vacant homes "remains troublesome," according to a report released Thursday by Metrostudy, a Houston-based research company that tracks housing activity.

The overall new-home inventory in a six-county area surveyed by the company around Orlando fell 25.9% to 17,288 units during the first three months of the year compared with the same period a year ago, a positive sign for restoring balance to the market.

But the decrease came in the under-construction category, Metrostudy said. The number of vacant new homes in the region rose 26.3% from the first quarter of 2006.

Builders though, were encouraged to see that the finished-but-vacant category, known as "standing inventory," dropped in the first quarter when compared with the final quarter of last year. That's a trend they expect to continue, said Keith Bass, Orlando division president for Ryland Homes.

"We would love to be selling more houses, but the fact that the finished-vacant numbers are moving in the right direction is encouraging," he said. "No one is putting anything new on the ground."

Bass said home buyers who have been signing contracts recently "are showing up and closing" on their purchases, so he expects the total inventory to continue falling during the second quarter — even the finished-but-vacant inventory.

"We've been successful in selling inventory," Bass said. "Our 1/8own3/8 finished-vacant is way down, just as it is for most of our competitors."

The Metrostudy report showed that housing starts in Orange, Lake, Seminole, Osceola, Volusia and Polk counties fell 46.7% during the first quarter compared with a year earlier, when demand was slowing but still strong.

The leading community in the region, ranked by annual new-home starts, was Solivita in Polk (431 units), followed by Avalon Park (Orange, 385.)

The pace at which individuals and families were moving into homes in the region remained fairly strong during the quarter, said Anthony Crocco, director of Metrostudy's Northeast and Central Florida divisions.

The number of what Metrostudy defines as closings — homes purchased and physically occupied in the subdivisions it surveys — totaled 6,790, which was 2.8% fewer than during the first quarter of 2006.

On an annual basis, closings were down 5.1% to 30,408. Units under construction fell 50.7% to 7,923.

Crocco said the fact that the region's total housing inventory is declining, year over year, and the slowdown in new-home starts is flattening, signals that "the Orlando area is heading in the direction of a necessary correction in the market. However, the high percentage of finished-vacant inventory remains troublesome."

Crocco noted, though, that the local economy remains strong, with Metro Orlando leading the state in job formation — a positive sign for the housing market.

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