The University of Central Florida’s Institute for Economice Competitiveness recently released their quarterly forecast which surprisingly reveals some promising facts about the housing market. They predict a bottom to the housing market in the second quarter of 2009. Amazingly, housing starts are 87% below the peak levels we experienced just a few years ago. They explain that home prices are now below replacement cost which is a natural floor for prices. There’s sense in building a home to sell if you can’t get more than what you put into it and we’re in that situation today. People have been asking me for quite some time where’s the bottom in the market and I think we’re finally here.
Since we’ve hit bottom, does it mean prices will stop falling? Oh contraire mofraire… they’ll continue to decline until we absorb the excess inventory. The good news is that we’ve finally hit below 12 months of inventory which is about half of what we’ve been hovering around for the past couple of years and normal levels are around 6 to 7 months so we’re not that far off. The number of sales have benefited and currently on a positive trend for 2009 reducing the time needed to absorb the excess inventory.
If the banks loosen their lending standards a little bit, we’ll reach equilibrium in no time but that’s what got us into this mess in the first place.
There’s good news about the economy in Orlando as well. Personal income, annual wage, and employment in Orlando are predicted to be the highest in the state. Employment is forecasted to increase 1.5% annually, personal income will increase 4.1% a year, and annual wage is predicted to increase 2.2%. While this sounds great, there are some downside to all this growth. Orlando is no longer an affordable alternative it used to be meaning the population growth we’ve seen in the past is history.
All in all, I’m liking what I’m hearing from this group of supposed experts. Maybe they’ll be better at predicting the bust than the boom.
UCF Institute for Economic Competitiveness: FL Forecast Q1 2009