The sun also rises (eventually): Florida's housing market was decimated in recent years. A glimmer of optimism is returning as dirt-cheap prices lure buyers back.

Author:Bergsman, Steve
Position:Cover Report: Business Outlook - Statistical data

How to judge the state of Florida's housing market? * It's not an easy question to answer, because the Sunshine State's housing sector has been in the dumps longer than its counterparts in most other states and the mid- to long-term trend lines are more confusing than straightforward. * Most of us measure the beginnings of the country's housing crisis from the start of the subprime mortgage crisis, which blew up during the summer of 2007, but Florida had already been experiencing a weakening residential market by that time. * As a precursor of much worse things to come, from August 2005 to August 2006, median condominium sale prices statewide had slipped from $205,800 to $201,300, or -2 percent, according to The Florida Sales Report-August 2006, Existing Condominiums. The report was prepared by the Florida Association of Realtors[R] (now known as Florida Realtors), Orlando, Florida, and the University of Florida Real Estate Research Center (now called the University of Florida Bergstrom Center for Real Estate Studies), Gainesville, Florida. * Housing markets in individual Florida cities by the third quarter of 2006--when home prices were peaking elsewhere in the country--were already beginning a free fall, according to the October 2006 Florida Association of Realtors/University of Florida report. Median home prices compared with the year before plummeted -44 percent in Fort Myers--Cape Coral, -18 percent in Sarasota-Bradenton, -17 percent in Punta Gorda, -17 percent in Naples, -11 percent in Pensacola and -11 percent in Melbourne--Titusville--Palm Bay, the 2006 report found.


So now, here we are four years later and Florida is still trying to sort out its future. Has the bottom been reached? Or is there still more pain ahead?

One way to get a bead on what's happening in Florida is to see what outside observers have to say.

One of the biggest naysayers on the state's prospects is neither a home builder nor an economist, but rather a hedge fund guy. David Einhorn, president of Greenlight Capital Inc., New York, was so negative on The St. Joe Co., Jacksonville, Florida, that he not only shorted the stock but, to back up his decision, he took stock pickers through a tour of Florida's Panhandle to show them St. Joe properties, reported The Wall Street Journal.

The St. Joe Co. is no Florida lightweight. The company owns 600,000 acres in the state, including residential property, land, commercial real estate and vacation resorts. Einhorn also is no lightweight, having famously shorted Lehman Brothers Holdings Inc. when it was trading at $70.

Einhorn, the Journal reported, lambasted St. Joe's holdings, calling one of its developments a ghost town, and devalued three of the company's residential communities to a mere $38.7 million when they were being carried on St Joe's books at $280.8 million.

Unlike Einhorn, Chris Lafakis is an economist, working at West Chester, Pennsylvania--based Moody's Analytics, and he likes Florida's long-term prospects.

"We are positive on Florida's economic growth," he says. "And we think population growth will return. Over the next five to 10 years, Florida will be in the top-10 in terms of population growth."

So what does Lafakis anticipate for Florida's housing market? Looking at the state region-by-region, he predicts, for example, that South Florida home prices will not return to peak levels until the year 2030.

No, that's not a typo. Lafakis says it will take 20 years before South Florida residents see the value of their homes get back to the levels of second-quarter 2006.

Deep problems

Lafakis limits Florida's problems to real estate, remaining optimistic about economic and job growth in the years ahead.

"We have seen price declines of over 40 percent in most of the major markets in Florida," he says. "It's just a reflection of how out of whack prices got during the housing boom. The economic fundamentals did not justify house prices rising to the extent that they did in some markets. It really doesn't portend to weaker economic growth or subpar economic fundamentals. It is just a reflection of the excesses that occurred during the housing boom," he says.

Even if Lafakis is correct on this score--and he may not be--the housing mess is still a big hurdle for Florida to overcome. After four years of troubles, some data points are still awful.

For example...

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