New-home inventory expands, demand slows in Naples-Fort Myers

NAPLES - Metrostudy’s quarterly survey of new-home construction reveals a weak market for builders in Collier and Lee counties as inventories of new homes have been increasing and the pace of move-ins has been declining.

“Finished vacant inventory, which is key to understanding the future direction of construction and pricing of new homes, actually rose from 703 units in the second quarter to 728 in the third quarter of 2009,” said Brad Hunter, who directs Metrostudy’s market research operations in Southwest Florida. “The increase was completely attributable to townhome inventory.”

The current move-ins pace in Collier and Lee counties (combined) fell from 266 detached and 76 attached in the second quarter to 232 detached and 35 attached in the second quarter. Attached homes refer to townhomes, duplexes and similar types of homes with ground-floor entries.

Hunter said that despite the decline in the absorption of new homes, the pace of new construction in the Naples-Fort Myers region of Florida picked up in the third quarter.

“While some builders are sitting on inventory, others have depleted their inventory to the extent that they felt a need to start new homes,” Hunter said.

Starts, which have been at depressed levels throughout the first half of 2009, rose in both counties.

In Collier County, builders started 89 detached single-family homes in subdivisions in the third quarter of 2009 compared with 54 starts during the second quarter. At the market’s peak in the second quarter of 2006, 681 detached homes were started.

“Absorption of detached single-family homes improved during the third quarter in Collier County, but absorption of townhomes was abysmal, dropping from an anemic 43 in the second quarter to only 24 in the third quarter,” Hunter said.

In Lee County, starts for detached single-family homes rose to 194 in the third quarter of 2009, from 91 starts in the previous quarter. Townhome starts fell from 22 in the second quarter to 11 in the third.

“The housing downturn has resulted in a vicious cycle: The drop in housing starts caused layoffs that had a ripple effect across all industries, and then job losses resulted in a drop in demand for new homes. Total non-agricultural jobs have now fallen year-over-year for more than two years in the two-county area, and the current loss rate is approximately 24,000 per year,” Hunter said.

“Between 2003 and 2005, the peak ‘housing bubble’ years, starts were consistently far above demand as measured by move-ins. In 2007, builders slashed starts, and production fell below the level of absorption, allowing inventories to correct. During the past year, starts once again exceeded demand. The bothersome part, however, is that this transition is occurring while demand continues to soften.”

Metrostudy is a provider of primary and secondary market information to the housing industry and related industries nationwide.