The Tallahassee economic recovery is getting little help from the home building industry. Construction of homes unexpectedly plunged last month to its lowest point since April, the Commerce Department reported on Wednesday.
The weak figures show that builders fear there are not enough buyers to soak up the glut of unsold homes already on the market.
They also illustrate how much the fledgling recovery depends on government aid. Builders held back in part because of uncertainty in October about whether Congress would extend a tax credit for home buyers. Earlier this month, lawmakers renewed the credit and extended it to more buyers.
Even with government support, the weakness of the housing sector is dragging on the economy.
The report on home construction said building of homes and apartments fell 10.6 percent in October to a seasonally adjusted annual rate of 529,000, from an upwardly revised 592,000 in September. Economists had expected a pace of 600,000.
“There has not has not been much improvement in the underlying demand for new and existing homes,” said Mark Vitner, senior economist with Wells Fargo Securities. “That’s a warning for 2010.”
Developers, faced with weak demand and competition from bargain-priced foreclosures, have scaled back sharply. The number of homes under construction last month fell 3.4 percent to 560,000, the lowest on record dating to 1970.
Jack McCabe, a Deerfield Beach-based real estate analyst, thinks a huge portion of recent homes sales in Florida were “directly attributable” to the tax credit.
“I think you can make a pretty strong case that nearly half of the recent sales are due to the tax credit stimulus,” McCabe said. That has hurried along buyers who might have already been looking to purchase in 2010 more than it has brought new buyers to the table.
Once credit ends, sales are likely to drop, a notion bolstered by the government’s report on Wednesday, McCabe said.
“Now that they have extended the stimulus, I expect we will see people continuing to buy through the spring. But come May, once the stimulus is gone, I think we’re going to see a sharp drop in sales,” he said.
That could mean “sales go back down to where they should be, which could be about half of this inflated market right now.”
“Once you get to that equilibrium of inventory, then it makes a lot more sense for people to say, ‘I can buy the house that I want, the way I want it, for the same price I can pick up a short sale or foreclosure,’” Anderson said.
“It’s still not a great market,” said Brad Hunter, chief economist with Metrostudy, a real estate research firm.
“But it’s not as bad as it was six months ago.”