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Friday, July 7, 2006
Affordability squeeze, insurance crunch and a little good news
Stat of the week:
31,000
Number of affordable housing units needed in Palm Beach County by 2010.
Quotes of the week:
“We’re getting squeezed, and we don’t know where it ends.”
— state Sen. Ron Klein about Nationwide Insurance’s proposed 71 percent rate hike on homeowners policies.
“While this decision is difficult, we have an obligation to ensure our homeowner rates are adequate so we can maintain long-term viability for our Florida customers and customers across the country.”
— Jeff Rommel, regional vice president, Nationwide Insurance.
Bullish Signs of the Week:
Some good, but not great, news: National Association of Realtors’ Pending Home Sales Index rises slightly, a mortgage application index also up a bit, mortgage rates fall slightly.
Bearish Signs of the Week:
See above: Home sales, mortgage apps and mortgage rates are much less favorable than they were a year ago. Plus, former boomtown Port St. Lucie sees starts plunge.
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Home-building slowdown threatens jobs
Somber news today from the Federal Deposit Insurance Corp., which takes a quarterly look at risks — including the residential real estate market — that impact the 8,790 banks and savings associations whose deposits the FDIC insures.
Though Florida’s economy continues to boom, the report says, with “exceptionally strong” job growth over the past year, rising gasoline prices and an active hurricane season pose a risk to the state’s vital tourism industry.
Although homebuilding boomed in the past few years, growth in residential construction is now slowing throughout the state, the report says. In the first quarter, which the report covers, building permits rose slightly less than 4 percent from a year ago, “well below the average pace of growth during the first half of the decade.”
The report also notes that home price appreciation has leveled off and home sales have declined. Condo sales, in particular, are soft and inventory is rapidly increasing. Nothing new here, but another voice adds its weight to the forecasts of a major “market correction” in residential real estate.
The market slowdown could affect the overall pace of economic growth in the state, the FDIC warns. In the past five years, real estate generated nearly 200,000 jobs. Those jobs are now at risk.
Also Friday, the Bureau of Labor Statistics reported that construction-related employment remains unchanged for the fourth straight month, at a seasonally adjusted annual rate of 7.5 million jobs.
Associated General Contractors chief economist Ken Simonson says the stagnant job outlook masks booming commercial real estate construction because the overall construction market has been distorted by a slowdown in residential construction.
“The seemingly stagnant job pool results from cross-cutting currents,” Simonson said. “Residential building and specialty trade construction employment fell by 25,000 since February, including a 9,000 drop in jobs just in June.”
Employment in single-family-home and condo construction will drop even faster once homes already “in the pipeline” are finished, Simonson said.
Meanwhile, commercial contractors say they would like to do more hiring but can’t find qualified workers, Simonson said.
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