The American and local economies heavily depend on a robust housing market because a house is the one true product manufactured in America. In addition, it is the best catalyst for a household formation.
Over the last couple of years, the housing market started a very slow re covery which has been primarily fueled by large national builders with access to financing and investors snapping up distressed properties. In the last two months, the housing market has faced some economic headwinds, which could upend the recovery.
According to Florida Realtors, closed home sales in Lake County declined 2.5 percent in March versus the prior year while listings increased 17 percent. The housing inventory of reported listings remained the same at 5.6 months. Active listings have increased 11.6 percent. These numbers probably debunk the theory that housing is suffering because there are few homes available for sale in the market.
Housing permits in Lake, Sumter, and Marion counties for February are flat compared to last year, with only seven more being issued. The huge increase in permits for Lake County for the year reflects the 807 permits issued in January as builders tried to beat impact fees for the year. The trend in local permitting is not good. Compared to permits issued in August 2013, February permits are down 25 percent.
According to the Orlando Regional Realtor Association, the average selling price in Lake County for March was $146,294, which is down 7.7 percent from the fourth quarter of 2013. The local housing market is trending in the wrong direction and, according to many in local residential construction, the trend is not improving.
Nationally, according to the United States Census Bureau, housing starts increased a measly 2.8 percent above February’s wintry influenced numbers, however, the February numbers are 5.9 percent lower than last year’s numbers. Surprisingly, building permits for March dropped 2.4 percent, and that is the best indicator of future activity.
The most startling numbers come from Black Knight Financial Services, which reports mortgage originations in February have fallen to a 14-year low. Not since 2000 have so few people applied for a mortgage. This number is very spooky considering the Great Recession and financial collapse occurred within that 14-year period.
Since February, the Mortgage Bankers Association reports some improvement in applications, however, in the first weeks of April applications fell to their lowest level since July 2009. This is despite an historic low housing interest rate, which is currently around 4.6 percent on a 30-year fixed interest mortgage.
What does all of this mean? The problem with housing and this economy is the inability of most Americans to qualify for credit and regulations. Because of new federal government guidelines, damaged consumer credit histories, and continued stymied economic growth, most people cannot get a loan. Ask any banker, they will proclaim they are lending money but only if a homeowner qualifies with a credit score of 700 or better. Some analysts believe more than half of all Americans do not meet that criteria.
Until those in Washington, D.C. get their act together on housing, expect the housing market and the country’s economy to sputter.
Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc., and he is also the host of the “Around the House” Radio Show heard every Monday at noon on My790AM WLBE in Leesburg.